JPMorgan warns the current AI-driven rally ranks among the fastest and largest in 40 years, signaling potential sharp reversals.
JPMorgan highlights growing risks of a sharp market reversal as AI-driven stock momentum reaches extremes comparable to the dot-com era. The bank notes the rally is the second-fastest in 40 years, trailing only the 1999 internet boom, with gains concentrated in a narrow group of AI-linked stocks.
The decoupling of momentum from fundamentals like valuation and quality suggests investors are chasing price action rather than underlying strength. Recent volatility in momentum-heavy stocks, including Korean memory chip names, further signals stretched positioning and potential instability.
JPMorgan recommends rotating toward value and diversifying geographically, reflecting institutional caution despite strong headline earnings. This could foreshadow outflows from crowded AI trades in the coming months.