JPMorgan urges buying chip dip as semiconductor upcycle extends into 2028

JPMorgan is telling clients to buy the chip selloff, calling the semiconductor upcycle far from over.

JPMorgan is urging investors to buy the recent semiconductor selloff, arguing the chip upcycle has room to run through at least 2028.

"The semiconductor upcycle is far from over," Mislav Matejka, strategist at JPMorgan, said in a July 6 note. "Meaningful new supply is unlikely to arrive before 2028."

The Philadelphia Semiconductor Index and chip-focused ETFs recorded sharp declines in late June and early July, with Advanced Micro Devices, Intel, Micron Technology, Nvidia and Broadcom all pulling back. The selloff followed a strong second-quarter rally and was driven by concerns over AI infrastructure spending, elevated valuations and cautious guidance from some industry players. Matejka said JPMorgan's preferred technology exposure remains semiconductor stocks, followed by hyperscale cloud providers and higher-risk AI plays.

The call comes as memory chip makers — including Micron, SK Hynix and Samsung — have sold out their high-bandwidth memory supply through 2026, with new fabrication capacity not expected to meaningfully arrive before 2028. AI data centers are projected to consume roughly 70 percent of global memory chip production this year, creating what analysts describe as a structural undersupply that gives producers sustained pricing power.

Magnificent Seven caution

While JPMorgan is bullish on chipmakers, it is more cautious on the Magnificent Seven, warning that concerns over AI monetization could weigh on valuations despite continued earnings growth. The bank also maintains a bearish long-term view on AI-sensitive sectors such as software, business services and media, though it expects occasional rebounds when those stocks become oversold.

The "AI cannibalization" risk — where massive capital spending on AI infrastructure erodes returns for companies spending heavily without clear revenue payoffs — is a key reason for the selective approach. JPMorgan expects global equities to reach new highs in the second half of 2026, supported by easing inflation, strong earnings and light investor positioning, but sees market leadership broadening beyond AI-related stocks into small caps, cyclical sectors and international markets.

Memory supply crunch supports thesis

The supply-demand imbalance in memory chips reinforces JPMorgan's bullish semiconductor view. Micron has sold out its entire HBM supply through 2026, and the company and its competitors have locked in buyers with multi-year contracts. Goldman Sachs has upgraded key memory stocks, citing the supply-demand imbalance as the primary driver.

Several memory stocks have posted year-to-date gains exceeding 100 percent in 2026, making the sector one of the strongest performers in the broader chip universe. The biggest risk, analysts say, is whether AI spending growth is sustainable at its current pace — if hyperscalers pull back on capital expenditure, the demand picture could shift.

The JPMorgan call signals that institutional investors see the semiconductor selloff as a buying opportunity rather than the start of a downturn. Investors will watch upcoming earnings from Nvidia, Micron and other chipmakers for guidance on whether AI demand can sustain the current cycle through 2027 and beyond.

This article is for informational purposes only and does not constitute investment advice.