What happened

Shares of Advanced Micro Devices (AMD 1.34%) were rallying on Monday, up 4.3% as of 2:09 p.m. EDT.

There wasn't too much company-specific news on AMD, although Bank of America analyst Vivek Arya did reiterate his buy rating on the chipmaker and several other cloud-related semiconductor stocks.

Today, the beaten-down semiconductor sector was rising across the board, as investors seem to be buying the very big dip in chipmakers and other technology names that have seen significant declines year to date.

So what

AMD has been one of the brightest stories in technology over the past few years, catching up to and surpassing Intel (INTC 4.08%) on technology, and rapidly taking market share in both the PC and data center processor market.

However, that success also caused AMD's P/E ratio to expand into a growth stock multiple, making it somewhat expensive heading into the year. As long-term interest rates have risen very sharply in 2022, high-multiple stocks have come under severe pressure, and AMD's had fallen by more than half to 28 times earnings, along with the stock's year-to-date decline of 56%.

Today, however, long-term yields are falling hard, with the 10-year Treasury bond yield slumping about 4%, from 3.8% to 3.65% as of this writing. This year, the movements in Treasury yields are almost the mirror image of tech stocks, which surged over the last few years amid rock-bottom rates. So as long-term yields fell today, virtually all of tech was seeing green -- especially semiconductors. 

Yet it wasn't only a matter of the elevated multiple causing AMD's slump this year. After a pandemic-fueled boom, it looks as if the PC market is going bust. CEO Lisa Su had said previously the PC market will decline by a mid-teens percentage this year, which could hurt earnings growth this year and next.

However, the stock's 56% plunge bakes in an awful lot of this bad news. Even if we do have a recession next year, AMD's market share gains combined with its high-growth cloud computing chip business gives it good long-term prospects. In fact, BofA's reiteration of its buy rating has specifically to do with cloud computing growth. The analyst believes cloud spending should still continue in 2023, even in a macroeconomic slowdown.

Thus, it appears as though long-term investors are stepping into to buy beaten-down semiconductor stocks today. The iShares Semiconductor ETF (SOXX 0.98%) is up a whopping 4.2%, bouncing off this year's painful 40% decline.

Now what

Semiconductor stocks tend to move together, especially in times of macroeconomic stress, because the broader economy tends to heavily affect this cyclical sector.

However, AMD has done so much better than the index over the past five years -- up 423%, nearly quadrupling the returns of the iShares Semiconductor ETF -- due to its market-share gains against Intel.

With Intel investing in its technology under new CEO Pat Gelsinger in a bid to catch up in the years ahead, heightened competition is the main factor to watch for AMD specifically relative to other chip names. If Intel regains market share, it's possible AMD may be a relative underperformer in the years ahead. However, if AMD's foundry, Taiwan Semiconductor Manufacturing (TSM 3.26%), keeps its technology lead, it's possible AMD could continue to do well, even in relation to the broader sector.