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After three years of agony, dot-com stocks have been staging a rally this year, although it's being done a little more carefully than in 1999, when analyst valuations were as outrageous as a press conference by Iraq's former information minister.

In December 1998, CIBC Oppenheimer's Henry Blodget predicted Amazon.com's stock would rise from its then-price of $242.5 per share, despite $45 million in losses and $154 million in sales for the previous quarter, to the insane price of $400. Two days later, Amazon hit that price point and Blodget was Wall Street's new Nostradamus.

As of this writing, Amazon.com's stock is worth $32.60 per share and Henry Blodget is barred for life from the securities industry for life after paying $2 million in fines and $2 million in disgorgement from stocks that he publicly praised while privately scorning.

Karma always has the last word.

But after three years of hemorrhaging, Amazon.com and its fellow Internet commerce survivors have been rallying lately, posting strong gains for the first five months of the year. As of May 14, the Nasdaq Composite Index was up 16.5 percent for the year. Amazon.com was up 50.8 percent year-to-date, Yahoo up 49.5 percent, and CNet Networks up an incredible 61.6 percent. Even Internet companies in the battered travel industry have done well. Hotels.com, despite having arguably the worst commercials on television, is up a whopping 109.7 percent since January 3.

And some technology stocks are thriving. nVidia, a maker of graphics chips, has picked up 97.5 percent this year. Among technology bellwethers, Intel has gained 28.8 percent this year, Oracle 19.5 percent, Cisco Systems 27.9 percent and IBM 16.4 percent.

The consensus is that there's a combination of bargain shopping, renewed faith in the companies that survived the last three years of agony and positioning for the next wave of a technology rally.

"What we have here is, the survivors have been in play for some time, and I think the market finally got rid of that excessive baggage and the fact that we had that speculative bubble is over, and we can concentrate on the survivors," says Peter Cardillo, chief strategist at Global Partners Securities in New York.

The tech and Internet dregs may be gone, but do the remaining companies deserve a boost just for staying alive? "I think people realized they sold off too far given that these companies had good business prospects ahead of them," says Christopher Traulsen, senior fund analyst for Morningstar. "The question now is whether they have the good prospects already priced into them."

Executives at CNet Networks believe the rise in the stocks of their company and other survivors is due to proving they can survive the storm. "We are leaders in our category and we are far past questions about whether you are going to survive," says Robert Borchert, CNet's vice president of investor relations. "The question these days is how quickly can you regain revenue growth and a profit trajectory."

CNet is expecting a slight rise in revenue this year due to projections of an increase in online ad revenue this year, for the first time in years. "Most [research] says online ads are stable to slightly up over last year," says Borchert. "The question two years ago was how far down can you fall. The question we are being asked today is how quickly can you grow and when."

Not so fast, says Mike Weiner, managing director for Banc One Investment Advisors. "I believe it's still true that well over half the people investing today got started in 1997 and they don't want to miss that next big run in tech, and have seen that interest in the survivors has snowballed and the survivors have done really well, and it's become self-fulfilling," he says.

While the run up has been a combination of fund managers and individuals waiting for these survivors to take off again, Weiner doesn't like the stock valuations he's seeing. "There's no doubt eBay has done it right, but its current price is 25 times trailing revenues," he says. "That's higher than Microsoft ever was, and that's the kind of thinking folks abandoned in 1998-99 to their chagrin, and it seems they are doing it again."

eBay, America's electronic flea market, is the one company everyone seems to agree is poised to be a winner. The company has been profitable on a net basis since it went public, and it currently has $1.1 billion in cash. "They are certainly poised for further growth, they've mastered a lot of the negative publicity about them and their revenues seem to be on target and growing again," says Cardillo.

But its $97.63 per share price gives it a market cap of $30 billion, for a price-earnings ratio of 97. Those are the kind of valuations frequently seen at the height of the Internet in 1999 and 2000.

Weiner is even more nervous about companies whose prospects don't look as rosy as eBay's. He cites Hotels.com as an example. "What loyalty does it engender? What does it do no one else can do?" Weiner says. "They are survivors and they are flying but we look at them and say what are we missing.? …When we look at a Hotels.com we can't find a sustainable business model."

The rally seems to be driven largely by professional investors. Peter Lynch is buying tech stocks but won't say which. The Pimco PEA Innovation Fund bought both eBay and WebMD late last year, the Smith Barney Peachtree Growth Fund has bought Amazon.com and the Frank Russell Tax-Managed Mid & Small Cap Fund has picked up shares of EarthLink.

"I think some funds are getting back into tech stocks, but retail buying is still very scattered," Cardillo says. "There's a hesitancy on their part, from being burnt and losing all their money. It's going to take a lot of convincing for the retail individual to come back into the marketplace."

Given the sector's steep, fast climb, it's not unreasonable to wonder if short-sellers will start targeting these stocks. But so far no one is shorting these stocks, as far as the market watchers can tell. "Good short people don't short stocks until they are going down," says Weiner. "You wait until it breaks. That's how many fortunes have been lost, is shorting it when it's going up."

Meanwhile, funds and money managers don't want to overlook a market run, particularly since history shows that the great proportion of a bull market's gains typically come in the beginning. "I can only imagine a lot of folks don't want to miss the next run, which is why there have been so many sputtering starts and stops," Weiner says. "You don't want to miss that next six-bagger, so you take a chance this could be it."