JPMorgan said in a July 20 equity strategy report that AI-related stocks have been hit by heavy selling over the past few weeks, according to Chaoxiang Research.
The report said Korea’s stock market has fallen 25% from its peak, while the Philadelphia Semiconductor Index is down 20%. Individual names including Samsung and Micron have dropped between 20% and 50%.
JPMorgan said the main drivers of the decline were technical factors and position unwinds, while fundamentals have not worsened. It added that the gap between semiconductor relative prices and relative earnings trends has continued to widen.
The bank said tight DRAM and NAND supply-demand conditions should continue through 2028. DRAM spot prices remain elevated, and Micron has also raised its earnings guidance, supporting JPMorgan’s view that supply tightness should last at least through 2027.
On technical indicators, the report said the Philadelphia Semiconductor Index RSI is approaching oversold territory, with most of the momentum gains built up earlier this year now largely erased. JPMorgan said that once an oversold signal is confirmed, a rebound window could open, and it recommended accumulating semiconductor exposure in stages during the summer.
The report also said the second-quarter earnings beat rate reached 97%, and S&P 500 companies that beat expectations outperformed the broader market by an average of 1.7 percentage points on the day results were released.
In allocation terms, JPMorgan raised its equity weighting to 65% from 60% and increased its eurozone allocation to 11% from 8.7%. At the sector level, it is overweight semiconductors, mining, capital goods, autos, insurance and banks, while underweight software, business services and media, which it grouped as AI-disruption sectors.
On geopolitical conflict, the report said the buy-the-dip strategy in place since late March remains effective.