Semiquincententacles: the US grip on global markets

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A shimmering strip of gold-plated handwriting swirls elegantly across a dark surface. It spells JP Morgan. Text: Ideas and Insights. Presentation. Title card: A man, Michael Cembalest, with glasses and gray hair wears a dark blazer over a light blue collared shirt and sits at a white table with a glass of water, against a modern office background with floor-to-ceiling windows overlooking city buildings. Slide: emiquincententacles. The US grip on markets on the 250th anniversary of the Declaration of Independence. Michael Cembalest. Chairman of Market and Investment Strategy. J.P. Morgan Asset and Wealth Management. June 2026. J.P. Morgan. Text: Michael Cembalest, CHAIRMAN of MARKET AND INVESTMENT STRATEGY.

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Good afternoon, everybody. Thanks for dialing in. It's the -- well, let me get this right. The semiquincentennial, 250th anniversary of the Declaration. Declaration of Independence. And I wanted to do something special for the occasion.

Over the last 18 months or so, I've gotten a lot of questions from clients regarding the sustainability of US outperformance. Arguably, since 1990, the US has been a stellar outperformer with respect to equities, bonds, real estate, venture, private equity, infrastructure, and a bunch of other things. And I always get a lot of questions on how sustainable that is. And then the current administration has amplified a lot of those questions, as well as the AI boom itself.

So I wanted to take the opportunity on this webcast to go through how we're looking at some of those issues. And for the occasion, I had one of our crackerjack analysts use AI to develop this image, which I'm calling the Aquilaceph, which is Latin for half bald eagle and half octopus. And

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Slide: Behold the Aquilaceph, half-bald eagle and half-octopus. A bullet point list. Image: A creature with the head and outspread wings of a bald eagle and the tentacles of an octopus grips planet Earth in its tentacles, set against a cloudy sky with sunbeams breaking through on the left.

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for me, it represents-- it's a metaphor for the tight grip that the US has on global markets.

So on this webcast we're going to talk about issues related to reserve currency status, capital flows to the United States, the so far unprofitable sell America trade, corporate profitability, and then all of the concentration and issues around AI and its dominance, investing in security and resilience, energy independence, the revival of the IPO markets, and then some concerns over the medium term regarding the rule of law and government defunding of science. So that's the agenda for today. Thank you for joining.

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Slide: 1, Reserve Currency Status.

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So let's start with reserve currency status, because I probably get more questions on this than any other topic. Let me just go through this quickly. The

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Slide: The usual suspects. A line graph titled Government budget deficits, Share of GDP. Multiple colored lines track deficits from 2006 to past 2026, with the vertical axis running from 2.5% down to negative 15.0% and a dashed vertical line near 2025 marking Projections. A legend lists Canada, Italy, UK, Japan, Germany, France, US, China. Most lines hover near 0% to negative 5% early on, then plunge sharply around 2009, recover toward the mid-2010s, drop steeply again near 2020 to their lowest points, then climb back upward, with the projections showing most countries leveling between negative 2.5% and negative 7.5%. Source: IMF, JPMAM, 2025, includes federal, state and local government.

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usual suspects that get brought out by the doomsayers is the United States has very high budget deficits, agreed. Although note that China is worse on this IMF measure, the gross government debt to GDP ratio has doubled from about 60% to 120% in the United States over the last year. That's

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Slide: The usual suspects. A line graph titled General government gross debt, Share of GDP. Multiple colored lines track debt from 2006 to past 2026, with the vertical axis running from 0% up to 250% and a dashed vertical line near 2025 marking Projections. A legend lists Japan, Italy, US, France, China, Canada, UK, Germany. Japan sits highest throughout, rising above 240% before easing toward 200% in the projections, while Italy holds around 130-150%. Most other countries climb gradually from 60-80% early on toward 100-130% by the projections, with China rising steadily from the lowest levels and Germany declining over time. Source: IMF, JPMAM, 2025, includes federal, state and local government.

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not great, and it's putting the US at a stone's throw from Italy. But of course, still way below Japan. Again, another example of where China looks just as bad.

And total household, corporate, and government debt together, the US is kind of in the middle of the pack. And

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Slide: The usual suspects. A line graph titled Total household, nonfinancial corporate and govt debt, Percent of GDP. Multiple colored lines track debt from 2006 to 2026, with the vertical axis running from 125% up to 425%. A legend lists Japan, France, Canada, China, US, Italy, UK, Germany. Japan sits highest throughout, climbing from around 325% to a peak above 400% near 2021 before easing. Most countries rise gradually over the period, spike sharply around 2021, then pull back slightly, while Germany stays lowest and flattest near 200-225%. Source: BIS, JPMAM, Q3 2025.

