Tech and AI Stocks Stalled in Q3 After Valuations Slipped, JPMorgan Says
Broad technology and AI-linked stocks effectively stalled through the third quarter after a derating, according to JPMorgan strategist Mislav. A derating means investors pay a lower price for each dollar of earnings, so prices fall even when profits do not collapse.
The assessment was reported on Sept. 28, 2026 via MarketWatch live coverage of U.S. equities, oil and bonds. The note described "stocks in the broad technology and AI-related ecosystem effectively stalled over the third quarter."
Earlier, J.P. Morgan Global Research forecast "double-digit gains across developed markets and emerging markets in 2026." The same outlook said "2026 style positioning will likely resemble 2025 with new extremes in crowding, record concentration and a winner-takes-all dynamic." Crowding means many investors own the same stocks. Concentration means a few large stocks drive most market gains.
From concentration to derating
The starting assumption inside the bank last autumn was momentum persistence. JPMorgan Wealth Management's Outlook 2026 said "tech stocks keep driving market gains" and that it "does not see a bubble about to burst," in a document published Oct. 27, 2025.
On the credit side, JPMorgan Private Bank's 2026 Asia Outlook, published Dec. 18, 2025, warned that "U.S. technology credits may face supply pressures in 2026 due to heavy AI-related capex while China's tech sector is less exposed." Capex is cash spent on equipment, chips and data centers. Credits here means corporate bonds.
On June 25, 2026, JPMorgan said retail investors had turned more cautious in using options and margin, a shift reported as a potential problem for tech (MarketWatch). Options are contracts that bet on short-term price moves. Margin is money borrowed from a broker to invest.
In my view, that pullback in borrowing helps explain the price action for regular savers to follow. When retail options flow and margin-funded bets had pushed prices higher, less willingness to borrow removes support. Less of that buying means smaller rallies and sharper drops when news disappoints.
On July 27, 2026, JPMorgan analysts said an in-house indicator was "flashing a buy signal for the S&P 500" and that they "remained tactically bullish on U.S. stocks," according to Bloomberg. Days later, technology sold off. JPMorgan strategists subsequently said "some big hedge-fund groups took heavy hits in the July tech selloff" (MarketWatch).
Flow breaks first
By early August, JPMorgan strategists said "technology stocks are not likely to be the main drivers of stock markets in the second half of the year" (MarketWatch). The Aug. 3 report framed tech as ceding leadership rather than leading the index.
JPMorgan flagged "bearish technical signals flashing in the U.S. market with warnings piling up heading into September," as reported Aug. 24 by Business Insider. Technical signals are trend and chart measures. Breadth measures how many stocks take part in a move.
The order was retail pullback in June, a buy signal in late July, hedge-fund selling in the July selloff, then weaker trend and breadth in August. Two older data points sit outside that Q3 sequence. JPMorgan's Mid-Year Outlook 2026 put defense tech at "roughly 8% of all global venture capital." Jamie Dimon had said there is "a 30% chance of a correction," as reported Oct. 9, 2025.
The broader context here is leadership rotation when markets are crowded. When concentration is at records and positioning is winner-takes-all, the bar for higher valuations rises even if earnings hold. A derating does not need an earnings collapse. It happens when buyers step back, leveraged holders cut positions, and the next buyer demands extra return to hold long-dated cash flows and debt-funded AI spending.
In my view, the order of selling is the part for investors to keep in mind. Retail pulled back on options and margin first. Hedge funds took losses and were forced out of tech next. Short-term buy signals can still flash after sharp falls while longer trends keep weakening. That mix often brings choppy, rotational markets, with strength outside the old leaders and extra sensitivity to bond supply where AI spending funds new debt. Double-digit index gains can still coexist with stalled tech, but only if breadth improves elsewhere and growth can be funded without testing leverage tolerance in options and margin or in primary credit markets.
