JPMorgan warns the AI trade lacks fuel for a July-style rebound

JPMorgan has a message for anyone waiting for AI stocks to bounce back the way they did over the summer: don’t hold your breath. In an October 14 report on capital flows and liquidity, the bank’s Global Markets Strategy team argued that the conditions behind July’s recovery in AI infrastructure names are currently absent. Without them, the strategists see a rapid rebound as unlikely. What JPMorgan is actually saying The report comes from the team led by strategist Nikolaos Panigirtzoglou. It focuses on the ongoing slide in AI infrastructure stocks, with memory chips taking a particularly hard hit. To understand the warning, you have to rewind to July. That month, the PHLX Semiconductor Index, better known as the SOX, fell 21%. That marked the index’s worst monthly performance since October 2008. JPMorgan’s research points to several drivers behind the July rout. Investors rotated out of AI positions that had become overcrowded, meaning too many funds were holding the same bets at the same time. Worries about capital expenditures added to the pressure. So did forced deleveraging among tech-focused hedge funds, which lost more than 10% in their TMT strategies (technology, media and t...