JP Morgan sees durable growth in AI amid bubble concerns
Artificial intelligence continues to play a central role in shaping both the U.S. equity market and the broader economy, according to a new analysis by J.P. Morgan Private Bank, a multinational finance corporation headquartered in New York. The report notes that AI is the primary driver of the U.S. equity market and, increasingly, the U.S. economy.
The firm said that the technology stocks now account for approximately half of the S&P 500 index and represent 60 percent of the broader U.S. market’s performance year-to-date. The report adds that “real U.S. economic growth for the first half of 2025 would be half of its reported pace if capital expenditures on software and IT equipment were excluded.”
The rapid rise of AI spending has sparked comparisons to past technology booms, but J.P. Morgan analysts point out that current conditions differ in several key respects. The analysis highlights Meta’s CEO’s view of the “two-sided nature of the AI race: on the one hand, companies could misspend hundreds of billions of dollars; on the other hand, they could achieve ‘super intelligence’.”
Monitoring signs of overinvestment
Despite widespread enthusiasm, J.P. Morgan’s report identifies several areas it is monitoring for signs of overinvestment or exuberance. The firm said that AI adoption in the U.S. has grown 60 percent over the last year, but with only 9.1 percent of companies reporting active use of the technology to produce a good or service, leaving substantial room for continued growth.
On the infrastructure side, the report notes that “the amount of computer processing power needed to train frontier AI models continues to increase at an exponential rate and the performance of the leading models out of both the U.S. and China continue to show improvement.” However, innovations that reduce power requirements “could be a positive for broader AI adoption and long-term productivity gains, but could result in market volatility given the importance of the infrastructure buildout to current market leaders.”
Capital strength of AI builders
J.P. Morgan’s analysis finds that companies funding the AI infrastructure expansion remain financially sound. “Investments remain sustainable if there is sufficient capital and no signs of overinvestment. Except for Oracle, the companies building the data infrastructure needed to scale AI (i.e., the hyperscalers) have less debt on their balance sheets than they generate in profit, and 3 of the 5 have surplus cash,” the firm said.
The report also emphasises that the actual amount of capex deployed remains low relative to prior capital overbuilds, such as telecoms ahead of the dotcom crash and energy during the shale/fracking boom.
In contrast to earlier speculative cycles, the firm said that as earnings have realised, the multiple on the most prominent AI companies has fallen relative to the market and previous bubbles. “Even the returns from recent IPOs, which have historically coincided with peak enthusiasm, are yet to see a meaningful pick-up,” it said.
“We believe the AI theme and buildout remain durable. We remain cognizant that historically the market has run ahead of technological advancements, and this, one day, might be no exception. However, we don’t think we are there yet,” the firm added.JP Morgan strategist: ‘More enthusiasm than excess’
Yuxuan Tang, Global Market Strategist at J.P. Morgan Private Bank, reinforced this balanced outlook. “Artificial intelligence remains a powerful force reverberating across markets and the broader economy. Despite rising questions around a potential tech bubble, our ‘AI bubble watch’ reflects more enthusiasm than excess. We see a substantial runway ahead for AI-driven innovation and recommend a barbell approach across public and private markets to capture the opportunity,” Tang said.
AI growth extends to gaming and beyond
Outside traditional tech sectors, industries such as iGaming are also adapting to the AI wave. In June, sector leaders like Martins Lielbardis of iGaming Centre told SiGMA World that he has observed how AI is reshaping content production, customer engagement, and data analytics, while also cautioning that human interaction remains vital to the player experience.
This perspective aligns with J.P. Morgan’s broader message, which is that the AI buildout may be reshaping markets and productivity. Still, the transition remains in its early stages — one that continues to demand both investment discipline and a grounded view of human value alongside technological progress.
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