Semiconductor Stocks Soared in May. Can the Rally Keep Running Into Summer?

Advanced Micro Devices just had one of its best months in two decades. The stock soared more than 40% in May to a record high, as investors poured back into chipmakers on relentless demand for AI hardware. And it wasn't alone. Smartphone-chip designer Qualcomm climbed about 40% to a record of its own, while the broader Philadelphia Semiconductor Index gained more than 60% for the year, far outpacing the S&P 500.

After a stretch like that, investors heading into summer face a fair question: can the run keep going, or have the stocks finally outpaced the businesses underneath them?

Image source: Getty Images.

The AI demand behind the run

It turns out that, for many of the chip companies behind these stocks, the underlying businesses do seem to be living up to their stock gains.

AMD, for instance, gave investors plenty to like when it reported first-quarter results in early May. Revenue rose 38% year over year to $10.3 billion, led by its data center segment, which grew 57% to a record $5.8 billion on demand for the company's EPYC server processors and Instinct GPUs. Its non-GAAP (adjusted) earnings per share grew 43%, and management guided for about $11.2 billion in second-quarter revenue -- a figure that implies about 46% year-over-year growth.

"These results mark a clear inflection in our growth trajectory and a structural shift in our business," said AMD Chair and CEO Lisa Su in the company's first-quarter earnings call.

Custom-chip designer Broadcom (NASDAQ: AVGO) is catching the same wave, but from a different seat. In its fiscal first quarter of 2026 (the period ended Feb. 1, 2026), revenue rose 29% to a record $19.3 billion, and its AI revenue more than doubled, up 106% to $8.4 billion, on demand for the custom accelerators and networking chips it builds for the largest cloud companies. It now counts six major custom-AI-chip customers, guided for about $22 billion in fiscal second-quarter revenue, up 47%, and reports those results on June 3.

Qualcomm's May surge, however, was a different story. Its stock's gain was based on more speculative news. In late May, Bloomberg reported that the company had reached a deal to supply TikTok owner ByteDance with millions of custom chips for AI data centers -- one of its first big customers for a product line meant to carry it beyond smartphones. Neither company confirmed the agreement, but the stock jumped on the news. In addition, investors seem to be realizing that Qualcomm could be a beneficiary of AI as it makes its way into the physical world.

Whether the run can hold into summer

But have investors who haven't bought into these growth stories already now missed out?

As of this writing, AMD trades at a forward price-to-earnings ratio of about 69 and Broadcom trades at more than 40 times forward earnings -- multiples that assume the AI build-out keeps compounding for years without a stumble.

Qualcomm's stock is much cheaper, at around 21 times forward earnings. But there's a reason for its comparative discount. Its core business is actually shrinking. Fiscal second-quarter revenue (the period ended March 29) fell 3% year over year as handset chip sales dropped 13%, and adjusted earnings per share fell about 7%. Additionally, management then guided for a sequential step-down in the current quarter. So what's helping Qualcomm stock? Investors seem to be betting that the reported ByteDance deal pays off and that its chip sales will surge as AI moves into devices.

Overall, however, there are good reasons for chip stocks' big gains in May, from Broadcom's success with custom chips for major tech companies to Intel's turnaround progress; the catalysts are mostly undeniable.

But Broadcom's June 3 report is arguably the next real test. A strong quarter and confident outlook could carry the group's momentum into summer; any hint of cooling demand, however, could do the opposite. Either way, the businesses themselves look healthy enough to keep growing even if the stocks take a breather.

For now, I don't think the biggest risk for investors is that AI demand suddenly dries up. It's that, at these valuations, merely good results may no longer be good enough. After a May like this one, a little patience may serve investors better than chasing the rally higher.

Daniel Sparks has and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Broadcom, Intel, and Qualcomm. The Motley Fool has a disclosure policy.