Investing opportunity across the economy with AI wave, says JPMorgan's Stephanie Aliaga

The market has feasted on great earnings and insatiable demand for semiconductors and AI hardware. What is your interpretation of how this pullback is playing out?

Host

Stephanie Aliaga

We had a ferocious rally this year, particularly in hardware. The semiconductor ETF doubled year-to-date. The bar is very high, creating sensitivity to uncertainties in the second half. However, the reaction to the jobs report is wrong: good news can be good news. The labor market strengthened without affirming inflation, so the Fed does not need to intervene. Quits are low and wage inflation is not firming.

The jobs report showed strength but no wage inflation pressure, which is positive for markets.

The selling was concentrated in parts of the market that had run up a lot (AI trade), not in consumer cyclicals or banks. This suggests it's about market dynamics, not economic weakness.

Host

Stephanie Aliaga

It's a short-term digestion. Investors are seeking stability. The AI wave is bigger than just hardware; there are opportunities across the economy in complementary investments like software, retraining, and workflow redesign.

Citing a 2002 report by Erik Brynjolfsson: for every $1 spent on hardware in the internet era, $9 was spent on complementary investments. A similar pattern is emerging for AI, with companies expecting to increase AI spend per employee by 50%.

New stock issuance (SpaceX IPO, Alphabet secondary) is growing beyond what we've seen. Is this a seller's market and how should investors react?

Host

Stephanie Aliaga

Expect volatility from high-profile liquidity events, but structural demand from 401(k) contributions and passive inflows provides strong support. Since 1990, the number of public companies has halved to 4,000, while daily inflows are valuation-agnostic. We can digest this issuance. Geopolitical risks (Iran) are on a de-escalatory path, and the economy is resilient to energy price shocks.

The stock market is not the economy, but the economy remains quite resilient.

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