Technology stocks are set to regain momentum after a three-month pause, as reduced crowding, strong earnings, and more realistic valuations attract investors back, according to JPMorgan Chase & Co. strategists led by Mislav Matejka. A note from the team highlighted that cleaner positioning and lower valuations, alongside rising capital expenditure and continued earnings strength, should support re-engagement with the tech sector.

While tech stocks still lead S&P 500 gains this year, recent months have seen a cooling rally amid concerns over AI spending returns. The Magnificent Seven now trade at their cheapest valuations in a decade, and semiconductor stocks are recovering from a rough patch influenced by calls from Anthropic PBC's Dario Amodei and OpenAI's Sam Altman to slow advanced AI development.

Matejka expressed skepticism that significant slowdowns will occur, calling the AI race an "existential, winner takes all" competition. He noted that while first-half gains are unlikely to repeat, renewed interest in tech could boost equities in South Korea, home to Samsung Electronics Co Ltd. and SK Hynix Inc., as well as emerging-market stocks.