JPMorgan Chase Warns Semiconductor Outperformance May Not Be Sustainable as AI Trading Faces Rotation

According to JPMorgan Chase's report released on July 3, semiconductor stocks have significantly outperformed hyperscale cloud service providers since September last year, but this outperformance may not be sustainable. The bank outlined two scenarios: an optimistic case where cloud providers catch up as their commercialization and profitability improve, or a pessimistic scenario where semiconductor demand weakens if cloud provider capital expenditure slows.

JPMorgan projects hyperscale cloud providers' capital expenditure growth to drop sharply from 100% in 2026 to 22% in 2027, and further to 7% in 2028. Should this slowdown materialize, semiconductor stocks could face significant pressure, potentially triggering a broader correction in AI-related trades.