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one of the issues that people concerned about, the dollar consistently mentioned is the increased frequency with which the United States is adding entities and individuals to the sanctions list. And

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Slide: Sanctions. A bar graph titled Specially Designated Nationals & Blocked Persons (SDN) List designations & Entity List additions, Number per year. Paired bars for each year from 2017 to 2025 compare SDN list designations against Entity list additions, with the vertical axis running from 0 to 3,500. SDN designations stay near 700-1,100 through 2021, then jump sharply to around 2,300-3,200 from 2022 to 2024 before dropping to roughly 1,750 in 2025, while Entity list additions stay much lower throughout, mostly under 550. Source: Center for a New American Security, January 29, 2026.

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the notion is that, well, the more people that are sanctioned by the United States, that's going to reduce the appetite of non-US entities and individuals to hold dollar assets.

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Slide: Dollar: stable, ignoring the doomsayers. A line graph titled US dollar trade weighted exchange rate, 2009 - 2026, Index. A single blue line tracks the dollar's value from 2009 to past 2024, with the vertical axis running from 70 to 115 and a dashed vertical line labeled Trump inaugurated. The line dips to its lows around 2011, climbs sharply through 2015, holds in the mid-90s to low-100s through the late 2010s, then rises to a peak above 110 near 2022 before settling back toward 100. Source: Bloomberg, JPMAM, May 2026.

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And we did have an abrupt 10% decline in the dollar around a year ago after the announcement of some of the tariffs. But ever since then, the dollar's been stable. And all I have to share with you is that those negative fundamentals, notwithstanding, the pillars that make the United States the world's reserve currency, aren't really changing.

And

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Slide: Our reserve currency tracker. A table titled Reserve currency tracker: US$ share of debt, FX, reserves and trade. Rows list Cross-border loans, Intl. debt securities, FX transaction volume, Official FX reserves, Exports invoicing, SWIFT payments, with columns for years 2020 through 2026, Latest as of date, Source, and Next release date. Most values hold in the 40-60% range across the years, with sources including ECB, BIS, IMF, SWIFT. Source: BIS, ECB, IMF, SWIFT, JPMAM. 2026.

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the great thing about working at J.P. Morgan is that we can very closely track some of the items on this page, which are the, again, these are what make the dollar the world's reserve currency is in that people use it for cross-border loans. They use it for the denomination of international debt securities. They use it to conduct foreign exchange transactions. Central banks use it to denominate their foreign exchange reserves. And then the dollar dominates in terms of exports, invoicing, and SWIFT payments.

And as you can see here, all of these different metrics, starting in 2020 and ending at the end of last year, roughly stable. So we don't see a lot of evidence that there's a shift in the appetite of global participants in the markets to shift out of the dollar as the world's reserve currency. So we're not seeing any evidence of that yet.

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Slide: Not much movement elsewhere... A line graph titled Select currency shares of global FX reserves since 2020. Colored lines track each currency from 2021 to 2026, with the left vertical axis labeled Percent running from 0% to 7% and the right axis labeled Percent running from 0% to 25%. Lines are labeled Japanese Yen, Euro (rhs), Great British Pound, Chinese Yuan, Swiss Franc. The Euro holds highest near 20%, the Yen and Pound stay relatively flat in the 4-6% range, the Yuan declines gradually from about 2.5% to under 2%, and the Swiss Franc stays near 0%. Source: IMF, Bloomberg, JPMAM, Q4 2025.

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The dollar has lost 2% or 3% in terms of its allocation in global foreign exchange reserves. But the yen and the yuan and the Swiss franc aren't making up ground either. What is happening is a slight 2% to 3% increase in the other bucket, which are things like the Singapore dollar. Swedish krona and the Korean won.

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Slide: ...only in the Other category. A line graph titled Other currency share of global FX reserves, Percent. A single blue line tracks the share from 2018 to 2025, with the vertical axis running from 2% to 7%. A text box reads Other FX reserve shares include Singapore Dollar, Swedish Krona, Indian Rupee, Korean Won, Norwegian Krone and other currencies whose individual shares of global FX reserves are not disclosed by the IMF. The line holds near 2.5% through 2019, then climbs steadily with some fluctuation to a peak above 6% by 2025. Source: IMF, Bloomberg, JPMAM, Q4 2025.

