Wall Street banking giant JPMorgan is urging investors to use the recent pullback in semiconductor stocks as a buying opportunity, arguing that the sector’s long-term growth outlook remains strong.
In a note to clients, JPMorgan strategist Mislav Matejka said the bank continues to favor semiconductor stocks over other technology segments following the sector’s sharp decline in late June and early July.
The strategist maintained that the semiconductor upcycle is far from over and believes meaningful new supply is unlikely to arrive before 2028, supporting the industry’s longer-term earnings outlook.
The recommendation comes after a notable sell-off across the semiconductor sector, which followed a strong rally during the second quarter of 2026.
In this line, the Philadelphia Semiconductor Index (SOX) and semiconductor-focused exchange-traded funds (ETFs) recorded significant declines, while major chip stocks including Advanced Micro Devices, Intel, Micron Technology, Nvidia, and Broadcom experienced sharp pullbacks.
Matejka said JPMorgan’s preferred technology exposure remains semiconductor stocks, followed by hyperscale cloud providers and higher-risk AI plays.
The bank views the recent weakness in the SOX index and Asian chip markets as a buying opportunity rather than a sign the semiconductor cycle is peaking.
Magnificent Seven caution
While JPMorgan remains bullish on chipmakers, it is more cautious on the Magnificent Seven, noting that concerns over AI monetization could weigh on valuations despite continued earnings growth.
The bank also maintains a bearish long-term view on AI-sensitive sectors such as software, business services, and media, though it expects occasional rebounds when these stocks become oversold.
Meanwhile, the recent semiconductor sell-off was driven by concerns over AI infrastructure spending, elevated valuations, company-specific guidance, and broader macroeconomic uncertainty.
Investors have increasingly questioned whether the rapid pace of AI-related spending can be sustained beyond 2026, particularly as technology companies commit billions of dollars to data center expansion and AI infrastructure.
The sector also came under pressure after cautious guidance from some industry players raised concerns about future growth.
Concerns over memory chip demand, potential oversupply, inflation, interest rates, and geopolitical tensions further weighed on sentiment.
The pullback followed a strong rally earlier this year, with several AI chip stocks posting significant gains before entering correction territory.
Despite its bullish semiconductor outlook, JPMorgan expects global equities to reach new highs in the second half of 2026, supported by easing inflation, strong earnings, and light investor positioning.
The bank also expects the market impact of Middle East tensions to fade, potentially easing pressure on oil prices, inflation expectations, bond yields, and interest rate forecasts.
JPMorgan further expects market leadership to broaden beyond AI-related stocks, with small caps, cyclical sectors, and international markets positioned to benefit as investor participation widens and stagflation concerns ease.
