JPMorgan strategists have issued a stark warning that the current artificial intelligence rally is mirroring the market dynamics of the late 1990s, with the coming weeks set to be decisive for equity valuations.
The bank’s research team argues that the market is approaching a critical juncture where the broad enthusiasm for AI must be stress-tested against fundamental realities, echoing the eventual split between speculative internet stocks and tangible infrastructure plays two decades ago.
This cautionary note arrives as global equities face the prospect of a traditional summer downturn, a seasonal pattern that often amplifies volatility in overextended sectors.
JPMorgan’s analysis suggests that the recent rally, heavily fueled by investor enthusiasm for generative AI, may be losing its breadth.
The bank highlights that capital is increasingly rotating away from pure-play semiconductor manufacturers and toward the physical infrastructure supporting data centers, such as power and cooling systems.
This shift indicates a maturing of the investment thesis, where investors are beginning to distinguish between companies with immediate revenue visibility and those relying on long-term growth narratives.