Why the AI trade is not set up for a rebound like July’s, according to JPMorgan

JPMorgan's assessment centers on market positioning rather than AI's fundamental outlook. According to the firm's strategist, the conditions that fueled July's sharp rebound are largely absent this time: short interest has already been unwound, meaning there are fewer bearish bets to squeeze higher; corporate buybacks are winding down; fund inflows have stalled; and long positioning remains crowded. Together, these factors suggest the fuel for a rapid recovery is limited.

The distinction matters because rebounds are often driven as much by positioning as by news. When shorts cover or fresh money enters, prices can rise even without improved fundamentals. With those mechanical supports diminished and longs already extended, the AI trade may need genuine catalysts — earnings, guidance, or capital-spending signals — rather than a technical bounce.

What to watch: whether buyback activity resumes, whether inflows return to AI-linked funds, and how crowded long positioning shifts in coming weeks. These flow and positioning indicators, more than headlines, may determine whether the pullback stabilizes or extends.