(Bloomberg) — It looked like a reckoning was coming on Aug. 5 when the Nasdaq 100 plunged more than 5% in the seconds after trading began, confirming fears that a technology bubble was about to burst.

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Barely two weeks and several rounds of reassuring data later, virtually all of these worries have been quickly swept aside.

As it turns out, the worst intraday sell-off in technology stocks since 2022 acted like a reset for investors, dampening valuations somewhat – and they got back in.

“The August sell-off was the best buying opportunity for technology companies in about a year,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial. “In an environment where growth is slowing, large technology companies offer investors the opportunity to invest in companies that are not only growing strongly but are also better insulated from the economic backdrop.”

Since then, stocks have made a sharp turnaround as data signals continued U.S. economic growth and easing inflation, reigniting speculation about a soft landing that has driven much of this year’s stock market gains.

The Nasdaq 100 has rallied over the past seven sessions, posting its biggest weekly gain since November and moving back toward its July 10 record high.

Leading the rally were the same heavyweights that had dragged the stock down. Nvidia Corp. has recovered about 26 percent from its low this month, adding more than $600 billion to its market value. Apple Inc. is on an eight-day winning streak, just 4 percent away from a record. An index of the Magnificent Seven technology giants has gained more than 10 percent.

That’s not to say that concerns about the sector’s longer-term prospects have disappeared. But some of the worries that contributed to the decline – high valuations that have become increasingly difficult to justify and fears that the Fed will have to go into recession-fighting mode – have receded.

“Given their market positions, their exposure to AI, their large cash holdings and their high earnings, the stocks of the big technology companies deserve a valuation premium,” said Robert Stimpson, co-chief investment officer and portfolio manager at Oak Associates. “We view technology as a company with both offensive and defensive characteristics.”

The rally got fuel from many quarters. Hedge funds took advantage of last week’s sell-off to stock up on technology stocks, as well as shares in other sectors such as communications services and consumer goods, according to data from Goldman Sachs Group Inc.’s prime brokerage. Companies themselves were also aggressive buyers, with Goldman’s buyback arm reporting record orders from companies. Retail buyers also rushed into the market, recording the most net buying activity in the past 12 months, according to data from Vanda Research.

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Of course, the macroeconomic environment has changed rapidly. Weak employment figures are now being overshadowed by a rise in retail sales. Things could well be reversing again.

But the companies continue to generate high profits. Although the tech giants’ profit growth is slowing, it is still enormous by traditional standards, allowing them to continue investing heavily in AI. According to reports from four of the five largest U.S. technology companies – Microsoft Corp., Alphabet Inc., Amazon.com Inc. and Apple Inc. – the group’s profit growth is expected to rise 35 percent in the quarter to June, compared to 13 percent for the S&P 500 Index.

The capital spending boosted by those earnings bodes well for Nvidia, the chipmaker that has benefited most from AI expansion. Nvidia is scheduled to report earnings on August 28, and investors will be paying close attention to what CEO Jensen Huang says about the outlook.

While Nvidia is expected to continue to make big profits, it’s not yet clear whether AI will deliver big, profitable breakthroughs for the companies investing in it. And those doubts could continue to overshadow the stock despite the recent rally.

“There are more concerns about buying large technology companies in bulk without clear payback periods for AI,” said Ameriprise’s Saglimbene. “That will likely continue in the coming quarters.”

(Updates inventory movements continuously.)

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