JPMorgan has advised investors to consider purchasing semiconductor stocks following a decline in the sector at the start of the second half of 2026. The PHLX Semiconductor Sector Index, known as the SOX, experienced a 5.4% drop last week, marking its second consecutive weekly decrease, but rebounded by 2.5% on Monday.
Market Recovery Signs
Despite the recent downturn, JPMorgan analysts perceive this as an ideal buying opportunity. Strategist Mislav Matejka indicated that the semiconductor market's upcycle is expected to persist, with no significant new supply anticipated until at least 2028. Market reactions reflected this sentiment, as the SOX opened higher and the Nasdaq Composite rose by 0.7%, driven by renewed interest in AI chip trades. Stocks such as Applied Materials, Marvell, and Broadcom led the recovery, while memory stocks including Western Digital and Seagate saw gains, pushing the Roundhill Memory ETF up over 6.1%.
Risk Assessment and Sector Preferences
While JPMorgan favors semiconductor investments, the bank expressed caution regarding the broader AI market. Matejka emphasized a preference hierarchy: semiconductors are prioritized over hyperscalers and other “AI at risk” investments. The bank's outlook on what it calls “AI cannibalization” trades, including software and media sectors, remains fundamentally bearish, with expectations that AI tools could negatively impact revenues in these areas.
Broader Market Outlook for H2 2026
Looking beyond semiconductors, JPMorgan anticipates positive trends in global equities in the latter half of 2026, driven by a favorable earnings forecast, easing inflation, and a lighter investor stance. Additionally, the potential market effects from the de-escalation of the Iran conflict could act as a catalyst, with forecasts suggesting a pullback in oil prices and inflation expectations. Matejka also noted that small caps and cyclical sectors are expected to benefit from increased market participation. Concerns regarding stagflation are also projected to diminish.
