Japan Quant Strategy: "AI bubble" narrative cyclically fading – Momentum recovery timeline being pushed back, but is it just a matter of timing?

Research evidence excerpt

Japan Quant Strategy: "AI bubble" narrative cyclically fading – Momentum recovery timeline being pushed back, but is it just a matter of timing?

J P M O R G A N Global Markets Strategy

16 July 2026

Japan Quant Strategy

“AI bubble” narrative cyclically fading – Momentum

recovery timeline being pushed back, but is it just a

matter of timing?

1.Localized turmoil around AI-related stocks continues Global Quantitative and Derivatives

Strategy

Volatile price movements in AI-related stocks continue to weigh on the upward AC Masanari Takada

momentum of Japanese stocks. Today (July 16), the Nikkei Average retreated to

(81-3) 6736-8636

the 66,600 level, as profit-taking pressure from the cash equity side acted as a masanari.takada@jpmorgan.com

headwind. The weakness in Japanese semiconductor-related stocks was JPMorgan Securities Japan Co., Ltd.

particularly apparent during Asian trading hours, as they continued to show a Tony SK Lee

strong correlation with South Korean stocks. (852) 2800-8857

tony.sk.lee@jpmorgan.com

In the South Korean stock market, not only has momentum trading in the cash J.P.MorganMorganBrokingSecurities(Hong (AsiaKong)Pacific)LimitedLimited/ J.P.

equity market reversed, but it also appears as if CTAs are liquidating positions in Robert Smith, PhD

index futures (KOSPI 200), leading to a significant increase in volatility. Today, the (61-2) 9003-8808

KOSPI 200 fell below the 1,100 level, and it appears that stop-loss selling by CTAs robert.z.smith@jpmorgan.com

is further destabilizing the market. J.P. Morgan Securities Australia Limited

Khuram Chaudhry

On the other hand, Japanese stocks overall have not fallen in the same (44-20) 7134-6297

direction. TOPIX futures are relatively firm and it appears that “safe-haven funds” khuram.chaudhry@jpmorgan.com

J.P.