JPMorgan strategist notes that the AI trade lacks the conditions for a July-style rebound. Several market factors have shifted since the previous recovery. Fewer short positions now exist to fuel a squeeze.
Buyback activity has ended, removing a key source of support. No new inflows are entering the sector. Too many long positions remain crowded.
These conditions suggest no immediate recovery is likely. The setup differs from July when short covering helped drive gains. Current positioning leaves little room for a similar bounce.
Investors holding AI stocks face a different landscape. The absence of buybacks reduces demand. Lack of fresh inflows limits upward momentum.
Heavy long positioning creates vulnerability to further declines. Without shorts to squeeze, upside catalysts are scarce. The market structure has fundamentally changed.
JPMorgan’s analysis points to a wait-and-see approach. The trade needs new drivers to recover. Until then, range-bound or downward pressure may persist.
Traders should watch positioning data and fund flows. These metrics will signal when conditions improve. For now, the AI trade remains without a clear rebound path.
