NEW YORK (CNN/Money) - October 9, 2002: The Nasdaq composite closed at 1,114.11 and there seemed no end in sight to the continued bear market for tech stocks.

What a difference a year makes. That close turned out to be the low point (for good, one hopes) for the Nasdaq, which has surged more than 70 percent in the past 12 months.

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And with the Nasdaq now hovering around 1,900, the talk is about when it will pass the 2,000 level, not fall through 1,000.

But have tech stocks run too far, too fast?

The S&P Tech index is trading at 29 times 2004 earnings estimates, while the rest of the market trades at a P/E of about 18. But investors have shrugged off valuation concerns since many tech companies have been raising earnings and sales guidance lately. And several market observers think that tech will keep heading higher as long as the fundamentals remain solid.

"For the most part, tech in general is not ahead of itself as long as the third and fourth quarter numbers come in on target," said Ted Parrish, co-manager of the Henssler Equity fund, which owns shares of tech companies Dell (DELL: Research, Estimates), Microsoft (MSFT: Research, Estimates), Intel (INTC: Research, Estimates), IBM (IBM: Research, Estimates), Texas Instruments (TXN: Research, Estimates), and Applied Materials (AMAT: Research, Estimates).

Earnings expectations for third quarter are fairly high, but don't appear to be unreasonably so. Excluding Lucent (LU: Research, Estimates), which analysts predict will lose a sizable amount less than a year ago, earnings for the S&P Tech sector are expected to increase 20 percent in the third quarter and 26 percent in the fourth quarter.

Kent Mergler, president of Northstar Capital Management, which runs the Fremont Large Cap Growth fund, said that when it comes to tech companies, sticking to rigid valuation models doesn't always work since estimates are constantly changing.

For example, one stock Mergler owns with a lofty valuation, eBay (EBAY: Research, Estimates), started the year with analysts expecting the company to earn 59 cents a share this year and 83 cents in 2004. Now, analysts are expecting 75 cents this year and $1.05 next. So why shouldn't the stock move sharply higher?

Todd Campbell, president of E.B. Capital Markets, an independent research firm catering to institutional clients, said that bears who have been waiting for techs to make a big pullback will have to keep waiting.

"The greatest mistake that people have made over the past three-to-six months regarding tech stocks is failing to listen to what the market is telling them," said Campbell.

Campbell thinks the Nasdaq should hit 2000 in the fourth quarter. In particular, he thinks semiconductor stocks, which have been among the biggest gainers in tech this year, will continue to surge. His fourth-quarter target for the Philadelphia Semiconductor Index is 500, 10 percent higher than current levels.

Still, shouldn't there be some cause for concern when you consider that some of the best performing techs are companies with no earnings? Doesn't that bring up painful memories of the 2000 crash?

Mergler said he has been steering clear of more speculative names and that their rise is more worrisome for long-term investors than the valuations of profitable companies that he owns like Dell, Cisco (CSCO: Research, Estimates), and Microsoft.

"I can't figure out why people want to own unprofitable companies with no prospect of making money in the near future. That's just trading paper," Mergler said.

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And Adam Adelman, senior analyst with Philippe Investment Management, a New York-based money management firm, said it is overly simplistic to say that all techs are overvalued.

Overall though, he thinks that much of the easy money in the tech recovery has probably been made so investors should probably temper their expectations somewhat and not get accustomed to 70 percent gains in 12-month periods.

"There are some very high expectations that are priced into a lot of tech stocks. The risk-return scenario is not very encouraging," Adelman said.