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Yahoo
30 minutes ago
- Yahoo
AI and momentum trades are getting too crowded, blue chips may be the way to go: JPMorgan
The most speculative corners of the market may be getting too popular, too fast. In a research note published Monday, JPMorgan warned that the rush into high-beta, momentum-driven stocks such as Palantir (PLTR), Coinbase (COIN), and Nvidia (NVDA) has reached "100th percentile" levels of crowding, the most extreme positioning in 30 years. The crowding "not only presents a risk for this segment, but is also a red flag for the broader market, implying there is rising complacency in the short term," strategist Dubravko Lakos-Bujas wrote. Investors may be overly confident that the AI-fueled rally has more room to run, with names like Tesla (TSLA) trading at over 160x forward P/E, compared to around 22x for the S&P 500 (^GSPC). The high-beta crowding, which includes low-value and speculative growth stocks, is happening rapidly. Positioning surged from the 25th to the 100th percentile in three months, the fastest climb since the firm began tracking the data three decades ago. JPMorgan notes that short interest has also dropped sharply, meaning fewer investors are hedging against downside risks. It's the "third-extreme overcrowding" episode this year, according to the firm. In January, investors piled into AI-linked megacaps. In April, they sought safety in low-volatility names amid concerns about tariffs. Now, the hot money is chasing speculative tech and meme-adjacent plays, leaving the market more vulnerable to a pullback. Read more: How to protect your money during turmoil, stock market volatility When April's low-volatility crowding began to unwind, it did so within three months, the fastest unwind on record. Following this reset, Lakos-Bujas' team recommends getting back into lower-volatility names that have lagged the broader market. Their blue chip stock picks have underperformed the market by 19% since April but may be poised to outperform if speculative bets start to unwind. "Low vol once again presents an attractive risk/reward, especially with looming tariff deadlines (Aug. 1), adverse seasonality, and aggressive investor positioning," Lakos-Bujas wrote. Top picks in the group include Coca Cola (KO), Allegion (ALLE), Intercontinental Exchange (ICE), CME Group (CME), and CBOE Global Markets (CBOE). Now may be the time to rotate back into safety, per the note. Investors may be buying into a "Goldilocks" scenario of solid economic growth, falling inflation, and a more dovish Fed. But JPMorgan sees that optimism as fragile, and crowded AI trades could be subject to quick reversals. And risky stocks that are not linked to AI are at even higher risk of reversal, the firm added. The view is gaining traction elsewhere on Wall Street. Apollo Global Management chief economist Torsten Sløk is also sounding the alarm. (Disclosure: Yahoo Finance is owned by Apollo Global Management.) In a research note last week, Sløk pointed to internal data showing that the P/E ratios of the 10 largest companies in the S&P 500, many of them AI standouts like Meta (META) and Nvidia, have surpassed levels seen at the height of the 1999 dot-com bubble. "Yes, AI will do incredible things for all of us," Sløk said on Yahoo Finance's Opening Bid. "But does that mean I should be buying tech companies at any valuation?" Sløk's response increasingly veered toward no. Francisco Velasquez is a Reporter at Yahoo Finance. He can be reached on LinkedIn and X, or via email at Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
an hour ago
- Yahoo
AI and momentum trades are getting too crowded, blue chips may be the way to go: JPMorgan
The most speculative corners of the market may be getting too popular, too fast. In a research note published Monday, JPMorgan warned that the rush into high-beta, momentum-driven stocks such as Palantir (PLTR), Coinbase (COIN), and Nvidia (NVDA) has reached "100th percentile" levels of crowding, the most extreme positioning in 30 years. The crowding "not only presents a risk for this segment, but is also a red flag for the broader market, implying there is rising complacency in the short term," strategist Dubravko Lakos-Bujas wrote. Investors may be overly confident that the AI-fueled rally has more room to run, with names like Tesla (TSLA) trading at over 160x forward P/E, compared to around 22x for the S&P 500 (^GSPC). The high-beta crowding, which includes