The second coming has arrived.

Don't believe us? Take a trip to London's Oxford Circus, look for Hanover Chapel's Victorian façade and pass between its ionic pillars.

Inside you will find a mumbling congregation and a host of welcoming and black-garbed service assistants, offering advice on mysteries beyond the layman's understanding. And all show deference to a simple icon. An apple.

Tech fever is back.

More than a century after the chapel was closed to Christian ritual, it has become a centre of technology-age homage – that paid to Apple Computes. Saturday's opening of the site, Apple's first retail store in Europe, attracted a queue of 5,000.

Even the language surrounding the opening is religious in tone. Shoppers talk of their "worship" of the brand, while an Apple spokeswoman tells Times Online of an "evangelical" fascination for its products. On Wall Street, analysts propose a "halo effect" – that the success of Apple's iPod music player is promoting attention in the company's other products.

Such hopes inspired an 11 per cent rise in Apple stock yesterday and shares in other technology stocks are equally in demand. On Friday, shares in PortalPlayer, which develops iPod software, surged by nearly two-thirds on their first day of trading.

Google's share price stands at nearly twice its launch level in August, giving the stock a price/earnings ratio approaching 200, ten times the market average, and the kind of valuation more typical of the bubble years of the late 1990s.

And therein, perhaps, lies the rub. After the trauma of the tech stocks bubble bursting four years ago, is this new enthusiasm, based on faith in the future rather than hard financial figures, all be too good to be true? Might we be falling for the same three-card trick once more?

Some of the big dot.com names are back in the headlines. Mary Meeker, the Morgan Stanley analyst noted for her bullish valuations five years ago, is back in the headlines after adjusting her valuation of Google stock to $168 – around its closing price last night – from $132 and saying that even this "could prove conservative".

Vodafone is trumpeting its launch into 3G, BT is spending billions on new infrastructure, and the rest of the dot.com sector is awash with takeover rumours – the latest surrounding TheStreet.com.

It is just like old times again.

"Don't say that," says Nick Evans, fund manager of Framlington's NetNet technology fund, whose units have grown in value by 40 per cent in the last two years. "I struggle to justify the Google valuation at the moment."

But that is not to say that technology stocks - dot.com, computer maker, chip developer and all - should be avoided. "You have to break down the sector and find the companies that offer profitable revenue growth, which have pricing power," he says.

Juniper and Cisco Systems, the makers of telecoms infrastructure, for instance, have the unique products and market strength to exploit investment by telecoms companies in services such as voice over IP, which allows telephone calls to be handled over the internet. BT's spending is sufficient for it to account alone for nearly 4 per cent of total UK fixed capital investment.

Furthermore, given the potential for technology markets, even companies with higher price/earnings ratios might look cheap in a couple of years.

At Evolution Securities, Lorne Daniel, a technology analyst, talks of the improved prospects which await the dot.com survivors now that the shake-out which claimed the likes of Boo.com and Pets.com has passed.

"Underlying all the hype, there were some strong business models. This idea of internet companies being able to take out all the costs of physical infrastructure."

Consolidation and collapse has, in the UK, left sector specialists with pricing power.

"Now you have, say, one company, Torex Retail, providing retail systems," Mr Daniel says. "You have one providing accounting software, one providing medical software support. And all operating in a global space."

UK technology companies, furthermore, attract less bubble-type values than the likes of Google and eBay in the US.

"They are highly rated because Americans always think they will beat the world."

And to the victor in internet markets there would appear to be rich spoils. Forrester Research, in Trends 2005, talks of online retail hitting £115 billion in Europe alone by 2009, four times the level forecast this year.

In the UK, e-commerce will rise from £9.8 billion to £28.0 billion despite the country's market rated as relatively mature. "Tesco, the UK's largest supermarket, is the most successful online grocer in the world," Hellen Omwando, one of the report's authors, notes.

Data yesterday from National Statistics showed that while business's online revenues doubled to £39.5 billion last year, only 5 per cent of companies used the internet for sales. More than two-thirds of UK businesses had, by the end of last year, yet to set up a website. That shortfall is regarded by analysts as representing untapped potential rather than internet scepticism.

Yet there remain doubts. Not, perhaps, over the future of e-commerce but its ability to enrich participants. William Nordhaus, a Yale economist, estimates that only 2.2 per cent of the benefits of new technologies were, between 1948 and 2001, captured by innovators. Much of the rest was swallowed up in price cuts which the technologies allowed and which were passed on to consumers.

Indeed, just because a company, such as Google, has excellent prospects does not mean it has the potential to justify a price earnings ratio of 200 times.

David Schwartz, a stock market historian who foresaw the crash in the Nasdaq below 2,000 when it was standing at more than 5,000, and who predicted this autumn's upturn in stocks, is equivocal about Google stock. "I know how it looks, but maybe those who are buying it are right. Maybe it will be just phenomenally successful," he says.

However, he has a more definite opinion about the future of stock markets in general. "With rallies after stock market falls of 50 per cent, some run out of steam after a few months and the rest last perhaps 30 months.

"Whether the current rally will end on its 30-month birthday in March next year, I do not know. But the Nasdaq I do not think will end 2005 in blue ink."

It will be another year of decline for the world's principal market for technology stocks. Unless, of course, the Apple deity proves almighty after all.

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