JPMorgan: Semiconductor Sector Near Oversold, Recommends Summer Positioning

ChainCatcher report, according to Chaoxiang Research: J.P. Morgan’s July 20 equity strategy report noted that AI-related stocks have experienced sharp selling pressure over the past several weeks, with the Korean market down 25% from its peak and the Philadelphia Semiconductor Index down 20%. Individual stocks such as Samsung and Micron have declined between 20% and 50%. The report attributes this correction primarily to technical factors and position unwinding, with no deterioration in fundamentals. The gap between semiconductor relative prices and relative earnings continues to widen; however, tight supply-demand balances for DRAM and NAND are expected to persist through 2028, with DRAM spot prices remaining elevated and Micron raising its earnings guidance, indicating that supply constraints will last at least until 2027. The RSI of the Philadelphia Semiconductor Index has approached oversold territory, with most of the year-to-date momentum gains retraced. J.P. Morgan believes that once an oversold signal is confirmed, a rebound window will open, and recommends investors gradually build positions in semiconductors over the summer. A record 97% of Q2 earnings reports exceeded expectations, with companies surpassing estimates outperforming the S&P 500 by an average of 1.7 percentage points on their earnings announcement days. In terms of allocation, J.P. Morgan has raised its equity allocation from 60% to 65% and increased its exposure to the Eurozone from 8.7% to 11%. At the sector level, it is overweight in semiconductors, mining, capital goods, automotive, insurance, and banking, while underweighting software, business services, and media—the so-called “AI-eroded” sectors. Regarding geopolitical tensions, the report maintains that the “buy-on-dips” strategy implemented since late March remains effective.