JPMorgan Backs Beaten-Down Semiconductor Stocks Despite AI Capex Fears
A 13% plunge in semiconductor stocks this month is prompting JPMorgan to urge investors to buy the dip, arguing that supply constraints through 2028 support strong corporate fundamentals despite rising doubts over AI spending.
The iShares Semiconductor ETF has dropped 13% over the past month, triggering a massive unwind in one of the market's most heavily traded sectors. Memory chip makers have borne the brunt of the rout. Micron alone has lost $350 billion in market capitalization from its highs.
Sandisk, Intel, Applied Materials, and Lam Research have each seen more than $100 billion in value erased during the slide. This sudden reversal follows years of extraordinary growth and soaring valuations for the semiconductor industry.
The selloff is driven by growing skepticism that the artificial intelligence spending boom is finally cooling. Geopolitical headwinds, including potential tariffs and export restrictions to key markets, are compounding the anxiety.
Furthermore, the release of a low-cost AI model called Kimi K3 by China's Moonshot AI has intensified fears. Some analysts have compared the release to the shock caused by DeepSeek in early 2025. "AI capex enthusiasm is beginning to cool," strategists at Barclays warned in a recent note.
Despite the negative sentiment, JPMorgan is emerging as one of the first major sell-side firms to push back against the panic. Strategist Mislav Matejka argued in a Monday note that investors are ignoring the strong underlying fundamentals of the chipmakers.
He pointed out that meaningful new supply additions are not expected to hit the market before 2028. "We think that semis will find a floor soon on continued strong earnings delivery," Matejka wrote.
This divergence in Wall Street opinion highlights a critical decision point for portfolio managers. JPMorgan's contrarian thesis relies heavily on the upcoming capital expenditure guidance from hyperscalers. "If hyperscalers capex guidance remains strong, then we think that investors should step back into the space over summer," Matejka said, noting it is too early to price in a cyclical peak.
Other institutional investors are also looking past the current volatility. Nancy Tengler, CEO and chief investment officer of Laffer Tengler Investments, said she does not view the memory sector's collapse as a structural threat.
"So I don't view it too seriously. If you're a long term believer and we have a very low cost in Micron, I'm not going to chase it here," Tengler noted. However, she added that if the declines continue, her firm is prepared to step in and buy.
