JPM warns on high beta trades like Palantir

Time for some sober analysis (CSA/Getty Images)

JPM: High-beta trades like Palantir are a red flag

Is it the wisdom of crowds, or just jumping on the bandwagon?

7/21/25 10:38AM

JPMorgan stock market analysts are out with a note this morning spotlighting extreme levels of “crowding” in some of the highly volatile momentum stocks that are some of 2025’s best performers.

The financial term for such stocks is “high beta.” Shares with high beta post exaggerated swings up and down relative to moves in the broader market. So, if the market is up a bit, a high-beta stock is likely up a lot (and vice versa for downward moves). One might describe these kind of stocks as “risky.”

JPM analysts say people are piling into these risky — though highly lucrative so far this year — trades at remarkably high levels, noting that their measure of crowding into such high-beta trades is at the 100th percentile of the data they have, the highest level on records going back to early 1990s. They wrote:

“We believe the current 100% percentile crowding based on our quantitative analysis not only presents a risk for this crowded segment, but is also a red flag for the broader market implying there is rising complacency in the short term.

This crowding is particularly unsustainable as it soared from 25% percentile to 100% percentile in just three months (fastest in 30 years), driven mostly by technical drivers (i.e., sudden reversal in sentiment and positioning / chasing equity leverage / short covering) rather than an inflection in macro / corporate fundamentals, and / or central bank easing.

More precisely, we would fade this rally in High Beta stocks, as it is not supported by a bust-to-boom recovery in the business cycle/fundamentals or significant easing in monetary/fiscal policies to sustain this outperformance over multiple quarters (e.g., post [the global financial crisis of 2008-09], and post Covid).”

JPM included a handy list of some of the stocks in its screen of “most crowded” trades, and you can see why they’d be crowded, as these shares have offered some of biggest returns of the last 12 months.

Foremost among them is Palantir, a deeply beloved holding for retail traders, as well as top Trump trade Axon and several stocks tied to AI-related data center demand for energy such as Vistra and NRG.

There are good stories behind all of these stocks. But it’s hard to look at JPM’s snapshot of market crowding into these momentum-driven shares — which is at levels not seen even during the most ebullient moments of the tech stock bubble of the late 1990s and early 2000s — and not consider that things may have gone perhaps a bit too far. (Not investment advice!) Though things, of course, can always go farther, at least for a while.

Nia Warfield, Luke Kawa

US stocks grind higher as volatility dissipates

The S&P 500 rose 0.2% in what was is fourth-smallest intraday range of 2025, as did the Russell 2000, while the Nasdaq 100 gained 0.5%.

Matt Phillips

Retail darling Planet Labs soars on earnings pop for second straight quarter

Planet Labs, which operates a network of satellites that record data, images, and information about the Earth, surged more than 40% after reporting better-than-expected quarterly numbers before the open of trading Monday.

It was the second straight quarter when the money-losing company’s quarterly update generated a massive market reaction. The stock jumped nearly 50% after numbers came out in June.

The company, which went public via SPAC in 2021, raised its full-year revenue guidance and notched its second straight quarter of positive free cash flow. Analysts and investors watch free cash flow closely as it can signal when a company’s business is starting to become more durable.

While the company is small — roughly $2.5 billion in market cap — it has posted pretty serious gains, rising almost 300% the past 12 months. Planet Labs also appears to have a fairly large retail shareholder base.

Just 57% of its float is in the the hands of institutional investors, according to FactSet data. That’s roughly the same as other retail favorites such as Palantir, though Planet Labs is no where near as highly valued as the defense data and AI software company led by CEO Alex Karp.

Planet Labs Boosts View as Deals Close Quicker on Higher Demand

Luke Kawa

OpenAI’s cash burn suggests selling Nvidia because of reported Broadcom chip orders may not make much sense

When Broadcom announced that it booked $10 billion in new orders from a customer reported to be OpenAI, shares of their major AI chip rivals tanked.

