It’s not AM vs FM that makes the difference, but the frequencies we use for public broadcasting. AM radio stations use around 1 MHz whereas FM ones use around 100 MHz. The lower frequencies bounce off the ionosphere, high above the atmosphere, and so can reach over the horizon to be received far from the transmitter. 100 MHz is too high to be reliably reflected by the ionosphere so you can’t be too far over the horizon to receive it.
The lower frequencies also have longer wavelengths, about 300 metres for AM stations. That’s too big to fit into small spaces so it doesn’t work well inside a tunnel whereas the 3-metre wavelengths of FM stations can.
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