JPMorgan: AI/Tech Stocks May Relinquish Top Spot in the Second Half

August 4th. The U.S. stock market started August with a strong rebound, but JPMorgan Chase warned that the market's second-half theme may no longer be solely driven by AI and large-cap tech stocks.

On Monday, Eastern Time, the S&P 500 rose 1.5% to 7600.50, just a stone's throw away from its all-time high; the Dow climbed 693 points to a new closing high; and the Nasdaq surged 2.1%. At first glance, tech stocks reignited risk appetite, but JPMorgan Chase strategist Mislav Matejka's team believes that in the second half of 2026, it will be difficult for tech stocks to replicate last year's "solo performer" market.

The bank's concerns are focused on two fronts: first, mega-cloud players such as Microsoft, Meta, Amazon, Alphabet, and others still have high AI capital expenditures, and the market is beginning to question when these investments will translate into free cash flow; second, the substitution effect of AI on sectors like software, business services, and media is suppressing valuations.

The recent market movements have already shown signs of this shift. In July, chip and AI momentum stocks saw sharp pullbacks, with the Nasdaq significantly underperforming the Dow and equal-weighted indices at one point. Meanwhile, falling oil prices, resilience in U.S. economic data, changes in rate cut expectations, have redirected attention and funds towards consumer cyclicals, industrials, financials, and non-U.S. stocks. Therefore, JPMorgan Chase is more inclined towards market leadership diffusion rather than continuing to bet on a few AI giants to drive the index.