Banking titan JPMorgan Chase is revealing its four-part strategy to capture the upside potential in the AI race that continues to heat up.
In its Outlook 2026 report, the bank says investors should stick with hyperscalers even if there’s widespread doubt that their hundreds of billions of dollars in CapEx will ultimately generate substantial returns.
“The four original hyperscalers (Microsoft, Meta, Alphabet and Amazon) are already growing earnings at about a 20% annual pace. Once you adjust for their growth, their valuation premiums seem justified… As a collective, they are already generating an estimated $25 billion in incremental quarterly revenue from AI activity, and we believe that number could be growing at a 200% year-over-year pace. If the hyperscalers can continue to escalate their cloud computing revenue gains, investors will likely tolerate the companies’ lower free cash flow yields.”
JPMorgan Chase also tells investors to keep a close watch on the AI supply chain, including power and semiconductors, as demand for chips continues to outpace supply by a wide margin.
“Nvidia’s Blackwell chip is expected to sell out over the next 12 months, while companies in the global supply chain (e.g., hyperscalers, Micron, SK Hynix, Samsung and TSMC) have emphasized capacity constraints on their earnings calls.”
Another investment theme on the bank’s radar is the “smart” companies that have deployed AI in their operations. According to JPMorgan, the firms will likely compound their gains and leave firms that are slow to adopt AI in the dust.
“Third, we want to find businesses that are successfully deploying AI to grow revenue and profits… The current crop of winners is likely to compound their gains due to faster, more efficient integration of AI into existing workstreams and business models.”
Finally, JPMorgan highlights the private markets as a critical source of AI exposure.
“Already, the top 10 private AI companies are collectively worth about $1.5 trillion. If they were publicly held, the companies would account for about a 3% share of the S&P 500. For context, the entire U.S. public small-cap market is only worth $3 trillion.”
Disclaimer: Opinions expressed at CapitalAI Daily are not investment advice. Investors should do their own due diligence before making any decisions involving securities, cryptocurrencies, or digital assets. Your transfers and trades are at your own risk, and any losses you may incur are your responsibility. CapitalAI Daily does not recommend the buying or selling of any assets, nor is CapitalAI Daily an investment advisor. See our Editorial Standards and Terms of Use.