Why Tech Has Room to Run

The S&P 500 information technology index rose 61% in 2009, so it's reasonable to ask if, in 2010, tech stocks have anywhere to go but down. Dig into the data, though, and you'll find reason for optimism. Prices are at about the same level they were in early 2008, and after recent boosts in earnings forecasts, the companies trade at about 14.8 times projected earnings, down from 16.9 two years ago.

Last year's tech juggernaut was packed with lower-quality stocks, particularly in semiconductors, that had been battered in the downturn, says Fidelity Select Technology manager Charlie Chai. This year he predicts the leaders will be higher-quality companies "that put up sustainable growth." That outlook assumes a continued economic recovery. If no large bumps in the road emerge, here's how pros think tech stocks will play out.