• JPMorgan (JPM) advises buying semiconductor stocks during the recent pullback, citing a strong AI-driven cycle.
  • The bank expects limited new supply before 2028, favoring chips over hyperscalers.
  • Global stocks are predicted to hit new highs in the second half of 2026, with gains broadening beyond AI.

Bet on Chips

JPMorgan analysts are urging investors to scoop up semiconductor shares after a recent dip, arguing that the artificial-intelligence-driven chip cycle remains robust. In a note released Tuesday, the bank said that meaningful new supply is unlikely to come online before 2028, keeping pricing power in the hands of established players. The preference for semiconductors over hyperscalers reflects a view that chipmakers will benefit more directly from sustained AI infrastructure spending.

The call comes as the Philadelphia Semiconductor Index has slipped about 8% from its March peak, amid jitters over potential trade restrictions and slowing earnings momentum. But JPMorgan sees this as a buying opportunity, predicting global equities will reach fresh highs in the second half of 2026 as market leadership broadens beyond a handful of AI giants.

Supply Discipline and Demand Surge

The bank's thesis rests on two pillars: demand is accelerating from data-center buildouts, while supply growth remains constrained by the complexity of advanced chip manufacturing. “The AI capex cycle is still in its early innings,” the analysts wrote, noting that orders for equipment and design software continue to climb. They highlighted that foundry capacity for leading-edge nodes is booked through 2026, and expansions won't meaningfully boost output until 2028 at the earliest.

This dynamic supports margins and free cash flow across the semiconductor ecosystem, from equipment suppliers to memory makers. JPMorgan particularly favors names with exposure to AI accelerators and high-bandwidth memory, as these areas face the tightest supply-demand balances.

Beyond the AI Trade

In a shift from the narrow rally of 2023 and early 2024, JPMorgan expects gains to broaden into other sectors as the year progresses. “The market is transitioning from a narrative driven by a handful of hyperscaler stocks to one where cyclicals and value participates,” the note said. Semiconductors, in their view, offer a way to play AI without the concentration risk of the mega-cap tech names.

However, the bank cautioned that the path higher won't be linear, with potential volatility from trade policy and interest-rate moves. Still, they argue the fundamental backdrop supports a multi-year upcycle. “Investors should use any weakness to add exposure,” the analysts concluded.

Correction: An earlier version of this article misstated the expected timing of new chip supply. The correct date is 2028.