NEW YORK (CNN/Money) - Semiconductor, computer hardware and networking stocks led the technology sector higher Thursday, with upbeat analyst comments about several companies fueling the advance.
The Nasdaq composite index, which is weighted heavily with technology names, rose 64.98 points to 2,044.23, a 3.3 percent gain on the day.
Shares of chip leader Intel (INTC: up $2.52 to $35.52, Research, Estimates) were the biggest movers on Nasdaq, rising more than 7.5 percent and helping boost other chip stocks as well as the stocks of personal computer makers.
Intel, the world's largest supplier of semiconductors, is the top supplier of PC microprocessors. As such, it frequently is regarded as a bellwether for both the semiconductor and PC industries.
Recommending that they buy Intel shares ahead of the company's fourth-quarter earnings report, J.P. Morgan told its clients in a research note Thursday its surveys indicate that PC sales in December were strong, which should alleviate some concerns about a possible inventory buildup among component suppliers.
The firm also said it sees signs that Intel's sales of chips used in servers may have been uncharacteristically strong for the fourth quarter, and possibly above the third quarter's level. That may also be an early sign of a recovery in enterprise technology spending, J.P. Morgan said.
Those comments came on the heels of a strong rally in chip stocks Wednesday, fueled in large part by a report from an industry trade group showing that worldwide semiconductor sales in November rose for the second consecutive month.
After rising 4.5 percent Wednesday, the Philadelphia Stock Exchange's semiconductor index gained another 45.18 points, or 8.3 percent, to 590.62.
The gains came as market watchers became more convinced that the chip industry, which runs in boom-and-bust cycles, had either reached, or at least is nearing, the bottom of its protracted downturn.
Merrill Lynch weighed in on Thursday, sounding a more bullish tone about expectations for the next report. While the sequential growth rate in November was lower that it has been historically, Merrill told its clients to expect "stronger than seasonal growth" of 30 percent in December.
Other chip stocks ending higher Thursday included: Advanced Micro Devices (AMD: up $2.98 to $19.37, Research, Estimates), Intel's top rival in the PC processor market; Micron Technology (MU: up $3.27 to $36.51, Research, Estimates), a leading computer memory chip maker; Applied Materials (AMAT: up $3.82 to $45.49, Research, Estimates), the No. 1 maker of equipment used to manufacture chips; and Rambus (RMBS: up $0.54 to $8.88, Research, Estimates), which makes money by licensing a technology used to speed up computer memory systems.
The stocks of PC and other computer hardware makers also extended their gains Thursday, pushing the Goldman Sachs computer hardware index 15.83 points higher to 285.49, a 5.9 percent gain on the day.
Shares of Gateway (GTW: up $0.79 to $9.19, Research, Estimates), the smallest of the U.S.-based top tier PC makers, were among Thursday's biggest percentage gainers. Dell Computer (DELL: up $1.53 to $29.03, Research, Estimates), the world's No. 1 PC supplier, also moved sharply higher.
Meanwhile, shares of proposed merger partners Hewlett-Packard (HWP: up $1.31 to $22.96, Research, Estimates) and Compaq (CPQ: up $0.48 to $10.96, Research, Estimates) ended in the plus column as well.
At the same time, shares of Apple Computer (AAPL: up $0.28 to $23.58, Research, Estimates) teetered into and out of the minus column, ending the session modestly higher.
That stock got a lift on Wednesday after Gerard Klauer Mattison, citing the potential for an upgrade cycle sparked by improvements in the company's desktop computers and its Mac OS X operating system, upgraded its rating on the company's shares to "outperform" from "neutral."
Elsewhere, shares of EMC (EMC: up $1.79 to $16.59, Research, Estimates), the top supplier of data storage systems, rose more than 13 percent Thursday after Salomon Smith Barney upgraded them to "buy" from "outperform."
Salomon Smith Barney said it sees EMC as having moved past its "fundamental bottom and begun to recover" and expects "is on the verge of many new product releases" and partnership announcements. Salomon Smith Barney also said it expects EMC to step up its mergers and acquisitions this year.
The stocks of telecommunications and data-networking equipment makers, many of which were among the worst performers in 2001, also stood out in Thursday's trade.
The American Stock Exchange's networking index rose 19.93 points to 356.02, a 5.9 percent gain.
Shares of Cisco Systems (CSCO: up $1.53 to $20.76, Research, Estimates), a leading supplier of the equipment used to route traffic on the Internet, were among the biggest percentage gainers there.
As have most of its competitors, Cisco's business was hit hard last year by a slowdown in capital spending among large corporations and communications service providers who, in the face of a slowing and uncertain economy, deferred or canceled many new-equipment orders.
Credit Suisse First Boston on Thursday told its clients it believes Cisco is better positioned than other networking companies to emerge from the downturn in a stronger competitive position than it entered it.
"Well past its darkest days and more focused than ever on winning in the market place, Cisco is using the current downturn to re-focus on the business and drive processes throughout the company that should improve operations, customer satisfaction, product development, employee development ... which we believe will widen its already formidable competitive advantage," the firm said in a research note.
For the data-networking segment as a whole, Credit Suisse First Boston said it believes the fourth quarter was marked by continued cautious capital spending on the part of both enterprises and service providers.
The firm said it expects most networking companies to report flat financial results until the economy improves.
Still, most networking shares rose.
Also ending comfortably in the plus column were: Riverstone (RSTN: up $2.46 to $18.83, Research, Estimates); Juniper Networks (JNPR: up $1.20 to $21.99, Research, Estimates); Redback Networks (RBAK: up $0.42 to $5.13, Research, Estimates); and Foundry Networks (FRDY: Research, Estimates). 
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