JPMorgan: AI Theme Intact, Market in Early Stages of a "Generational Trade"
Miles Bennett
JPMorgan chief investment strategist Phil Camporeale says the market remains in the early stage of an AI-driven "generational trade" — the recent tech pullback is normal profit-taking, not a trend reversal, and the real story is non-tech earnings catching up.
Tech stocks are falling — why does JPMorgan say the AI thesis is intact?
Camporeale frames the recent semiconductor and tech pullback as a normalisation process, not a trend reversal.
His time horizon is long: the AI investment theme spans three to five years, even ten to fifteen, along with its boost to productivity.
This means → JPMorgan's core call is that AI's transformation of the economy has barely begun; current volatility is noise on a decade-long scale.
If the thesis hasn't changed, who is selling?
Investors who entered the semiconductor sector early last year have earned returns triple the S&P 500's year-to-date gain.
In plain terms = with that much profit on the table, taking gains is the most natural reason to sell — no need to invoke "AI logic collapsing."
Retail funds flowed out significantly last week, and thin summer liquidity amplified the short-term swings.
The Mag-7 valuation premium just hit a ten-year low — what does that mean?
The valuation premium of the Magnificent Seven over the remaining 493 S&P constituents has narrowed from 30% to 10% — a ten-year low.
Camporeale says this is "more about the other 493 stocks than about the Seven themselves."
This means → the rotation is driven by earnings broadening — non-tech companies are catching up on profits, not an unravelling of the AI narrative.
In this rotation, which sector does he favour?
Camporeale expressed strong interest in financials.
Three reasons: earnings estimates being revised upward, active share buybacks, and sustained strength in capital-markets activity.
He noted that both JPMorgan and Goldman Sachs highlighted robust capital-markets performance in their latest earnings reports.
Will the Fed hike? What's his read?
Camporeale considers the market's prior 30% implied probability of a Fed rate hike "too high."
His evidence: since the June 17 Fed meeting, inflation data have come in below expectations, the jobs report was soft, and market-implied inflation gauges have retreated.
In plain terms = multiple data points are cooling — the preconditions for a hike are simply not in place right now.
What should investors watch in the second half?
With the valuation premium at a ten-year low, the AI thesis's proof point is shifting: from "does the story hold up" to whether non-tech sectors can keep delivering earnings growth.
This reflects a market that has moved past the first phase of "paying for the AI narrative" — what comes next is real profit broadening, in real dollars.
Summer-liquidity-driven volatility may not predict the second half — Camporeale calls the current setup "a happy problem."
Content is for reference only, not financial advice.