JPMorgan Warns of "Technical Stampede" Risk in Crowded AI Chip Stocks

JPMorgan Chase issued a warning regarding a potential "technical stampede" in AI chip stocks, citing risks from overly crowded trades and institutional risk-management models. The firm cautions that rising volatility could trigger forced selling by investors using Value-at-Risk (VaR) models, potentially leading to a cascading market downturn unrelated to fundamental performance. The bank's report highlighted that chip stocks are among the most crowded trades, with the Philadelphia Semiconductor Index experiencing a 10% correction earlier this month before rebounding to new highs. A Bank of America survey confirmed "long semiconductors" as the most crowded single position among global institutional investors. JPMorgan also noted the semiconductor sector's weight in major indices is growing approximately six times faster than its revenue share, indicating a valuation premium significantly outpacing fundamental improvements. This concentration, combined with high valuations and increasing volatility, elevates market fragility.