The AI Chip Rally Is Masking a Dangerous Truth. Half the S&P 500 Is Being Left Behind

The Philadelphia Semiconductor Index has climbed roughly 64% since late March, a move that has redrawn the map of market leadership in a matter of weeks. Nathan Peterson, Director of Derivatives Research and Strategy at Schwab, framed the week’s action around a single dominant theme on the firm’s Market Update podcast: “The driving engine behind last week’s push higher in stocks continued to be the AI infrastructure plays, especially in the chip stocks.” Last Friday alone tacked on another 5.5% for the index, capping a week in which mega-cap chip names moved with ferocious velocity.

Chip Stocks Are Driving the Market’s Returns

Intel (NASDAQ:INTC | INTC Price Prediction | INTC Price Prediction) has tripled since late March, with Friday’s nearly 14% spike fueled by reports that the company will build chips for Apple. That move followed a Q1 earnings report where Intel posted non-GAAP EPS of $0.29 against an estimated $0.01, and Data Center and AI revenue of $5.05 billion, up 22% year over year. CEO Lip-Bu Tan told investors that the “next wave of AI will bring intelligence closer to the end user, moving from foundational models to inference to agentic.”

Advanced Micro Devices (NASDAQ:AMD) added fuel after CEO Lisa Su revised longer-term growth expectations higher following Tuesday’s earnings. Total Q1 revenue reached $10.3 billion, up 38% year over year and above the high end of guidance. Data Center revenue hit $5.8 billion, up 57% year over year, driven by strong demand for EPYC CPUs and Instinct GPUs. Q2 guidance points to roughly $11.2 billion in revenue, well above analyst expectations at the time. AMD also raised its server CPU market growth forecast from 18% to 35% annually, now projecting the market will exceed $120 billion by 2030. Memory leaders Micron Technology (NASDAQ:MU) and SanDisk (NASDAQ:SNDK) joined the move, with SanDisk surging nearly 17% on Friday on top of a fiscal Q3 report showing revenue of $5.95 billion, up 251% year over year.

The Breadth Problem

The sector picture on that Friday told a stark story. Infotech climbed 2.58%, while no other sector advanced by even 0.6%, and five of eleven S&P 500 sectors closed lower. Industrials and financials finished in the red, a clear blow to the cyclical names that historically confirm a durable bull market rather than merely a concentrated one.

Even with the S&P 500 near record highs, only 52% of S&P 500 stocks were trading above their 50-day moving averages during the week covered by this report. That reading sits at a below-average percentile, meaning the index’s strength was being carried by a narrow leadership group rather than broad participation across sectors.

Private Credit Joins the Trade

Bloomberg reported that Apollo and Blackstone were among private credit lenders in discussions with Broadcom (NASDAQ:AVGO) over roughly $35 billion in financing for AI chip development, a deal that would rank as one of the largest ever in private credit history. The backdrop for that financing has only grown more compelling since. Broadcom had posted fiscal Q1 AI semiconductor revenue of $8.4 billion, up 106% year over year, with CEO Hock Tan guiding Q2 AI revenue to $10.7 billion and targeting more than $100 billion in AI sales for fiscal 2027.

When Broadcom actually reported fiscal Q2 results on June 3, 2026, those Q2 AI semiconductor numbers came in at $10.8 billion, up 143% year over year and above even that already-elevated forecast. Tan guided Q3 AI revenue to $16 billion, representing growth of more than 200% year over year, and set a full fiscal year 2026 AI revenue target of $56 billion. The $100 billion fiscal 2027 target was reaffirmed. With private credit now financing AI infrastructure alongside public equity, the capital stack behind this trade is deepening at a remarkable pace, even as broader market breadth remains thin.

Editor’s note: This article has been updated to correct AMD’s Q1 2026 Data Center revenue to $5.8 billion (from $5.78 billion) and to incorporate Broadcom’s fiscal Q2 2026 earnings results, reported June 3, 2026, showing AI semiconductor revenue of $10.8 billion (up 143% year over year) and a full-year FY2026 AI revenue target of $56 billion. AMD’s revised server CPU market growth forecast and 2030 market size projection of $120 billion were also added.