What happened
Shares of NVIDIA (NVDA 2.76%) and Advanced Micro Devices (AMD 1.11%) rose sharply on Tuesday, as semiconductor stocks climbed alongside a broad-based rally in the Nasdaq Composite (^IXIC -1.22%).
By the close of trading, the chipmakers' stock prices were up 8% and 6.2%, respectively.
So what
Following a roughly 10% pullback from its highs in February, the Nasdaq Composite rallied more than 3% on Tuesday. Market prognosticators credited a slight decline in interest rates as one of the reasons for the sharp upward move, but a more compelling reason is that many great stocks had simply fallen to levels that long-term investors found intriguing.
AMD and NVIDIA popped along with other tech stocks on Tuesday. Image source: Getty Images.
On Monday, Bank of America analyst Vivek Arya argued that NVIDIA and AMD were trading at attractive prices and reiterated his buy ratings on both stocks. Arya said that "a robust gaming environment" bodes well for sales of the chipmakers' graphics processing units (GPUs).
Now what
In addition to strong gaming-related sales, higher sales of laptops and other mobile devices during the coronavirus pandemic have contributed to a chip shortage. This imbalance between soaring demand and limited supply is likely to help AMD and NVIDIA fetch relatively high prices for their chips, boosting their profit margins in the process. Today's gains, in turn, might be just the beginning of a larger rally in these semiconductor leaders' share prices.
