AI and momentum trades are getting too crowded, blue chips may be the way to go: JPMorgan

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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 volatilityWhen 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.Terms and Privacy PolicyPrivacy & Cookie SettingsMore InfoS&P 5006,309.62 +4.02 (+0.06%)Dow 3044,502.44 +179.37 (+0.40%)Nasdaq20,892.69 -81.49 (-0.39%)Russell 20002,248.76 +17.63 (+0.79%)VIX16.50 -0.15 (-0.90%)Gold3,442.70 -1.00 (-0.03%)PortfolioSign in to access your portfolioSign inTop gainersMEDP Medpace Holdings, Inc. 477.73 +168.85 (+54.67%)IQV IQVIA Holdings Inc. 187.38 +28.42 (+17.88%)DHI D.R. Horton, Inc. 153.50 +22.28 (+16.98%)NEGG Newegg Commerce, Inc. 30.53 +4.19 (+15.91%)ICLR ICON Public Limited Company 161.50 +21.87 (+15.66%)Top losersBMI Badger Meter, Inc. 204.80 -40.42 (-16.48%)LMT Lockheed Martin Corporation 410.74 -49.79 (-10.81%)THC Tenet Healthcare Corporation 155.97 -18.68 (-10.70%)MCRB Seres Therapeutics, Inc. 12.39 -1.46 (-10.54%)MSCI MSCI Inc. 526.48 -51.49 (-8.91%)Most activeOPEN Opendoor Technologies Inc. 2.8800 -0.3300 (-10.28%)LCID Lucid Group, Inc. 3.1300 +0.3100 (+10.99%)NVDA NVIDIA Corporation 167.03 -4.35 (-2.54%)NIO NIO Inc. 5.01 +0.49 (+10.84%)QS QuantumScape Corporation 13.80 +1.28 (+10.22%)Earnings eventsTrending tickersKSS Kohl's Corporation 14.34 +3.92 (+37.62%)TXN Texas Instruments Incorporated 214.92 +0.35 (+0.16%)LMT Lockheed Martin Corporation 410.74 -49.79 (-10.81%)DNUT Krispy Kreme, Inc. 4.1300 +0.8700 (+26.69%)ENPH Enphase Energy, Inc. 42.50 +2.84 (+7.16%)Top economic events