The bank's mid-year outlook for 2026 points to an AI chip backlog and over $650 billion in hyperscaler spending as reasons to buy the dip in chipmakers.
JPMorgan is telling its clients to stop worrying and learn to love the semiconductor selloff. The bank’s Mid-Year Outlook 2026 doubles down on chipmakers as a core investment thesis, naming Broadcom specifically as a Strong Buy for the remainder of the year and flagging the broader AI-driven chip cycle as far from over.
The recommendation comes at an interesting moment. Semiconductor stocks have been under pressure in recent weeks as investors fret about whether the pace of AI infrastructure spending can be sustained beyond 2026.
The case for chips right now
JPMorgan analyst Harlan Sur and the broader research team are pointing to an AI chip backlog as the primary catalyst behind the Broadcom call. In English: there are more orders for AI chips than companies can currently fill, which means revenue visibility stretches well into the future.
The numbers backing this up are substantial. Hyperscaler capital expenditure expectations have been increased by $130 billion for 2026, bringing total projected spending to over $650 billion through year-end.
Taiwan and Korea are identified as key regions for semiconductor growth, largely because that’s where the most advanced chip fabrication and memory production lives.
JPMorgan noted that its clients were already acting as “aggressive buyers” of select chip stocks during dips related to AI demand concerns back in June. The bank appears to be formalizing what its institutional clients were already doing: treating the weakness as an entry point rather than an exit sign.
Why the dip happened in the first place
The recent pressure on semiconductor names reflects a legitimate debate happening across Wall Street about what happens after the initial wave of AI infrastructure buildout. The concern goes something like this: hyperscalers like Microsoft, Google, Amazon, and Meta have been spending at unprecedented rates to build out AI capacity. At some point, that spending either plateaus or declines.
JPMorgan acknowledges this isn’t a zero-risk trade. The bank specifically flags the narrowing valuation gap between chipmakers and the hyperscalers themselves as a risk factor. When semiconductor companies start trading at multiples that rival the platforms buying their products, the margin of safety shrinks.
The outlook forecasts that global equities broadly could benefit from AI-powered productivity gains into late 2026, with semiconductors positioned at the front of that wave.
The Broadcom angle
Broadcom’s selection as a Strong Buy isn’t random. The company has become one of the more interesting plays in the AI chip space because it straddles both the custom silicon and networking infrastructure markets.
The AI chip backlog JPMorgan references likely speaks to Broadcom’s custom ASIC business, where major cloud providers have committed to multi-year chip development programs. That backlog visibility is precisely what makes the recent stock weakness look like a buying opportunity to JPMorgan’s team.
What this means for investors
JPMorgan’s outlook extends through late 2026 for the broader equity rally and positions Broadcom as a hold for the rest of the year. The $650 billion-plus in projected hyperscaler spending provides a floor of sorts for chip demand in the near term. But spending commitments can be revised, delayed, or restructured. Investors should watch quarterly capex guidance from the major cloud providers as the real-time barometer of whether JPMorgan’s thesis is holding up.
