Chip sellers are making money, chip users are losing money! JPMorgan: The next few weeks will be crucial for the fate of the US stock market.

``` AI-themed stocks are currently experiencing a divergence in performance—chip and infrastructure suppliers continue to strengthen, while hyperscale cloud computing giants investing heavily in AI have stalled. JPMorgan strategists warn that this pattern is strikingly similar to the end of the 1990s Internet bubble. The price action in the coming weeks will determine whether this is a healthy sector rotation or a prelude to a larger-scale collapse. Both Alphabet and Tesla released their earnings reports this week, both announcing increased capital spending on AI, but the market reaction was lukewarm. This further reinforces the main narrative of this year: AI "shovel sellers"—chipmakers and infrastructure providers—continue to benefit, while the "shovel users"—tech giants making massive AI computing purchases—are being punished by investors. The Roundhill Magnificent Seven ETF (MAGS) is up just about 1.5% this year, while the Philadelphia Semiconductor Index (SOX) has risen more than 70% over the same period. On Wednesday, JPMorgan strategist Jason Hunter warned clients: If hyperscale cloud giants fail to break key technical resistance levels, while semiconductors remain below crucial resistance, "What began as mere rotation within the AI theme could turn into a more concerning broad-based breakdown." The Ghost of the 1990s: History Repeats or a False Alarm? JPMorgan Asset Management’s Chairman of Market and Investment Strategy, Michael Cembalest, elaborated on this historical analogy in a podcast released by the bank on Wednesday. He noted that in the latter stage of the 1990s internet boom, a similar internal split emerged: communications services stocks peaked and moved sideways first, while infrastructure stocks kept climbing, “which turned out to be a false signal for the market.” The current situation is highly similar—hyperscale cloud giants at the front end of the AI industry chain have declining free cash flow and stagnant stock prices, while chip, infrastructure, and optical network firms keep climbing. Cembalest used a vivid analogy to highlight the issue: “You always want the carriages to run slower than the locomotive, but now it’s the other way around.” In his July 1 research report, Hunter’s chart clearly shows the historical price action at the end of the Internet bubble, noting the SOX index has already corrected 20% from its high since early July, while the hyperscale cloud giants sector has rebounded within a wide range for 2026. Optimism and Pessimism: Two Equally Weighty Interpretations For the current market situation, Hunter offered two diametrically opposed interpretations, saying both have technical merit. Optimists believe hyperscale cloud giants finding support within their trading range means money is moving out of the crowded hardware sector. This rotation could ultimately lend the AI theme more lasting momentum over the coming months or even quarters. Pessimists point out that similar sector convergence occurred in Q2 2000, marking the top of the entire market cycle. “Technically, both arguments have validity, which is why we believe price action in the next few weeks is crucial,” said Hunter. Key Technical Levels: The Numbers That Determine Destiny Hunter specified a set of key technical levels for investors to watch closely. For the Semiconductor Index, SOX must break through the short-term resistance at 12,769–13,333. Failure to do so may send the index down to the 9,975–10,554 support range, implying a larger 28–32% correction from the June high. However, Hunter also notes if SOX falls toward this lower support range in the coming weeks, it may present a “tradable buying opportunity.” On the individual stock level, Hunter outlined the key levels for several core stocks: - Alphabet: Needs to break the 50-day moving average at $368 and resistance at $381, but as of Thursday’s premarket it traded at $328, still below target. - Amazon: Needs to break resistance at $251–$258 to “confirm a continuation of a larger bull trend,” with $278 as the next target. - Meta: After bouncing from $525–$553, it has stalled near $669–$694. A break above $694 would be a “strong bullish signal.” - Microsoft: The key support is around $350, but the current price is still well below the medium-term resistance at $465–$493, and needs to break $400 (50-day MA), $421 (61.8% retracement since May), and $438 (200-day MA) in sequence. Risk Warning and Disclaimer The market carries risks and investments should be made cautiously. This article does not constitute individual investment advice, nor does it take into account the particular investment objectives, financial situation, or needs of any individual user. Users should consider whether any opinions, views, or conclusions in this article are appropriate to their particular circumstances. Investments made accordingly are at your own risk. ```