JPMorgan strategists are urging investors to view the recent pullback in semiconductor equities as a buying opportunity, while forecasting a broadening of equity market leadership in the second half of 2026 as stagflation concerns ease.
In a client note, Mislav Matejka wrote: "The risks of renewed flareups remain, but we believe one should keep using any dips on the back of adverse geopolitical headlines in order to add." He identified semiconductors as the preferred technology exposure in the firm's internal ranking, placing them ahead of hyperscalers and AI-focused risk trades.
Matejka spelled out the firm's tactical stance on technology: "semis over hyperscalers over AI at risk plays," and said the recent softness in indices tied to semiconductors - including weakness in the SOX and in Korea - should be seized as an opportunity. He added that the semiconductor upcycle is not near a peak and that "meaningful supply is not likely to arrive before 2028."
While upbeat on chips, Matejka signalled more caution toward the headline large-cap tech cohort commonly referred to as the Magnificent Seven. He noted that although earnings and valuation dynamics still provide support, the group is "likely to see derating continuing on monetization fears."
JPMorgan reiterated a defensive stance toward trades it classifies as vulnerable to AI-driven cannibalization, saying it remains "fundamentally bearish on AI cannibalisation trades," a category that includes select software, business services and media companies. The firm did acknowledge that tactical recoveries are possible when those areas become oversold.
On macro catalysts, Matejka highlighted the unwinding of the market impact from the Iran conflict as a central driver for the second half of the year. He argued that oil prices, inflation expectations, bond yields and central bank rate projections "could all reverse their upmove that was seen during Q2," a development that would influence a range of asset classes.
At the broader market level, JP Morgan projects fresh highs for global equities in the second half of 2026, backed by a robust earnings outlook, easing inflation pressures and lighter investor positioning. Matejka emphasised that AI is "unlikely to be the only story in town in 2H," and that small caps, cyclical sectors and international markets should benefit from a widening of market participation.
Investors should weigh these tactical recommendations against the persistent uncertainty around geopolitical flareups and monetization concerns across some technology subsegments. JPMorgan's guidance frames semiconductors as a primary beneficiary of the cyclical upturn in technology, whereas select AI-exposed and monetization-sensitive names may remain at risk.
Bottom line: JPMorgan advises adding to semiconductor positions on dips, expects a broader equity rally in H2 2026 if geopolitical and inflationary pressures abate, and cautions on AI cannibalisation trades and potential derating among the largest tech names.