Moore's Law is alive and well. Intel upheld the computer-industry maxim that processing power doubles every 18 months by unveiling its 2-GHz Pentium 4 chip at its semiannual developer's conference in San Jose, Calif., on Monday. The company debuted its 1-Ghz Pentium III chip about 18 months ago.

Usual-suspect PC makers quickly followed Intel's announcement with news about systems based on the new chip. Dell Computer unveiled its 2-GHz OptiPlex commercial system at a base price of $1,866. It includes 128 Mbytes of RDRAM and a 20-Gbyte hard drive. Gateway Inc. launched a similarly configured Professional S2000 system at $1,999. On the consumer side, Compaq weighed in with its 2-GHz Presario 7000T system at $1,727. Most PC vendors will follow suit with a range of business and consumer offerings based on the 2-GHz Pentium 4, which Intel is selling at a bulk price of $562.

Intel officials say the 2-GHz mark isn't merely a psychological milestone, but a gateway to next-generation applications, such as real-time streaming audio and video in the office and peer-to-peer computing. "The experience of the PC industry has proven repeatedly over the years that usage models evolve and new applications emerge," says Louis Burns, VP and general manager for Intel's Desktop Platforms Group.

But some analysts say Intel, which last month reported a 76% drop in second-quarter net income, is becoming a victim of its technical prowess, suggesting that the company's arrival at this latest benchmark was less a steady march than it was a headlong careen fueled by cutthroat competition with Advanced Micro Devices Inc. AMD recently debuted its latest Athlon chip at 1.4 GHz.

Others question whether the PC market is ready for desktop systems that are more powerful than yesterday's mainframes. "The difference between 1.4 GHz and 2 GHz will be lost on the average user because right now very few applications can exploit that difference," says Mark Shifrin, a Technology Business Research analyst. Shifrin, however, says he's cautiously optimistic that the impending release of Microsoft's Windows XP operating system will boost demand for state-of-the-art PCs.

But further clouding the picture for Intel and its original equipment manufacturer partners is the fact that the PC market remains mired in a prolonged slump. Average selling prices fell as much as 19% through the first six months of this year, according to a recent report by U.S. Bancorp Piper Jaffray. As it launched its new chips Monday, Intel slashed prices on lesser offerings. For instance, the company cut the price of its Pentium 4 1.8-GHz chip, state-of-the-art until Monday, 54% to $256. More price cuts are expected later this year.

For their part, PC makers say the horsepower represented by 2-GHz chips will be quickly absorbed by a networked computing environment in which client machines are burdened by more and more tasks. "With companies becoming engaged in things like online collaboration, PCs will be running a lot of background tasks, such as virus checking, that are going to consume a lot of horsepower," says David Hand, director of worldwide marketing for Dell's OptiPlex and Precision systems. In the short term, however, Hand concedes that most businesses that buy Pentium 4 systems will opt for lower priced 1.5-GHz or 1.7-GHz chips. Says Hand, "That still gives you incredible bang for the buck."