NEW YORK (CNN/Money) - Intel and Microsoft are the Bogey and Bacall of the technology world, or for the younger readers, Ben and J. Lo.

As the makers of the dominant chip and operating system that power PCs, it goes without saying that the results of Intel and Microsoft this week will go a long way toward determining whether the recent rally in technology stocks is for real, or just another false start.

On Tuesday, Intel (INTC: Research, Estimates) posted revenue growth of 3 percent from a year ago, and a 7 percent increase in earnings per share, to 16 cents, two cents ahead of estimates according to First Call.(see more)

Microsoft (MSFT: Research, Estimates), due to report Thursday, is expected to report a 12 percent increase in quarterly revenue, and a 6 percent increase in earnings per share, to 46 cents.

An earnings surprise isn't out of the question for Microsoft either, which has a history of low-balling expectations. But what investors need to see will be concrete proof that the corporate spending outlook is brightening. And while some smaller tech companies have recently indicated that corporate demand is improving, few expect Intel and Microsoft to start celebrating the dawn of a new bull run in tech.

"You're going to see a continuation of this cautious tone," said Mark Schultz, a portfolio manager for M&T Asset Management, which oversees the Vision family of mutual funds. "Don't tell Wall Street you're going to do XYZ and fall short on the Z. You'll get punished." Schultz owns both stocks in the Vision Large Cap Core fund.

But Schultz adds that another reason companies won't promise much is that there still are only ambiguous signs of improving demand. What's more, both companies still face major challenges. First and foremost is the fact that they are closely tied to the personal computer business, a subsector of technology that is nearing saturation.

For Intel, there are concerns about pricing in an industry that is essentially a commodity. The only other differentiating factor besides price is speed, and rival Advanced Micro Devices (AMD: Research, Estimates) is aggressively competing with Intel on both fronts.

So unless there is a broad increase in demand for personal computers, it's unlikely that Intel will be able to show any significant signs of revenue recovery -- analysts are expecting sales to increase just 5.7 percent in 2003.

Indeed, in the conference call Tuesday night, Intel forecasted revenue for the current quarter of $6.5 billion to $7 billion, the low end being slightly below the current estimate of $6.6 billion. And management said it expects capital spending for the year to be between $3.5 billion and $3.9 billion, well below $4.7 billion in 2002 -- a sign perhaps that it does not expect a big increase in demand.

"What can help Intel is a corporate PC upgrade cycle. People have been expecting one for some time but it is yet to happen," said Jay Wong, co-manager of the Payden U.S. Growth Leaders and Payden Small Cap Leaders funds. His firm owns both Intel and Microsoft.

Microsoft has arguably done a better job expanding into growth areas, including video games and wireless devices. But the vast majority of its profit still come from the Windows operating system and Office line of applications software. And one fund manager argues that despite Microsoft's $40 billion-plus cash hoard, it won't have as easy a time making headway into new growth areas as it has with desktop software.

"They're going up against strong financially well established companies. In cell phones, they're going up against Nokia and in gaming they're going up against Sony," noted Romeo Dator, co-manager of the U.S. Global Investors All-American fund, which owns Microsoft. " It's not a given that Microsoft will be able to succeed in all these new areas."

To that end, Schultz says that while he owns Intel and Microsoft, neither are the best bets on new growth areas. He says he is more bullish on chip companies International Rectifier (IRF: Research, Estimates) and Intersil (ISIL: Research, Estimates), and also on gaming software developer Electronic Arts (ERTS: Research, Estimates).

It's highly unlikely that Intel or Microsoft will indicate that the tech landscape is getting worse. But will the absence of bad news be enough to sustain what has been a big move in tech stocks?

Intel and Microsoft are both up about 10 percent this year, and neither stock is cheap. Intel is trading at about 28 times estimated earnings for this year, while Microsoft has a P/E of 29, based on earnings estimates for its current fiscal year, which ends in June. "Valuations have run up since the bellwether stocks have had nice rallies," said Payden's Wong." The large caps look slightly overbought."

Beating diminished expectations is certainly better than missing them, of course. But until blue-chip tech companies are able to tell investors that the environment is truly improving, there's probably no reason to expect the stocks to continue racing ahead.

"I still don't think that the tech outlook is all that great," said U.S. Global's Dator. "This rally is based on sentiment, not fundamentals."