JPMorgan: AI Rally Broadens Beyond Tech Giants

JPMorgan Private Bank strategist Stephen Parker noted a broadening in market leadership, suggesting the ongoing rally is not solely dependent on the performance of the 'Magnificent Seven' tech stocks. Parker observed that while these large-cap technology firms have shown minimal gains year-to-date, broader market indices continue to reach new highs, with sectors like industrials and utilities emerging as key drivers.

The strategy shift, according to Parker, has transitioned from a focus on hyperscalers to an emphasis on infrastructure providers crucial for AI development. Companies like Quanta Services (NYSE:PWR) have reported significant earnings beats and record backlogs, with Q2 adjusted EPS of $4.24 surpassing consensus by 39.93% and revenue increasing 41.1% year-over-year to $9.56 billion. Quanta's backlog reached a record $53.44 billion, fueled by accelerated customer investments in electric grids and critical infrastructure.

GE Vernova (NYSE:GEV) also demonstrated robust growth, posting Q2 orders of $24.2 billion, an 88% organic increase, and a total backlog of $176 billion. Data-center orders alone exceeded $5 billion year-to-date for GEV, more than doubling full-year 2025 projections.

Eaton (NYSE:ETN) reported a 21.4% increase in Q2 revenue to $8.53 billion, with data-center sales up approximately 65%. The company's U.S. data-center backlog stands at 307 gigawatts, estimated to represent 15 years of supply at current build rates, underscoring the sustained demand.

Networking companies like Cisco Systems (which reported Q2 revenue growth of 46.33% year-over-year to $7.5 billion) and Arista Networks (up 5.92% in recent trading) are also benefiting from the infrastructure build-out, indicating a wider sectorial expansion driven by AI-related capital expenditures.