The conventional wisdom up until now has been that since corporate IT budgets were slashed and stayed lean after the dot-com bust, there isn't much left to cut. Therefore, the thinking goes, the tech sector will suffer a slowdown but not an actual decline. However, market watchers are starting to seriously hedge their bets, revising their official expectations and in some cases forecasting declines.

Before a Thursday afternoon rally, probably caused by traders seeing opportunities to snap up historically low shares, the tech-heavy Nasdaq closed Wednesday at 1499, a new low for the year and a level not seen since the tail end of the dot-com bust five years ago. The new low point marked a stunning loss of confidence in the tech sector. Shares of Google sank to below US$300 for the first time in three years.

Market analysts have continued to downgrade tech shares this week. Goldman Sachs downgraded Dell to "sell" from "neutral" based on expected declines in margins and earnings. Dell remains highly dependent on sales of hardware, which is typically the first thing cut when IT budgets are trimmed.

Goldman initiated coverage of Palm with a "sell" rating. It sees limited chance for a company turnaround since increasing competition will likely drive market-share losses, and the company's new software platform strategy remains unproven.

Credit Suisse cut its share price target for Apple to $120 from $135 to reflect a more conservative outlook for the personal computer industry.