Microsoft is reported to be seeking a five per cent stake in Facebook for up to $500m (£250m), raising concerns of another internet investment bubble.

Last year Yahoo bid $1bn (£500m) for the social networking site’s entire business. Now Microsoft’s reported offer pushes its value up to $10bn (£5bn).

Technology stock prices are also at peak levels.

Last week Google, Apple and Research in Motion shares all reached record highs. And the technology-dominated Nasdaq index is up 18 per cent so far this year, hitting higher levels in July and August than at any time since 2001.

Rocketing company valuations in unproven technologies or business models should spell caution, said Ovum principal analyst David Bradshaw.

“Every 10 years there is some sort of overheating then a clawing back, and it looks like we are in the early run-up to a Web 2.0 bubble,” he said.

But not all market rises are cause for concern.

“The increase in technology stock share prices is more likely down to Wall Street’s belief that they will not be hit by the sub-prime mortgage crisis,” said Bradshaw.

The IT market is also better-placed to withstand a slowdown than five years ago, because it has more solid foundations.

A technology market downturn today would be very different to the dot com crash, said Advent Partners venture capitalist Martin McNaire.

“We now have hundreds of millions of people with broadband connections transacting online, tried and tested marketing means, and an installed base of 800 million PC users that we did not have the first time around,” he said.

No single company valuation leads to a bubble, according to Peter Rowell, chairman of investment bank Regent Associates.

“A good indicator is when initial public offering and flotation levels are high, and we’re not seeing that on either side of the Atlantic,” said Rowell.

With annual growth at about 6.5 per cent – just above that of the overall gross domestic product – the IT sector is in one of the most stable periods in its history, he said.