low-value and speculative growth stocks, is happening rapidly. Positioning surged from the 25th to the 100th percentile in three months, the fastest climb since the firm began tracking the data three decades ago. JPMorgan notes that short interest has also dropped sharply, meaning fewer investors are hedging against downside risks. It's the "third-extreme overcrowding" episode this year, according to the firm. In January, investors piled into AI-linked megacaps. In April, they sought safety in low-volatility names amid concerns about tariffs. Now, the hot money is chasing speculative tech and meme-adjacent plays, leaving the market more vulnerable to a pullback. Read more: How to protect your money during turmoil, stock market volatility When April's low-volatility crowding began to unwind, it did so within three months, the fastest unwind on record. Following this reset, Lakos-Bujas' team recommends getting back into lower-volatility names that have lagged the broader market. Their blue chip stock picks have underperformed the market by 19% since April but may be poised to outperform if speculative bets start to unwind. "Low vol once again presents an attractive risk/reward, especially with looming tariff deadlines (Aug. 1), adverse seasonality, and aggressive investor positioning," Lakos-Bujas wrote. Top picks in the group include Coca Cola (KO), Allegion (ALLE), Intercontinental Exchange (ICE), CME Group (CME), and CBOE Global Markets (CBOE). Now may be the time to rotate back into safety, per the note. Investors may be buying into a "Goldilocks" scenario of solid economic growth, falling inflation, and a more dovish Fed. But JPMorgan sees that optimism as fragile, and crowded AI trades could be subject to quick reversals. And risky stocks that are not linked to AI are at even higher risk of reversal, the firm added. The view is gaining traction elsewhere on Wall Street. Apollo Global Management chief economist Torsten Sløk is also sounding the alarm. (Disclosure: Yahoo Finance is owned by Apollo Global Management.) In a research note last week, Sløk pointed to internal data showing that the P/E ratios of the 10 largest companies in the S&P 500, many of them AI standouts like Meta (META) and Nvidia, have surpassed levels seen at the height of the 1999 dot-com bubble. "Yes, AI will do incredible things for all of us," Sløk said on Yahoo Finance's Opening Bid. "But does that mean I should be buying tech companies at any valuation?" Sløk's response increasingly veered toward no. Francisco Velasquez is a Reporter at Yahoo Finance. He can be reached on LinkedIn and X, or via email at Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
2 hours ago
- Yahoo
Sarepta Therapeutics stock sinks after FDA tells company to stop shipping its bestselling drug
Sarepta Therapeutics' (SRPT) stock continued to sink Monday, down more than 8% in early trade though quickly paring losses following a rough end to last week, including a previously unreported patient death in a clinical trial of an unnamed therapy and the threat of the FDA taking a different therapy, Elevidys, off the market. Both therapies aim to treat different types of muscular dystrophy. This extended decline in the stock comes even as analysts have pared back their concerns over the weekend, after Wall Street sent the stock into free fall on Friday, down 35% at the close of trading. "Net-net, so long as Elevidys stays on the market (which we think, post digging into FDA's press release on Friday, is certainly the case for ambulatory patients), from current levels, there is upside in SRPT shares. We acknowledge that if we are wrong about Elevidys staying on the market in ambulatory patients, fundamentally, then this would clearly be thesis changing for us," JPMorgan analyst Anupam Rama wrote in a note to clients Monday. Elevidys generated $282 million in revenues in the second quarter of this year, or about half of the company's $513 million in net revenues. The patient death occurred a month ago in a phase 1 trial of the unnamed therapy but was not revealed in an earnings call last week. BioCentury first reported the patient death, which then prompted the FDA to request Sarepta to halt shipments of Elevidys, its Duchenne muscular dystrophy drug. Sarepta refused. That shocked analysts who on Friday and Saturday said that management's handling of the situation, as well as its defiance of the FDA, has put investors in "unprecedented times." "This saga continues to get messier, and