JPMorgan warns AI stocks unlikely to replicate July rally: bottom-fishing funds ebb, leverage risks rise.

JPMorgan strategist Nicholas Panigirtzoglou notes that the October sell-off in AI stocks is unlikely to replicate the sharp rebound seen in July. Compared to earlier periods, current market willingness to buy the dip has weakened, short positions are insufficient to fuel potential short-covering buying, corporate buyback funds have shrunk, and the renewed buildup of leveraged exposure in ETFs could further amplify market volatility. JPMorgan believes that based on investor positioning and fund flows, AI infrastructure stocks do not appear to have entered oversold territory yet. The current sell-off has spread from South Korean memory chip stocks to the U.S. semiconductor sector. SK Hynix and Samsung Electronics have both seen their share prices fall by nearly a third over the past month, while the Philadelphia Semiconductor Index has dropped 10% in the last five trading days. Additionally, the combined $40 billion share buyback plan previously announced by SK Hynix and Samsung Electronics was completed ahead of schedule in mid-October, potentially removing some of the buying support from corporate repurchases. Meanwhile, BlackRock CEO Larry Fink warned that a pause in U.S. data center construction could push the economy into recession, noting that a significant portion of U.S. economic growth is tied to capital expenditures on AI infrastructure. As market concerns grow over AI investment returns and corporate profitability, price adjustments in the AI industry chain could also impact data center construction, energy infrastructure, and related employment sectors.