Why Nvidia Stock Is Skyrocketing Today

Shares of Nvidia (NASDAQ: NVDA) are surging on Tuesday. The company's stock gained 3% as of 12:50 p.m. ET but it was up as much as 8.4% earlier in the day. The significant rebound comes as the S&P 500 gained 1.4% and the Nasdaq Composite jumped 1.2%.

News of tariff negotiations sparked optimism for Nvidia and other chip stocks.

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An end in sight?

After days of chaos in the market some hope emerged that an end is in sight. President Donald Trump's tariff announcement after market close last Wednesday sent markets around the globe in a downward spiral Thursday through Monday. Recession fears have grown significantly as markets saw one of their worst three-day stretches in decades.

Today, however, some optimism emerged as some key trade partners are showing restraint, refusing to retaliate against U.S. tariffs as China did soon after the announcement last week. South Korea's president said it would not add fuel to the fire, saying "I don't think that kind of fighting back will improve the situation dramatically" adding his country "clearly would like to negotiate."

While tensions are still high and things could escalate, today's chatter made it seem that the Trump administration is interested in working to make deals. The administration has given many different reasons for the tariffs, some of which indicated they could be permanent rather than leverage in negotiating more favorable trade deals. The market clearly hopes it is the latter and investors seemed to take today's events as a sign there is an end in sight.

I still think that Nvidia is in a strong position and is currently oversold -- at least under normal conditions. If the current trade war, particularly between China and the U.S., is not resolved, that calculus could change. I think it's best to remain cautious at the moment and wait for more clarity.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.