JPMorgan: Semiconductors Nearly Oversold, Suggest Phased Allocation in Summer

According to Chaoxiang Research, JPMorgan's equity strategy report on July 20 noted that AI-related stocks have suffered heavy selling over the past few weeks. The Korean stock market has fallen 25% from its highs, the Philadelphia Semiconductor Index has dropped 20%, and individual stocks such as Samsung and Micron have declined between 20% and 50%. The report believes the core drivers of this decline are technical factors and position clearing, with no deterioration in fundamentals. The gap between semiconductor relative prices and relative earnings trends continues to widen, but the tight supply-demand balance for DRAM and NAND will persist until 2028. DRAM spot prices remain high, and Micron has also raised its earnings guidance, judging that supply-demand tightness will last at least until 2027. The RSI of the Philadelphia Semiconductor Index has approached the oversold zone, and momentum gains accumulated year-to-date have been largely erased. JPMorgan judges that once oversold signals are confirmed, a rebound window will open, suggesting investors build semiconductor positions in tranches during the summer. The proportion of Q2 earnings reports beating expectations reached 97%, and S&P 500 companies beating expectations outperformed the market by an average of 1.7 percentage points on the day of their earnings releases. In terms of allocation, JPMorgan has increased equity allocation from 60% to 65%, and the Eurozone allocation from 8.7% to 11%. At the industry level, it overweights semiconductors, mining, capital goods, automobiles, insurance, and banks, and underweights software, commercial services, media, and other "AI Cannibalization Group" sectors. Regarding geopolitical conflicts, the report believes that the "buy the dip" strategy since the end of March remains effective.