Is the chip industry headed for a repeat of the 2004 bust? That seems to be the sentiment among some investors, judging by last week's reaction to a pair of closely watched semiconductor companies' financial reports. Texas Instruments ( TXN) and National Semiconductor ( NSM) both delivered upbeat financial numbers, only to see their shares tumble. TI shares fell more than 3% the day after its results, while National's shares shed 90 cents, about 4%, in the wake of its report. The common thread among both chipmakers was inventory, which each firm acknowledged was increasing -- something that has a tendency to spook investors. "The spreading shift from inventory depletion to building supply (INTC, TXN, etc.) adds to our concerns regarding an approaching cyclical peak," wrote Deutsche Bank analyst Ross Seymore in a recent note maintaining a hold rating on National Semiconductor. (According to Deutsche Bank the research analysts who prepared the note, or their family members, own shares of National Semiconductor.) But while inventory levels deserve careful monitoring, they don't warrant recent fears of an impending chip-sector slowdown, say some analysts and investors -- at least not at this stage. "Every time inventories build, people in general get very nervous," says Piper Jaffray analyst Tore Svanberg. "You get a little bit of panicking, especially when things have been as good as they have in the semiconductor sector ." Svanberg believes these fears are overblown, noting that inventory throughout the supply chain is always up during the March quarter. (National Semiconductor has been an investment-banking client of Piper Jaffray's during the past 12 months.) In some sense, the chipmakers have been victims of their own success. The fact that sales in the seasonally slow first quarter are not down as much usual has raised fears that customers are buying more chips than they actually need. The danger is that customers will ultimately be forced to sharply curtail their orders, as they work to sell off the inventory they've accrued.