Nvidia (NVDA) stock rallied more than 10% on Wednesday following better than expected guidance from peer AMD (AMD) and a bullish call from analysts at Morgan Stanley following a more than 20% drop in the stock.

AMD's quarterly results out late Tuesday quelled some concerns that AI trade may have run its course as investors rotated out of Big Tech over the past month, as the company beat expectations on the top and bottom line and posted a better than expected outlook for the third quarter.

"The fear of some of this momentum not lasting, or maybe fear that the revenue trajectory wouldn't be there over the next 12 months or so — I think that is starting to ease" CFRA senior equity analyst Angelo Zino told Yahoo Finance on Wednesday.

AMD stock rose as much as 6% in early trading.

Chip peers including Broadcom (AVGO), Micron (MU), Taiwan Semiconductor (TSM), ASML (ASML), and Super Micro (SMCI) were also rallying on Wednesday.

Nvidia stock was also boosted on Wednesday by a note out from Morgan Stanley analysts led by Joseph Moore, who moved the stock to a 'Top Pick' after shares after a recent pullback from record highs reached in June.

The firm wrote the roughly 25% in Nvidia stock "selloff presents a good entry point as we continue to hear strong data points short term and long term, with overblown competitive concerns."

Morgan Stanley cited five main drivers of the recent decline in Nvidia — spending plans, competition, export controls, supply chain fears, and valuation worries — but said, "Through those concerns, the earnings environment is likely to remain strong, for Nvidia and for the whole AI complex."

The firm maintained its Overweight rating at $144 price target on the stock.

Nvidia stock is still up more than 130% this year, outpacing the Nasdaq's more modest 17% gain. The company is set to report its next quarterly report on Wednesday, Aug. 28.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.

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