While investors have piled into more defensive sectors such as health care and consumer staples, cyclical tech stocks have lagged the broader market by 8 percentage points.
But a better-than-forecast earnings season and a steadily improving U.S. economy could help revive the sector.
With earnings season picking up this week, one brokerage firm is expecting tech earnings to come in better than expected. Their forecast is based on some key metrics.
Already, bottom-up consensus Wall Street estimates are for a 4.5 percent increase in revenue for technology year over year, but a 3.8 percent decline in earnings.
In a note, Bank of America Merrill Lynch strategists wrote that "sectors with strong earnings revision, sales revision and management guidance ratios have been more likely to have a greater amount of earnings beats than misses in the subsequent earnings season."
When ranking the S&P sectors by those metrics, health care and tech look most attractive, strategists say.
IBM: Market Bellwether?
Paul Hickey, of Bespoke Investment Group, said bellwether IBM will be the company to watch when it reports results on Thursday, April 18. "When IBM beats estimates, 80 percent of the time the S&P trades higher over the next five weeks and vice versa. When IBM goes down, the S&P 500 goes down 75 percent of the time over the next five weeks."
Big Blue has "a presence in every Fortune 500 company, so if they're doing well, all their customers are doing well," Hickey added.
UBS analyst Steven Milunovich upgraded IBM to "buy" from "neutral" this week, and bumped up 2014 and 2015 earnings estimates. "We are comfortable that margins can continue to rise on an increasing contribution from high-margin software, growth initiatives, and emerging markets," the analyst wrote in a note.
Milunovich is expecting a 10 percent rise in earnings in the first quarter with revenue coming in flat.
Beyond earnings, IBM is poised to benefit from computing trends such as cloud computing. The analyst wrote IBM is "well positioned for the coming computing era because (1) integrated vendors do well early in a tech transition; (2) most of the near-term action will be in private cloud, IBM's strength; and (3) IBM's hosting capability and support of OpenStack will be helpful later in the wave."
Beware of PC Stocks
While enterprise technology firms and those ready for the next era of computing may be in better shape, companies tied to the aging PC era are under pressure. PC shipments are tumbling as fewer consumers replace aging laptops and instead buy new tablets or smartphones. That data led to a rush of downgrades of Microsoft this week.
(Read More: Tech Stocks Slammed as PC Industry Shift Intensifies)
Goldman Sachs cut the software giant to "sell" while Nomura took Microsoft shares to "neutral." BGC cut the stock to "hold" as well.
"We lower our estimates and ratings to reflecting worsening PC trends and a lack of traction in tablets and smartphones," Goldman analysts wrote in a note. Goldman analysts expect PC market share to decline to 65 percent in 2013 and 59 percent in 2014, down from 73 percent in 2012.
"As we expect Microsoft's market share in total compute to continue to erode over the next two years, we think the company's financial results also gradually deteriorate unless Microsoft successfully repositions itself as a more meaningful participant in the new era of consumer compute," they wrote.
Consensus Wall Street earnings estimates for Microsoft are too high — by 3 percent in 2013 and 5 percent in 2014, Goldman analysts say.
Nomura analyst Rick Sherlund is also a bit bearish on the PC market in the near term. But he sees better days ahead when Intel's new notebook processor extends battery life of ultrabooks — super light notebooks — and prices fall to an expected $600 level. They now retail in the $900 to $1000 range. "There's an opportunity for the stock to do better when you get to the second half of the year," he said.
Again, the growth in tablets and other mobile devices is outpacing demand for desktop PCs. "PCs are a mature market in the enterprise space and in gradual decline, while in the consumer space half the market does not need Office, so they don't need Windows and don't need Microsoft," he wrote in a note. "These consumers want an easy-to-use experience to consume content with their tablet or smartphone, with disposable apps and a rapid pace of innovation."
Sherlund of Nomura continued, "If the need is just for a tablet, Microsoft is not the first or second choice in the market and Windows 8 does not change that dynamic."
But there are still Microsoft bulls. "This story is not just about Windows," UBS analyst Brent Thill told CNBC. "Twenty four percent of their revenue is Windows-based." The bulk of their business is enterprise. "They've got a great server business, a great Office business," Thill said.
Thill has a "buy"rating with a $33 price target. "Their consumer business is weak; Their enterprise business is still very strong," he said. "And that is the real story."
PCs overall are relinquishing market shares to smartphones and tablets. But even the stocks of Apple and Google may still struggle in the coming quarters, Dan Niles of AlphaOne Capital Partners told CNBC. He notes both firms have missed revenue expectations for a string of quarters and that looks likely to continue despite the demand for smartphones and tablets.
RBC cut estimates on Apple for the first quarter as their on the ground research indicated weaker demand in March. June quarter guidance could also disappoint, as iPhone sales may be lower than expected due to product transitions in the quarter, the analysts wrote.
Instead, Samsung-related stocks could see their earnings revised higher, AlphaOne's Dan Niles said.
"Unlike Apple, Samsung is doing very well in the market," Niles said. Despite an ongoing patent dispute with Apple, the South Korean tech giant has been able to churn out new mobile devices and upgrades at a fairly rapid pace — to the delight of consumers.
And although investors tend to associate Qualcomm with Apple, Niles said Qualcomm is starting to get more interesting because "they are going to report the quarter soon and Samsung is a big driver for their business."
For Google, Niles said their challenge will be maximizing mobile platform's slim margins. Google can charge only a fraction for ads on a smartphone or tablet compared to desktops. That trend is hurting its business mix as growth in mobile will only pick up further.
The threat from social search and the "millstone" that is the money-losing Motorola acquisition are also problems, he said.
But Kevin Landis of First Hand Funds told CNBC that with only three big companies – Samsung, Apple and Google — battling it out in the smartphone space, "those are the players that really, really matter." His fund doesn't have a position in Samsung, but said the North Korea tensions may be "giving me a chance to buy it cheap."
Can Techs Lead the Market?
Specific tech names and fundamentals aside, what has underperformed may simply fare better in the future. And that could help tech investors here.
First-quarter sector laggards—tech and materials—are poised to outperform in the second quarter, according to Thomas Lee, JP Morgan's Chief U.S. Equity Strategist, in a research note. "There is a curious and historically reliable seasonality that favors 1Q laggards to lead in 2Q (materials and technology, but cyclicals broadly)," he wrote.
Additionally, better earnings across the board and a pick-up in economic growth could eventually feed through to higher spending on tech gadgets and services. And that uptick could make investors more comfortable owning cyclical sectors.
Cyclicals like tech to do better and push the broader market higher, Jim McCaughan of Principal Global Investors, told CNBC. Several macro trends are improving — to tech's benefit.
"It's a matter of low energy costs by international standards, innovation and manufacturing and the housing market turning," McCaughan said. "I think all of those things tend to point to domestics and cyclicals doing better. So I like manufacturing, technology and small and mid-caps that are very dependent on the U.S. economy."
(Read More: Strategists See Technology Gains Continuing)
—By CNBC's Justin Menza. Follow him on Twitter
Nomura intends to seek or receive compensation for investment banking services from Microsoft in the next three months.
Dan Niles has a personal and professional investment (either long or short) in MXIM, RFMD, QCOM. His firm does not own more than 2% of the shares outstanding.
MSFT is a UBS investment banking client, and the analyst, a member of his team or his household has a long position in Microsoft shares.