we are increasingly in unprecedented times, with the FDA requesting Sarepta to suspend the distribution of Elevidys, and the company refusing to do so," Leerink Partners analyst Joseph Schwartz wrote in a note to clients Saturday. Elevydis was also in the crosshairs after two teenagers died earlier this year following treatment, making the latest death the third for the company in a year. Leerink downgraded the stock to Market Perform and lowered its price target to $10 from $14. The company's stock is down 88% year to date. Read more about Sarepta's stock moves and today's market action. Management's messaging The downturn began just days after Sarepta's second quarter earnings call, in which CEO Doug Ingram said the company would end several clinical trials, including for SRP-9004, as part of a restructuring. But none of the executives on the call mentioned the death. On a call with investors Friday, Ingram attempted to quell concerns that ending some research programs was related to the death and was focused instead on the need to cut costs. "We did not discuss this matter in our call on Wednesday, because it was neither material nor central to the topics at hand on Wednesday," Ingram said at the start of the call Friday. He described the patient as a 51-year-old late-stage, nonambulatory male. "After only recently learning about a death that occurred a month ago ... [we are] losing any remaining confidence we had in the management team, and seeing the headlines that the FDA will request SRPT to voluntarily stop all shipments of Elevidys (SRP-9001) in Duchenne muscular dystrophy (DMD), we stepped to the sidelines and downgraded the stock," Leerink's Schwartz wrote in a note to clients Friday. Jefferies analyst Andrew Tsai said the revelation could make Sarepta's stock less appealing. "Seeing a third SRPT-related death occur within a span of 4 months will raise questions about SRPT's gene therapy platform," Tsai wrote on Friday. "Serious downside risks (i.e. deaths) have been challenging to handicap, which could cause near-term stock exhaustion." In a statement Friday, following the FDA's request to halt Elevidys, Sarepta said it did not see a reason to acquiesce. "Based on our comprehensive scientific interpretation of the data, which shows no new or changed safety signals in the ambulant patient population, we will continue to ship Elevidys to the ambulant population. We look forward to continued discussions and sharing of information with FDA in order to advance our shared purpose of protecting patient safety and informed access to care," the company said in a statement Friday. Weekend turnaround Over the weekend, management spoke with analysts and appeared to have allayed some concerns. They told analysts that the FDA was aware of the death and that the agency's sudden request to pull Elevidys was not valid. "Regarding the FDA's request that SRPT voluntarily stop all shipments of Elevidys (SRP-9001) in Duchenne muscular dystrophy (DMD), management agreed with our thoughts that this was seemingly in reaction to the headlines on Friday, rather than a decision rooted in science or regulatory precedent, especially as the agency has been aware of the death ... for quite some time," Leerink's Schwartz wrote. Others, like JPMorgan's Rama, noted that the FDA is unlikely to pull the drug off the market for the population unaffected by the drug — the mobile, or ambulatory, population. Meanwhile, Jefferies analyst Andrew Tsai held a more cautious tone. "We acknowledge the story could be challenging to navigate after a third patient death, but we are merely assessing the situation as more information becomes available," he wrote in a note to clients on Sunday. "Despite the FDA's request to halt Elevidys shipments, SRPT will elect to continue shipping the gene therapy to ambulatory DMD patients. Since we are unsure if the FDA can pull Elevidys, the logical question is how Elevidys sales will trend amid increased uncertainty and pot'l FDA controversy." Sarepta's management also told analysts that if it were forced to pull Elevidys, it would have to cut more costs in order to stay afloat. Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, provider services, digital health, PBMs, and health policy and politics. That includes GLP-1s, of course. Follow Anjalee as AnjKhem on social media platforms X, LinkedIn, and Bluesky @AnjKhem. Click here for in-depth analysis of the latest health industry news and events impacting stock prices
