JPMorgan says AI trade is flashing a dot-com era warning
JPMorgan strategist Jason Hunter says the split between AI spenders and chip winners could decide the market’s next move within weeks.
By Frankie Delgado · News Reporter
3 min read
The AI trade is starting to look lopsided, and JPMorgan is telling clients to watch the tape closely.
After Alphabet and Tesla opened big tech earnings with a rough reception, investors again zeroed in on the cost of the artificial-intelligence buildout. Both companies raised AI spending plans, according to MarketWatch, adding to concern over when those investments will pay off.
The market’s reaction showed the divide. Shares of Asian chip suppliers SK Hynix and Samsung rose as investors bet on more demand for AI hardware. Meanwhile, the companies writing the checks for AI infrastructure have lagged.
MarketWatch data showed the Roundhill Magnificent Seven ETF up about 1.5% for the year, while the PHLX Semiconductor Index had climbed more than 70%.
JPMorgan sees an awkward split
JPMorgan strategist Jason Hunter told clients Wednesday that the gap between AI “hyperscalers” and semiconductor stocks is becoming a key market test.
Hunter warned that if hyperscalers fail to break above important technical levels, and chip stocks remain below their own resistance marks, a rotation inside the AI trade could turn into what he called a “more concerning unwind.”
Michael Cembalest, chair of market and investment strategy at JPMorgan Asset Management, drew a comparison with the late-1990s internet boom in a JPMorgan podcast published Wednesday.
Cembalest said communications-services stocks, which he described as the front end of the internet trade, began to stall while infrastructure names kept rising. He called that period a “head fake” for the market.
He said there are similarities now: AI hyperscalers are flattening out as free cash flow falls, while chip companies, infrastructure providers and optical-networking names have continued to benefit.
The bull case and the bear case
Hunter said there is a more upbeat way to read the move. If investors are shifting out of crowded hardware trades and back into hyperscalers, that could make the AI theme more durable in the months ahead, according to his note.
The darker reading is the one that has Wall Street glancing back at 2000. Hunter said a similar convergence appeared in the second quarter of that year, near the top of that market cycle.
He said both interpretations have technical support, making the coming weeks important for determining whether the AI trade steadies or weakens further.
Hunter said the PHLX Semiconductor Index needs to rise above short-term resistance between 12,769 and 13,333 after falling 20% from its June high. If it fails, he said the index could retreat to a support area between 9,975 and 10,554, equal to a 28% to 32% drop from the June peak.
JPMorgan would view a move into that lower area in the coming weeks as a tradable buying opportunity, according to Hunter.
Big tech levels to watch
Hunter also flagged price levels for several hyperscalers, saying breakouts would be bullish after months of weaker performance.
- Alphabet needs to move above its 50-day moving average at $368 and then the $381 area, according to Hunter. MarketWatch reported the stock near $328 in premarket trading.
- Amazon must clear resistance between $251 and $258 to confirm the broader uptrend, Hunter said. He put the next target at $278.
- Meta’s rebound from the $525 to $553 area stalled near $669 to $694, and a move above that band would send a strong bullish signal, according to Hunter.
- Microsoft has found technical support near $350, but remains below medium-term resistance between $465 and $493. Hunter listed $400, $421 and $438 as upside levels to monitor.
The broader premarket mood was soft. U.S. stock futures were lower, according to MarketWatch, while oil prices rose about 3% after Yemen’s Houthis said they struck two Saudi Arabian oil tankers in the Red Sea.
This story draws on original reporting from MarketWatch.