JPM | APAC THEMATICS - Hyperscaler kick-off: Google -3% as Cloud beats but capex lifts and FCF goes negative / Oil: Brent > $95 on Houthi disruption / Rates: Japan 2y yields break out

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JPM | APAC THEMATICS - Hyperscaler kick-off: Google -3% as Cloud beats but capex lifts and FCF goes negative / Oil: Brent > $95 on Houthi disruption / Rates: Japan 2y yields break out

Specialist Sales

APAC Specialist Sales J P M O R G A N

22 July 2026

are 75% done, and the fact 20% drawdowns in the SOX are historically good times to buy. What was the feedback? Very mixed.

Bulls continued to argue Tech remains, by far, the best EPS growth story, so this positioning unwind is an opportunity to buy. AI

capex will continue to rise, and the supply chain upcycle remains a longer-duration one. Short-term bears argue the HF

positioning unwind is insufficient, price action to events remains poor, and that buy-side expectations around CSP capex are

already elevated that the room to positively surprise is limited. Longer-term bears argue that while things might look great now

and into early 2027, the sector is over-earning in a way that is not long-term sustainable.

(3) Michael Cembalest… outlines his worries about US market technicals. His main concern about the current equity market

boom is the stagnant stock price returns and falling FCF for the corporate-facing engine of the AI boom (hyperscalers) while

stock prices and cash flows for semiconductors (the caboose of the AI boom) are soaring. Michael sees similarities to late-99 and

early-00, when comm-services rolled over (Verizon, AT&T, etc) even as communication equipment companies kept rising (Cisco,

Nokia, etc). Which, per Michael, raises the question… who is going to continue to pay for the AI boom if the tech sector’s

primarily customers are not making more money as well. See note (link).

(4) Beyond tech… Brent is back >$95/bbl on US/Iran and Houthi attacks. Tit-for-tat strikes between the US/Iran continued for