US Stocks Post Best Quarter Since 2020 as Chip Stocks Surge
Wall Street just completed its strongest quarter in six years, driven by a record surge in semiconductor stocks that is forcing investors to weigh robust capital expenditure forecasts against rapidly expanding valuations.
US equities posted their best quarter since 2020, with the S&P 500 gaining 9% year-to-date and the Nasdaq advancing 12%. The rally was overwhelmingly concentrated in semiconductor and AI infrastructure stocks, leaving the broader market with a stark divergence in performance.
The Philadelphia Semiconductor Index tracked toward its best quarterly gain on record, rising nearly 90% over the three-month period. The iShares Semiconductor ETF (SOXX) is now up 100% year-to-date. Individual names saw extreme moves, with Sandisk climbing 741% year-to-date, Intel surging 243%, Applied Materials gaining 146%, and Lam Research rising 124%.
This explosive growth is underpinned by massive spending from hyperscalers. Total capital expenditures across these tech giants are estimated to reach around $800 billion in 2026. Corporate leadership has signaled that this level of investment will persist into 2027. "A lot of these leaders are painting a picture of really high demand going on for some time to come," noted market analyst Jason Moser.
However, the speed of the ascent has decoupled stock prices from underlying business fundamentals. Valuation multiples across the sector have expanded dramatically, a dynamic that occurs when a stock surges 100% in a single quarter. "The business isn't fundamentally 300% better than it was three months ago," observed Travis Hoium, highlighting the growing gap between price and current earnings.
Market participants are drawing parallels to the telecom build-out of 2000, which saw equities falter not when spending collapsed, but when it merely flatlined. "I just want to remind people that when no one thinks it's a bubble, that's when it's actually a bubble," Hoium warned.
Despite the concentration in chips, market breadth is showing signs of improvement. While mega-cap tech lagged—Meta fell 10% and Microsoft dropped 20%—non-AI stocks began to show life. "If it's only the same handful of companies going up indefinitely, that seems less sustainable than the market continues to rise on the strength of others," said Lou Whiteman.
For investors seeking semiconductor exposure, the sheer momentum makes individual stock selection increasingly risky. Moser suggested that broad ETFs offer a safer route, providing instant diversification to capture the sector's upside while mitigating the risk of a sudden multiple contraction.