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And then in terms of China itself, China as world's reserve currency is frankly an absurd idea. And

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Michael skips a slide. Slide: China as world reserve currency is frankly absurd. A line graph titled How much Chinese liquidity would leave if it could?, M2 money supply as a % of GDP. Multiple colored lines track countries from 2002 to 2026, with the vertical axis running from 0% to 250%. A legend lists China, Japan, Switzerland, UK, Belgium, France, Netherlands, Canada, Germany, Italy, US, Sweden, Brazil, India. China rises highest, climbing steadily from around 150% to nearly 240% by 2026, while Japan holds near 175-200% and most other countries cluster lower between 25% and 125%. Source: Haver Analytics, JPMAM, Q1 2026.

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the reason for that is if you look at the money supply to GDP in China, it has absolutely exploded at a time of tremendous capital controls in China.

So if China were to be the world's reserve currency and relax the capital controls, there could be a massive departure of funds out of China that would destabilize their equity markets and real estate. So this is, frankly, an absurd idea.

And in the piece that we published yesterday, we walk through just how different China is from the rest of the world. And there's some charts here that explain that. Whether

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Slide: One of these things is not like the other. Three line graphs side by side, each tracking M2 money supply, Central bank assets, and FX reserves. The left graph, titled Pegged currencies, Index (100 = September 2009), in US$, runs from 2009 to past 2025 with the vertical axis up to 300. All three lines climb together fairly closely, rising from 100 toward the 225-275 range by the end. Source: Bloomberg, JPMAM, March 2026. The middle graph, titled Mexico (floating currency), Index (100 = July 2010), in US$, runs from 2000 to 2025 with the vertical axis up to 300. The three lines move upward together with fluctuation, converging near 200-250 by the end. Source: Bloomberg, JPMAM, April 2026. The right graph, titled China (controlled / restricted), Index (100 = September 2009), in US$, runs from 2009 to 2025 with the vertical axis up to 650. M2 money supply rises steeply and pulls far above the other two, climbing toward 600, while Central bank assets and FX reserves stay relatively flat near 150-250. Source: Bloomberg, JPMAM, May 2026.

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you're looking at pegged currencies or floating currencies, what you tend to see is that the money supply, central bank assets, and foreign exchange reserves all move together, but not in China. There's a massive gap there, and the money supply has just exploded relative to those other things, which is a clue that China is really not in a position to be the world's reserve currency.

So

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Slide: The US needs a lot of money from abroad. A line graph titled US net debtor nation measures, Percent of GDP. Two lines track measures from 1982 to past 2024, with the left vertical axis running from 20% to negative 100% and the right axis running from 1% to negative 7%. A blue line labeled Net international investment position holds near 0% early on, then declines steadily to below negative 80% by the end. A gold line labeled Current account fluctuates between roughly negative 2% and negative 6%, dipping lowest around 2006 and again near 2024. Source: Brookings, IMF, Bloomberg, JPMAM, Q4 2025.

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let's move on to the question of capital flows.

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Slide: 2, Capital flows.

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The United States surely needs lots of capital. There's no question about that. There's a couple of different ways of looking at this. The net international investment position. You can look at the current account deficit. The United States needs a lot of capital.

The

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Slide: For the most part, it's still rolling in. Four line graphs in a two-by-two grid. The top-left graph, titled Foreign holdings share of US Treasuries, Share of total outstanding US Treasuries, runs from 2012 to 2026 with two lines labeled All Treasuries and Excluding Treasury Bills, both declining over time from around 50% toward 30%. Source: US Treasury, JPMAM, March 2026. The top-right graph, titled Foreign holdings of US Treasuries, US$, trillions, runs from 2012 to 2026 with the same two lines rising overall, All Treasuries climbing toward $10 trillion. Source: US Treasury, JPMAM, March 2026. The bottom-left graph, titled Foreign holdings of US long term non-sovereign bonds, US$, trillions, runs from 2012 to 2026 with a single line climbing from about $3.5 to over $5.5 trillion, with a note that it is primarily corporate bonds, also includes some municipal debt securities. Source: US Treasury, JPMAM, March 2026. The bottom-right graph, titled Foreign holdings of US equities normalized by S&P 500 returns, US$, trillions (normalized to February 2026), runs from 2012 to 2026 with a single fluctuating line trending upward toward $22.5 trillion. Source: US Treasury, Bloomberg, JPMAM, March 2026.

