JPMorgan Flags 'Dangerous' Divergence in AI Stocks, Warns of Market Risks

JPMorgan's chief technical strategist, Jason Hunter, has sent a warning to clients about the AI trade. He notes that the current divergence in AI stocks mirrors what happened before the dot-com bubble burst in 2000.

The S&P 500 is still near all-time highs, but the Philadelphia Semiconductor Index and memory stocks have been on a tear, up 87% and 141% respectively this year. Meanwhile, Meta and Microsoft, which are among the biggest AI spenders, have underperformed the hardware suppliers.

Hunter has seen this kind of split before, where communications equipment suppliers surged while companies making heavy capital investments crashed from peak valuations. He is not saying that the market is about to collapse, but rather that a crowded investment theme showing internal fracture has historically been dangerous.