In a medium saucepan set over low heat, begin melting the Velveeta cheese, stirring occasionally with a wooden spoon for about 5 minutes.

Once the Velveeta is melted, gradually add the shredded sharp cheddar cheese, stirring constantly for another 3–5 minutes until fully incorporated.

Stir in the diced tomatoes with green chiles to the cheese mixture and season with cayenne pepper, adjusting heat to taste. Mix for about 2 minutes.

Increase heat to medium-low and continue cooking for an additional 5 minutes, stirring frequently until warmed through and bubbling slightly.

Remove from heat and transfer to a serving bowl. Garnish with chopped cilantro or green onions if desired.