JPMorgan Warns AI Stocks May Struggle to Replicate July Rally

On October 15, JPMorgan strategist Nikolaos Panigirtzoglou pointed out that the October sell-off in AI stocks may be difficult to replicate the rapid rally seen in July. Currently, the market's willingness to buy on dips has weakened, and short positions are insufficient to provide potential buyback support. Corporate buyback funds have decreased, and leveraged exposure in ETFs has been rebuilt, which may further amplify market volatility. JPMorgan believes that AI infrastructure stocks have not yet entered an oversold state. The sell-off has spread from South Korean memory chip stocks to the U.S. semiconductor sector, with SK Hynix and Samsung Electronics both seeing their stock prices drop nearly one-third over the past month, while the Philadelphia Semiconductor Index has fallen 10% in the last five trading days. The $40 billion stock buyback plans of SK Hynix and Samsung Electronics were completed ahead of schedule in mid-October, which may lead the market to lose some of the buying support provided by corporate buybacks. Meanwhile, BlackRock CEO Larry Fink warned that if the U.S. halts data center construction, the economy could fall into recession, as U.S. economic growth is related to capital expenditures in AI infrastructure. Concerns about the return on AI investments and corporate profitability may deepen, potentially affecting data center construction, energy infrastructure, and related employment sectors.

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