What happened
After a brutal decline, tech stocks rebounded on Tuesday. By the close of trading, shares of Apple (AAPL -0.48%), Facebook (META -1.86%), and Square (XYZ -1.88%) were up 4.1%, 4.1%, and 11.5%, respectively. Many other high-growth stocks rose even more.
So what
The prices of many tech stocks soared in 2020, as investors sought out businesses that could continue to generate sales growth during the coronavirus crisis. Yet in recent weeks, as COVID-19 case counts have begun to decline, we've seen a rotation out of high-priced growth stocks and into less expensive companies.
Investors seemed to be assuming that many tech stocks would see their sales growth slow dramatically once the pandemic subsides. In turn, the Nasdaq Composite (^IXIC -1.62%) declined by about 10% since its highs in February. Many premium-priced growth stocks fell much more during this time.
Many Nasdaq stocks rallied on Tuesday. Image source: Getty Images.
Judging by today's gains, however, some investors thought the sell-off was overdone. Bargain-hunters jumped at the chance to buy high-quality businesses like Apple, Facebook, and Square at more attractive prices, helping their prices begin to rebound on Tuesday.
Now what
Today's broad-based move in the Nasdaq suggests that the rally could just be getting started. But rather than day-to-day price swings, investors should focus more on the long-term fundamental growth drivers of the businesses in which they invest. And in this regard, the future appears bright for Square, Facebook, and Apple.
The growth of e-commerce and digital payments should continue to fuel Square's expansion for many years to come. Facebook, meanwhile, stands to benefit as advertising shifts increasingly to social media platforms. Finally, Apple remains a financial powerhouse -- one that's poised to reward its shareholders with a growing dividend stream, as rising sales of its iconic devices and popular services drive its earnings ever higher.