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good news is all of the evidence that we see is the capital is continuing to roll in. We don't look quite so much at the share of foreigners holding Treasuries and T-bills. But if you look at them on an absolute basis, those numbers are going up. In other words, foreign holdings of Treasuries and T-bills are rising. Same thing for corporate bonds, and same thing for equities. So there's no buyer strike that we can see with respect to international investors and US publicly tradable securities.

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Slide: 3, Sell America? Much anticipated rarely profitable.

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What triggered a lot of this was there was something unique and different that happened last year. And

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Slide: The long run. A bar graph titled Real annualized returns on equities, 1900-2022, Percent. Bars for each country rise in ascending order from left to right, with the vertical axis running from 0% to 7%. Austria sits lowest near 1%, climbing through countries including Italy, Belgium, Germany, France, Spain, Japan, Switzerland, Canada, Sweden, up to the highest bars Australia and South Africa near 7%. The USA bar, shaded red, stands near the high end around 6.5%. Source: Dimson, Marsh and Staunton Database, 2023.

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everybody kind of knows that the US is at the top of the league tables over the long run. This is that Elroy Dimson is a guy who publishes a database that goes back a long way. And this is from 1900 to this is basically the 20th century and the early part of the 21st century. The United States has the third-highest real annualized return on stocks.

But something did happen after Trump was elected that hadn't happened in a long time.

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Slide: Sell America. A graph titled Sell America instances since 1970, with a subtitle reading S&P -5%, US trade-weighted dollar -5%, US equities vs ROW -5%, 10 yr Treasury yield +10 bps, over a 30 day period. Tall vertical lines mark individual instances along a timeline from 1970 to past 2025, clustered around the mid-1970s and early 1980s, with a single isolated line near 2025. Source: Bloomberg, JPMAM, June 15, 2026.

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And if we look at a decline in the stock market, underperformance of the US stock market versus the rest of the world, a decline in the dollar, and rising Treasury yields, they all did coincide a little over a year ago, and for the first time since 1982.

And I was on a podcast of Scott Galloway's, where he argued that this was the beginning of a sell America trend, and I disagreed. And

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Slide: Sell America? Four line graphs in a two-by-two grid. The top-left graph, titled US dollar trade weighted exchange rate (DXY), Index, runs from May 2025 to past May 2026 with a single line fluctuating between about 97 and 102, trending downward overall. Source: Bloomberg, JPMAM, June 15, 2026. The top-right graph, titled Change in 10+ year bond yields since May 8, 2025, Change in yield, tracks two lines labeled Global ex-US 10+ year yield and US 10+ year yield, both rising over the period toward 0.6-1.0%. Source: Bloomberg, JP Morgan Government Bond Index, June 22, 2026. The bottom-left graph, titled US vs World ex-US equities, market cap weighted, Cumulative total return % since May 8, 2025, tracks Nasdaq 100 vs MSCI World ex-US and S&P 500 vs MSCI World ex-US, both climbing to around 25-30% by the end. Source: Bloomberg, JPMAM, June 22, 2026. The bottom-right graph, titled US vs World ex-US equities, equal weighted, Cumulative total return % since May 8, 2025, tracks Nasdaq 100 EW vs MSCI World ex-US EW and S&P 500 EW vs MSCI World ex-US EW, rising toward 15-20% after dipping below 0% midway. Source: Bloomberg, JPMAM, June 22, 2026.

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in terms of tracking how things have turned out since Scott and I had this discussion, US assets are either stable or outperforming. So 10-year bond yields are a little bit higher. But outside and the rest of the developed world, they're much higher, dollar's flat, and US equities are outperforming. So again, not a lot of evidence of a sell America trade that's taking hold.

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Slide: The bug zapper. A line graph titled The discount for non-US stocks, MSCI World ex-US fwd P/E divided by US fwd P/E. A single gold line tracks the ratio from 2005 to past 2025, with the vertical axis running from 60% to 130% and a dashed horizontal line at 100%. The line starts above 100%, fluctuates near and above that level through about 2013, then declines steadily to lows near 60% around 2024 before ticking back up toward 80%. Source: Bloomberg, JPMAM, June 15, 2026.

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And the discount for non-US stocks has turned out to be something of a bug zapper for asset allocators who continue to allocate to non-US stocks aggressively. And for the most part, with the exception of 2025, have experienced underperformance for doing so.

So

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Michael skips a slide.

