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A rally in


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shares helped the company recover some market value it had lost during a multiday selloff in tech stocks that exposed the volatility of tech's highfliers.

Apple shares were recently trading up $15.22, nearly 10%, to $168.98. Shares are still well below their 52-week high of $191.79 reached last Tuesday before losing 20% of their value in the next four trading sessions.

Apple led a tech rally that included other tech stocks such as


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Research In Motion

( RIMM), whose shares also suffered steep losses after the rout in tech stocks that started last week.

Buyers may be stepping into the market to pick up shares that look more attractively priced. At their 52-week high, Apple shares, for example, were trading at over 38 times analysts' consensus estimate of the company's 2008 earnings per share, according to Thomson Financial. At the current share price, that ratio has fallen to the low 30s.

"Apple is going to be a battleground, and day-to-day swings can be vicious," said Darren Chervitz, research director for the $102 million Jacob Internet Fund. The fund has currently holds 16,000 Apple shares, down from 40,000 in May.

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Part of the Jacob fund's decision to sell Apple shares stems from portfolio management. As the value of Apple shares surged, the fund has sold some shares to lock in profits and reduce its concentration in a single stock.

But Chervitz is also leery of the high expectations that investors use to justify Apple's valuation. These expectations for sales and profit growth have come under pressure as the continuing credit crisis casts a pall of uncertainty over consumer spending.

"There's no doubt that iPods and Macs are discretionary items that consumers will put off buying if they go into retreat mode," says Chervitz.

Google shares are similarly volatile because of investors' outsized growth expectations, says Chervitz. Google shares have fallen 12% since the tech stock meltdown began last week, but are still trading at roughly 35 times next year's annual estimated earnings per share.

The Jacob fund has added moderately to its Google holdings this year, increasing the number of shares it own from 11,000 in February to 12,000 by mid-August, according to filings with the

Securities and Exchange Commission


Chervitz says that


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may be less volatile because it has a more reasonable valuation. Its shares are trading at 24 times the consensus estimate for 2008 full-year earnings per share. The Jacob fund has acquired about 35,000 eBay shares this year, but has not changed this position since May, according to SEC filings.

Both Apple and Google, however, will remain attractive investments relative to their competitors if they continue to gain market share in a slower growth or even recessionary environment. Thus, while companies may spend less on Internet advertising, Google may still increase its lead over rivals like





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Chervitz says he expects the current bout of market volatility to continue until investors are assured that the problems plaguing the financial services and real estate market are not going to lead to a recession.

"This is somewhat of guessing game," says Chervitz. "But I tend to believe that the ramifications

of the credit and housing market problems will be worse than commonly expected."