JPMorgan: AI and tech stocks may cede their leading rally positions in the second half of the year.

US stocks kicked off August with a strong rally, but JPMorgan warns that the market’s main trend in the second half may no longer be driven solely by AI and large tech stocks. On Monday (Eastern Time), the S&P 500 rose 1.5% to 7600.50 points, just shy of its all-time high; the Dow Jones gained 693 points to notch a new closing peak; the Nasdaq rallied 2.1%. On the surface, tech stocks have reignited risk appetite, but JPMorgan strategist Mislav Matejka’s team believes tech stocks will struggle to replicate last year’s single standout market performance in the second half of 2026. The bank’s concerns center on two fronts: First, AI capital expenditures by hyperscale cloud providers including Microsoft, Meta, Amazon, and Alphabet remain at high levels, and the market is starting to question when these investments will translate into free cash flow; second, AI’s substitution effect on sectors like software, business services, and media is weighing on valuations. Recent market moves have already signaled this shift: In July, chip and AI momentum stocks saw sharp pullbacks, and the Nasdaq at one point significantly underperformed the Dow and equal-weighted indices. Meanwhile, falling oil prices, resilient U.S. economic data, and shifting rate-cut expectations have renewed investor interest in consumer cyclicals, industrials, financials, and non-U.S. stocks. JPMorgan therefore favors a broadening of market leadership, rather than continuing to bet on a small number of AI giants driving index gains.