JPMorgan Sees Semiconductor Rebound After AI Stock Selloff

JPMorgan said the recent selloff in AI-related stocks was driven mainly by technical factors and position unwinding, not a deterioration in fundamentals. According to ChainCatcher, the bank noted that Korean stocks have fallen 25% from their highs, the Philadelphia Semiconductor Index has dropped 20%, and shares of Samsung and Micron have declined 20% to 50%.

The report said the valuation gap between semiconductor prices and earnings has widened, while tight supply and demand for DRAM and NAND are expected to continue through 2028. DRAM spot prices remain elevated, and Micron has raised its guidance, with supply shortages expected to last at least through 2027. The Philadelphia Semiconductor Index RSI is close to oversold territory, and most of this year’s momentum gains have been reversed.

JPMorgan said a rebound window could open once oversold signals are confirmed, and advised investors to build semiconductor positions gradually over the summer. The bank also said 97% of second-quarter earnings reports beat expectations, and S&P 500 companies that beat estimates outperformed the index by an average of 1.7 percentage points on the day of results.

In portfolio allocation, JPMorgan raised its equity weighting from 60% to 65% and increased eurozone exposure from 8.7% to 11%. It said it is overweight semiconductors, mining, capital goods, autos, insurance, and banks, while remaining underweight software, business services, media, and other AI-exposed sectors. The report added that the buy-the-dip strategy has remained effective since the end of March.