Silicon Valley is humming. After four consecutive years of strong economic growth, California's high technology heartland, is setting records for the creation of new businesses, jobs and wealth. The success of Silicon Valley - a 50-mile stretch of land bounded by the Pacific Ocean and San Francisco Bay - prompts the question: how long can this go on?

Some industry leaders see no end to it. They claim the valley has entered a golden age in which the business cycle has been all but abolished.

Others are not so sure. Can such a torrid rate of growth be physically sustained? Could the valley's magic formula be undermined by social changes?

At present, optimism reigns. Silicon Valley is home to an estimated 7,000 high-tech companies, with a dozen or so new ventures being created each week. Venture capital funds are pouring in at an unprecedented rate.

New companies in the valley attracted more than $1 billion in venture capital investments in the second quarter of this year - an all-time record, up 34 per cent from the same period last year, according to Price Waterhouse, the consulting and accountancy group.

Start-ups and other fast-growing companies helped to create 125,000 new high-paying jobs over the past four years, including over 50,000 last year.

With unemployment at a mere 3.1 per cent and exports rising at about 30 per cent a year, the valley is being hailed as the zenith of US capitalism and the model of entrepreneurial industry. Wall Street is caught up in the euphoria. The market value of quoted Silicon Valley companies totals nearly $450 billion.

Silicon Valley is emblazoned on the covers of US business magazines. Business Week declares the valley to be an "economic miracle" and the "quintessence of the American dream". In a recent survey of residents, 76 per cent are convinced that the good times will continue. This is the highest "feelgood factor" since numbers were first collected in 1987.

The Internet is driving this new wave of growth in Silicon Valley. Software, rather than the valley's traditional semiconductor and computer hardware businesses, is growing fastest. This has led some economists to declare that the region is no longer dependent upon capital spending cycles, and is thus impervious to general economic trends.

Economists from the University of California, Los Angeles, issued a warning in June that Silicon Valley was bursting at the seams.

"The valley appears too crowded, too high-priced and too hemmed in by restrictions (on building development) for these growth rates to long endure," says Mr Tom Lieser, author of a UCLA study of the California economy.

Local politicians fear Silicon Valley will become a victim of its own success, as high prices and overcrowding force companies out. It would not be the first time. Waves of outward migration from the valley during previous "boom times" helped to create centres of high-tech industry in Austin, Texas, Phoenix, Arizona, and other parts of the US.

Another problem that threatens future growth is an acute shortage of engineers and software developers. Growing companies in the valley must now struggle to find qualified people.

Yet Silicon Valley has long been a magnet to "techies" from all over the world and the US shortage will surely be filled by immigrants, so long as the US government does not adopt the kind of restrictions debated by Congress last year. These could have cut immigration by 40 per cent. That debate served as a wake-up call to valley executives, some of whom have become active campaigners on the immigration issue.

Silicon Valley may welcome immigrants and be largely free of ethnic or racial prejudice, but it is no social paradise. Intense competitiveness, especially among start-up companies, leads to a gruelling schedule. The 80-hour working week is not unusual and it takes its predictable toll on family life. Yet there are few complaints among those intent on building the next Yahoo! or Netscape.

What motivates this dedication? The answer is twofold: status and money. Status among hightech peers is achieved by creating and marketing innovative technology, by "making a difference". This, in turn, is measured largely by wealth. "Money is the way we keep count," those from the valley will say.

The conspicuous wealth of a significant segment of the valley's population is one of the biggest changes to occur over the past few years.

Among the early generations of high-tech entrepreneurs, only a few made a lot of money and most were careful not to flaunt their wealth. Mr Jerry Sanders, founder of Advanced Micro Devices, used to cause a stir in the 1980s by driving a Rolls-Royce. Now there are millionaires aplenty. More than 20,000 were created just last year, according to Business Week.

For most high-tech workers, stock options represent the fast track to financial security. Rapidly rising high-tech stock prices have made these options especially lucrative over the past few years and have done much to create the valley's optimism.

A reversal of Wall Street's bull market could, however, wipe out many of these paper gains. Top industry executives are concerned about the effect this might have on employee morale and productivity.

Microsoft warned financial analysts last month that a prolonged slump in the stock market could force it to pay much higher salaries to compensate for the lack of stock option bonuses. California high-tech salaries are rising at five times the national average.

Small wonder the valley is becoming a media-sensitive society in which it sometimes seems getting the chief executive's face on the cover of a magazine is just as important as shipping new products. So long as the positive images prevail, there is hope that investors will not lose faith.