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let me jump ahead to some important questions about profitability. And

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Slide: Yes, US tech margins have exploded vs other sectors... A line graph titled S&P 500 free cash flow margins: tech & interactive media vs the rest, Percent. Two lines track margins from 1977 to past 2022, with the vertical axis running from 0% to 30%. A gold line labeled Tech & interactive media climbs steadily from around 5% to peaks above 25% in recent years. A blue line labeled The rest of the S&P 500 (ex financials & REITs) stays relatively flat between about 2% and 6% throughout. Source: Empirical Research Partners, May 2026.

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yes, the tech sector in the United States has really been the driver of a lot of the outperformance. And you can see here, we're looking at the free cash flow margins in the S&P 500. And the tech and interactive media sectors have blown ahead of everything else.

But this masks, I think, a pretty important point, which is if you look across the world at the major sectors, which is consumer staples, consumer discretionary, tech, healthcare, industrials, financials, and the comm services sector, the US has higher return on assets and higher return on equity than the rest of the world. And here we're defining that as Europe, Japan, and China.

And

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Slide: But the US is more profitable than other regions across all major sectors and most minor sectors as well. Four tables comparing US, Euro, Japan, and China across sectors. The top-left table, titled Major sector return on assets, has columns Staple, Con disc, Tech, Hcare, Comm serv, Indust, Finan, with the US showing the highest values across most, including 15.0 in Tech. Source: Bloomberg, JPMAM, June 15, 2026. The top-right table, titled Major sector return on equity, has the same columns, with the US again leading in most, including 32.6 in Tech. Source: Bloomberg, JPMAM, June 15, 2026. The bottom-left table, titled Minor sector return on assets, has columns Utilities, Materials, Real estate, Energy, with values clustered in the 2-5 range across regions. Source: Bloomberg, JPMAM, June 15, 2026. The bottom-right table, titled Minor sector return on equity, has the same columns, with values mostly in the 5-14 range. Source: Bloomberg, JPMAM, June 15, 2026.

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so every once in a while, the US can get a lot more expensive from a valuation perspective. But the North Star for investors in terms of allocating capital has to be where do companies make the most money. And that continues to be, as you can see here, mostly in the United States and the sectors that really matter.

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Michael skips a slide. Slide: 4, Concentration, market cap, earnings and belief.

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Now, let's get into this question of the AI boom. And in the outlook this year, we showed this chart. A lot of you saw it where the tech and hardware spending that took place in 2025 as a percentage of GDP was the same as Eisenhower's Interstate Highway Project, the Manhattan Project, the electrification of farms, and the moon landing, all stacked together on top of each other.

So, in other words, this is a major giant capital expenditure exercise. And a lot of our clients are justifiably concerned. What are the returns on all of this, and how do we feel about a market that's so concentratedly reliant on one particular theme? And so I wanted to spend the bulk of the podcast talking about that.

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Slide: Equity market concentration. Three graphs. The top graph, titled Equity market concentration: the US is actually at the lower end, Top ten company share of country equity index market capitalization, Percent, is a bar chart with countries rising in ascending order from about 20% to near 100%. The US bar, shaded blue, sits toward the lower end. Source: Bloomberg, JPMAM, June 15, 2026. The bottom-left graph, titled MSCI All Country World Index region weights, Percent, is a stacked area chart from 1970 to 2024 showing shifting shares labeled Other, Emerging markets, Japan, Europe, and US, with the US occupying the largest band at the bottom. Source: Elroy Dimson pre-1988, MSCI, Bloomberg, JPMAM, March 2026. The bottom-right graph, titled Top 10 company share of S&P 500 market cap & earnings, Percent, runs from 1985 to past 2025 with two lines labeled Top 10 share of market cap and Top 10 share of 12 month forward earnings, both rising in recent years toward 40-45%. Source: Goldman Sachs Global Investment Research, June 5, 2026.

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The first thing is, it is true that the equity market concentration in the United States has gone up, and we have a chart in this deck, and also in the paper that shows for most of the 1990s, the top 10 stocks represented 15% to, let's call it, 15% to 20% of market cap. And now that number is 40%. So in other words, the top 10 stocks represent almost 40% of the market cap.

First, the amazing thing is that's the third lowest number in the world, other than Japan and India, all the rest of the countries that you can see here on the top chart haven't even higher market cap concentration from the top 10 stocks. So this happens to be a phenomenon that takes place everywhere.

