J.P. Morgan Warns of AI Hardware Rally vs. Cloud Weakness, Echoing 1999 Dot-Com Bubble Era

According to a July 2 report from J.P. Morgan's Chief Technology Strategist Jason Hunter, U.S. equities are showing market divergence similar to the months preceding the 1999-2000 dot-com crash. AI hardware supply chain stocks are surging, with the Semiconductor Index up 87% this year and the Roundhill Memory ETF up 141% since its April launch, while mega-cap cloud infrastructure investors face pressure. The Magnificent Seven ETF has dropped about 7% from its January peak, with Meta and Microsoft—the highest AI capital spenders—declining notably.

Hunter highlighted that this pattern mirrors 1999, when telecom equipment makers soared while telecom and internet operators crashed from excessive capital spending. He cautioned investors to watch whether mega-cap companies stabilize this summer, warning that failure could trigger "portfolio and sentiment-driven corrections" in autumn. Meta, Microsoft, Amazon, and Alphabet are projected to spend a combined $725 billion on AI capital expenditures this year.