In a recent note, J.P. Morgan addressed concerns regarding the sustainability of AI spending amidst a 25%-30% correction in Asian technology stocks and the Philadelphia Semiconductor Index. The bank argues that there are no fundamental indicators suggesting a slowdown in AI investments over the next 6-12 months.
It highlights that advancements in AI models and strong demand for AI inference continue to support the current investment cycle. J.P. Morgan does not foresee hyperscalers reducing their AI compute investments, predicting they will seek financing through equity and debt markets for infrastructure expansion.
The bank also notes that the semiconductor equipment manufacturing sector is well-positioned for growth, particularly with the rise of 2.5D and 3D packaging technologies. However, it points out that while memory supply-demand fundamentals are solid, recent actions by Nvidia and AMD to reduce memory content in AI products have complicated the market narrative. Overall, J.P.
Morgan expects broader earnings upgrades and increased capital expenditure in AI, countering the market's pessimistic outlook