NEW YORK (CNN/Money) - Intel is spicing up the typically boring dog days of summer. Unfortunately, it's also confusing the hell out of the market.

Last Thursday, CEO Craig Barrett told Dow Jones Newswires in Taipei that the company was seeing a gradual pickup in PC demand though not a full fledged-recovery. All in all, pretty decent news and it sparked a 3.2 percent rally in the Philadelphia Semiconductor Index, or SOX.

The very next day, the world's largest semiconductor company raised its third quarter sales guidance by a substantial amount.

Chip chip hooray! The SOX shot up as much as 5 percent Friday morning.

On the company's conference call Friday, CFO Andy Bryant said the company was seeing strength across all its PC chip product lines.

Hello recovery!

But Bryant also bemoaned having to raise guidance so soon in the quarter, saying that it was too early to tell whether September would be as strong as July and August.

Uh-oh. The SOX wound up finishing Friday with a gain of less than 1 percent.

And to top it all off, Barrett further rained on the semiconductor recovery parade by saying in a Reuters interview in Malaysia Tuesday that the third quarter sales pickup could be just temporary.

Boo-hoo. This latest news caused the SOX to swoon 2.6 percent as of midday Tuesday.

So investors have every right to be befuddled. This very well might be the most tepid positive preannouncement by a major company in the history of Wall Street. What gives?

It appears that Barrett and Bryant seem to be trying to calm down investors, which, like the Pointer Sisters, are so excited. (And they just can't get hide it.) Intel (INTC: Research, Estimates), after all, is the best performing stock in the Dow this year, up 75.6 percent. The SOX is up 51 percent.

"The clear message from Intel to Wall Street is 'Let's not get carried away.'" said Sunil Reddy, manager of the Fifth Third Technology fund, which owns shares of Intel.

Realistically, Intel has reason to be more optimistic than it is willing to admit. Patrick Ho, an analyst with Moors & Cabot, an investment bank focusing on tech and biotech stocks, said that Intel's quarters are typically "back-end loaded" which means that most of the business comes in the latter part of the quarter.

If Intel's business in July and the first part of August was so strong to justify raising guidance, odds are that Intel should come closer to the high end of its new sales range since September is typically the strongest month of the third quarter.

The third quarter is usually strong for Intel due to a pickup in chip orders tied to the crucial back-to-school PC shopping season.

And the fourth quarter tends to be even better as corporations go through their year-end budget flushes and consumers gear up for the holiday shopping season.

But the big unknown remains 2004. And that's what seems to be scaring Intel.

The only reason that shares of Intel, and for that matter shares of most semiconductor stocks, have runup so dramatically is because investors are betting that there is a real, sustainable recovery in information technology spending. The hope is that estimates for next year are way too low.

A slightly better than usual second half of this year, followed by more talk of sluggish demand in 2004 will not be enough to satisfy Wall Street.

"The big question heading into the fourth quarter and beyond is whether corporate profits hold up enough to cause a broad-based recovery in IT spending," said Krishna Shankar, an analyst with JMP Securities. "IT spending is probably at a bottom but the trajectory of the recovery is debatable."

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So while it might look like Intel is, on the surface, sending a mixed message to investors, it really isn't. Barrett and Bryant aren't being overly coy. It probably is too soon to tell how strong a year 2004 will be.

Even if Intel had more confidence that 2004 will see a major pickup in spending, there's little upside to declaring the beginning of the recovery just yet. But there's a lot of downside to being overly optimistic.

Shares of Intel surged 54 percent in the fourth quarter of 2001 on hopes that the tech sector's woes would finally end in 2002. During its third quarter of 2001 earnings report that October, Intel COO Paul Otellini called the second quarter of 2001 the bottom for Intel. It wasn't. Sales slipped again in the second quarter of 2002 and Intel's stock plunged 50 percent last year.

"Intel does not want to be the company that calls the turn. Why stick your neck out if you don't have to?" said David Wu, an analyst with Wedbush Morgan Securities. "If you're right nobody will remember and if you're wrong people will ask a lot of questions."

JMP Securities' Shankar owns shares of Intel but his firm has no investment banking relationship with company. Other analysts quoted in this piece do not own Intel and their firms do not do investment banking for Intel.

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