Markets Get a Fed Bounce -- and These Mega-Stocks Were Big Winners

The stock market got a nice recovery on Wednesday, spurred by a measured response from the Federal Reserve with respect to its monetary policy going forward. The Fed walked the fine line between doing too much or too little to address ongoing concerns about inflation, and investors were pleased with what they saw. After having been down much of the day, the S&P 500 (^GSPC -0.21%), Dow Jones Industrial Average (^DJI 0.05%), and Nasdaq Composite (^IXIC -0.33%) finished with sizable gains.

Data source: Yahoo! Finance.

Given how the Nasdaq has been the hardest hit by worries about a potential Fed overreaction to inflation, it's not surprising to see that it was the biggest winner among major market benchmarks. Indeed, within the Nasdaq, you could find several pockets of strength. The most significant was in the semiconductor space, where giants AMD (AMD 0.41%) and Nvidia (NVDA 0.83%) put up big share-price advances. Below, we'll look more closely at the chipmakers to see why they were on the upswing after the Fed news.

Image source: Getty Images.

AMD gets moving higher

Advanced Micro Devices finished the day up 8%. That recovered almost half of the semiconductor maker's losses since its mid-November highs.

AMD has done an amazing job of finally coming into its own as a major player in the global tech market. After spending years in the shadow of rivals, the company's products have seen heightened demand in recent years. Moreover, the trends toward digital transformation have dramatically boosted AMD's prospects, with customers seeking to take advantage of the capabilities of its most modern offerings.

Yet many had worried that short-term factors were too big a part of the gains that AMD's stock had seen lately. With the potential for interest rates to rise, some feared that AMD's future growth couldn't come fast enough to warrant the stock's price.

Today's rebound showed that investors have confidence that the Fed can manufacture a Goldilocks scenario in which any rate increases are modest and slow, preserving and extending a prospective expansion. That's exactly what shareholders in a growth stock like AMD want to see, and they're excited to see whether the chipmaker can live up to its full potential.

A great picture from Nvidia

Similarly, Nvidia shares finished up 7.5%. That was also about half of the losses it had suffered in the past several weeks, with many of the same factors coming into play.

Nvidia has been an innovative force in semiconductors, with products helping to make applications possible for artificial intelligence, data centers, graphics processing, and cryptocurrency mining. Those have all been high-growth areas, and Nvidia has tapped into them successfully.

Interestingly, one Wall Street stock analyst seemed to think that AMD had better prospects than Nvidia. Analysts at KeyBanc made favorable comments about how strong demand for cloud computing services is in turn boosting the appetite among tech buyers for semiconductor chips, and they pointed to AMD as being the potential big winner even as Nvidia sought its share of the fast-growing pie.

In the end, both Nvidia and AMD will likely have a lot in common when it comes to share-price performance going forward. As long as the industry environment remains favorable and the two companies get support from accommodative monetary policy, there's room for both AMD and Nvidia to move back to and surpass their old record highs.