[J.P. Morgan Global Equity Strategy / 2026.02.18]

AI Fear Creates Opportunity

Subtitle: Finding Value in Traditional Industries and Valuation Appeal Amidst Excessive Concerns

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3-Line Summary

• Market Diagnosis: The sell-off triggered by fears of AI job displacement is nearing its end, and JPM diagnoses this as excessive fear and an opportunity to realign portfolios.
• Investment Strategy: Recommended purchasing tangible, real-world traditional industries (HALO stocks) that are free from AI threats, and European bank stocks that have unfairly declined due to market volatility.
• Fund Flows: Global funds are not leaving the market, but are moving to value stocks, infrastructure, and practical AI trading beneficiaries such as Korean memory semiconductors.

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Detailed Analysis

■ 1. Long-Short Strategy Utilizing AI Fear

New opportunities have arisen as the market excessively sells off companies vulnerable to AI. JPM suggests that a strategy of approaching stocks exposed to AI threats conservatively (Short) while buying (Long) relatively undervalued stocks outside of this influence is the starting point for overcoming current volatility.

■ 2. The Resurgence of HALO Stocks

Mentions of AI-related disruption are surging in corporate earnings releases. As a refuge from this, JPM recommends increasing the weighting of HALO stocks, which are tangible, non-digital traditional industries such as tobacco, beverages, machinery, food, and electricity. They become solid investments amidst the upheaval of the digital world, and companies benefiting from AI infrastructure and robotics-related stocks are also viewed positively.

■ 3. Rediscovering European Cyclicals and Bank Stocks

With the concretization of Europe's "Made in Europe" policy, cyclical stocks such as automobiles, chemicals, quantum technology, chips, and renewable energy are expected to benefit. In particular, the recent decline in European bank stocks is not due to a crisis in the banking industry itself, but rather a result of investors shedding companies that will be replaced by AI, overlapping factors, and unfairly being swept up in sell-off volume. Therefore, JPM draws a line, stating that the current stock prices are oversold.

■ 4. Actual Flow Paths of Market Funds (Benefiting the Korean Stock Market)

Despite the weekly decline in the S&P 500 index, $26 billion flowed into equity ETFs. Within the U.S., funds are moving from growth stocks to value and infrastructure stocks. In particular, global funds are heading towards Korea and emerging markets (EM), which are recognized as practical beneficiaries of AI trading based on the strength of semiconductor memory in a weak dollar environment.

■ 5. UK Labor Market Slowdown and Opportunities to Buy Government Bonds

While U.S. macroeconomic indicators are mixed, the UK clearly shows a trend of labor market slowdown (decrease in salaried workers, increase in unemployment rate). JPM believes this provides justification for the Bank of England (BoE) to cut interest rates and analyzes that a strategy of buying UK government bonds (betting on falling interest rates) is effective.

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StockHub Insight & Comments

In the recent trend of connecting individual company analysis with macro investment strategies, this JPM report accurately pinpoints the discrepancy between the market's psychological panic and the actual movements of smart money.

While the market is gripped by AI fear, funds have not escaped the stock market, but have instead cleverly moved to tangible, real-world traditional industries (HALO) and European value stocks, where valuation appeal has increased. Of particular note is the fact that global funds are removing the AI bubble and flowing into the Korean memory semiconductor sector, which is a practical hardware beneficiary. This is interpreted as a rational portfolio restructuring process by stock market participants who want to avoid the uncertainty brought about by software innovation while still reaping the rewards of AI growth.