The judgement of the Invisible Hand was that this was nearly a zero-sum outcome: $130 billion of market cap erased from Nvidia and Advanced Micro Devices, and a $135 billion increase in Broadcom’s market value.

But looking at this from the perspective of near-term cash flows, the market’s view seems off.

The Information is reporting that OpenAI now expects to burn through $115 billion by the end of 2029 (or more than 11 seasons’ worth of NFL broadcasting rights).

Let’s zoom in on this tidbit from The Information:

But the biggest change emerging from OpenAI’s latest projections was to its cash flows. The company projected it will burn more than $8 billion this year, or roughly $1.5 billion higher than its prior projection from earlier this year. Cash burn will more than double to more than $17 billion next year—$10 billion higher than what the company earlier projected

That $10 billion fits all too neatly with the $10 billion in orders from a major new customer that Broadcom CEO Hock Tan pointed to in the chip designer’s earnings call.

(Cheers to @lokoyacap for flagging this on X)

Assuming the reporting around OpenAI and Broadcom is accurate, these orders for ASICs don’t look to be displacing what the ChatGPT creator was going to spend on Nvidia’s GPUs, but are just in addition to it! The money’s not coming out of Jensen Huang’s pockets, it’s coming out of OpenAI’s coffers. Their spending budget is just getting bigger.

Perhaps if you squint, there’s a world in which OpenAI may prefer to have an additional $10 billion in Nvidia GPUs rather than ASICs, and I am still of the belief that hyperscalers diversifying their chip sources due to constrained top-end supplies isn’t a good sign for the company selling the most in-demand product.

But it’s quite intriguing, and says something about the depth of the pockets that fuel the AI boom, that OpenAI’s reported new relationship with Broadcom has seemingly no direct negative financial impact on Nvidia in the near term.

Luke Kawa

Broadcom’s post-earnings romp continues on heavy volumes

As Broadcom enjoys a rush of new orders from a major new customer (reported to be OpenAI), it’s also reveling in a flood of traffic into the stock.

Volumes are running at 2.5 times their daily average through 1:20 p.m. ET as traders continue to bid up shares in response to the brighter outlook for 2026 revenues, which sent the stock up 9.4% on Friday.

The chip designer is basking in a flood of price target hikes from Wall Street, with Bank of America, JPMorgan, Argus Research, Citigroup, Bernstein, Deutsche Bank, Morgan Stanley, Barclays, Piper Sandler, Rosenblatt Securities, Wells Fargo, and Susquehanna upping their view on how high shares can go since the company reported earnings last week.

Separately, Taiwanese industry outlet DigiTimes is reporting that orders from several other leading tech companies for custom-made Broadcom chips (or ASICs) are “already in the pipeline.” This report has not been corroborated by our own or any other publication’s reporting to date.

Matt Phillips

SpaceX spectrum deal sends would-be rivals lower

Shares of struggling satellite services company EchoStar soared Monday, after the company — which had recently tottered close to bankruptcy — announced the sale of some of its wireless spectrum licenses to Tesla CEO Elon Musk’s SpaceX for $17 million.

The sale provides a competitive advantage to Musk’s growing Starlink satellite services business, as the licenses it is acquiring from Echostar allows Starlink to operate ground based broadband and cellphone services, the Wall Street Journal reported.

Entities that stood to be hurt by the emergence of a Musk-led SpaceX Starlink service got hit hard on the news. AST SpaceMobile, which has plans to offer a similar satellite-to-consumer cellular service, tumbled.

So did wireless tower providers like Crown Castle and American Tower. Low cost cellular service provider T-Mobile, which had a deal with SpaceX, also slumped, as Luke noted earlier, along with other large wireless telecommunication services providers.

The wireless telecommunications industry grouping within the S&P 500 was down more than 2.5% shortly after noon, making it the worst performing industry within the S&P 500 on Monday.

SpaceX strikes $17B deal to buy EchoStar's spectrum for Starlink's direct-to-phone service | TechCrunch