JPMorgan Raises S&P 500 Target to 7,800, Warns of AI Trade Crowding

Huoxing Finance reports that on June 25, J.P. Morgan raised its year-end outlook for U.S. equities but cautioned investors that the overcrowding in AI-related momentum stocks has become the market’s most vulnerable segment. Led by Dubravko Lakos-Bujas, J.P. Morgan’s strategy team raised its S&P 500 year-end 2026 target from 7,600 to 7,800, citing continued upward revisions to corporate earnings expectations and AI-related capital expenditures nearing a doubling. The bank noted that consensus earnings estimates for 2026 and 2027 have each risen by approximately 10% since the start of the year—a magnitude typically seen only during recoveries following recessions or major shocks. However, J.P. Morgan did not interpret this upgrade as a risk-free rally. The bank warned that low-quality growth stocks, speculative growth stocks, and secondary-tier AI-themed stocks have become “extremely crowded,” and could trigger sharp corrections if capital flows reverse. Strategists also highlighted that increased equity supply over the coming quarters and potentially tighter monetary policy may constrain further valuation expansion. In terms of allocation, J.P. Morgan recommends a barbell strategy: one end holding high-quality growth stocks and direct AI beneficiaries, while the other end allocates to low-volatility, high-quality stocks as a portfolio buffer. The bank remains bullish on technology, select industrials, utilities, defense, banking, and certain healthcare growth stocks, but believes the market’s upward trajectory will not proceed in a linear fashion.