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

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.