But more importantly, let's get into the details of the concentrations and what the risks are. And let's start with NVIDIA for obvious reasons.

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Slide: The NVIDIA share of the accelerator market. Still $1 trillion of demand for Blackwell and Rubin but... A stacked bar graph titled AI accelerator revenue by company, US$, billions. Bars for each year from 2022 to 2026E rise steadily, with the vertical axis running from $0 to $200 billion. A legend lists Other, Intel, Custom ASICs (Google, AWS, Meta, Microsoft), AMD, NVIDIA. NVIDIA, shaded blue, forms the largest portion of every bar, growing from under $20 billion in 2022 to around $150 billion by 2026E, while Custom ASICs add a notable red segment on top in the later years and AMD, Intel, and Other contribute thin bands. The total stack reaches roughly $200 billion by 2026E. Source: Silicon Analysts, Q1 2026.

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They have represented the lion's share of what we all refer to as the accelerator market, which is what those GPUs fall under the category of accelerators, because they basically handle compute away-- they move compute away from the CPU into a method that's better suited for those particular mathematical computations.

And they used to be the only game in town for these accelerators. And now, understandably, given 80% gross margins, a lot of the customers of NVIDIA are trying to figure out a way to do it themselves. And so what you see is Google is building its own TPUs. Amazon has Trainium chips. Microsoft and Meta, to a lesser extent, are also relying on their own chips.

And you can see in this red bar in this chart that all of a sudden, NVIDIA no longer represents 85% to 90% of this accelerator market. Their market shares are falling gradually.

And I thought it was pretty notable that Anthropic committed to run Claude for the next decade on Amazon chips. And that's a pretty strong endorsement of what's referred to as these ASICs, which are these customized versions of GPUs.

So the first question in terms of concentration has to be around NVIDIA. Now, Jensen Huang has talked about $1 trillion of demand for Blackwell and Rubin infrastructure through the end of 2027. So nobody's having any garage sales for NVIDIA. But a market that's been predicated on NVIDIA and its massive market cap garnering 90% or so share of the accelerator market may have to adjust to those numbers coming down. So that's concentration risk number one.

The

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Slide: Frontier lab revenue is growing at a very rapid clip. A line graph titled Anthropic and OpenAI annualized revenue, US$, billions. Two lines track revenue from January 2023 to past 2026, with the vertical axis running from $0 to $50 billion. A blue line labeled Anthropic stays low through 2024, then climbs sharply in 2026 to nearly $50 billion. A gold line labeled OpenAI rises more gradually ahead of Anthropic for most of the period, reaching about $25 billion. Source: EpochAI, May 15, 2026.

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second risk is even though Anthropic and OpenAI aren't public yet, they are indirectly having an enormous impact on the valuation of a lot of different companies. And I've never seen anything like this kind of revenue growth this rapid in the billions. Can see this in the millions with biotech companies that go through phase III studies and things like that. But the idea that these are in the tens of billions and revenues growing as quickly are remarkable.

But let's have the discipline to think not just about revenue and not just think about gross margins, but for particularly for companies like this, which are gobbling up so much computing capacity, we have to start thinking about capital spending and the impact on operating margins instead. And

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Slide: Gross margins vs operating margins. Two horizontal bar graphs. The left graph, titled Estimated compute commitments as of June 2026, Gigawatts, has a horizontal axis from 0 to 20 GW. OpenAI's row is broken into segments labeled Stargate (Oracle) 10 GW, AMD MI450 6 GW, AWS 2 GW, plus Cerebras 0.75 GW. Anthropic's row shows AWS 5 GW, Google + Broadcom 3.5 GW, Google 2 GW, and SpaceX 0.3 GW, with notes marking April - June 2026: 10.8 GW and Pre-April: ~2 GW. Source: The Product Compass, TheWhiteBox Consulting, JPMAM, June 2026. The right graph, titled Cloud provider revenue backlogs, US$, billions, has a horizontal axis from $0 to $750 billion. Rows for Microsoft, Oracle, Google, and Amazon each break into segments by a legend listing OpenAI's spending commitment, Anthropic's spending commitment, and Other revenue backlog. Microsoft shows $280, $30, $317; Oracle shows $300, $253; Google shows $200, $268; Amazon shows $138, $100, $226. Source: The Information, May 21, 2026.

(SPEECH)

information is a little scarce. These companies aren't public yet, but when we work through the numbers on the capital commitments for computing capacity that OpenAI and Anthropic have agreed to, they're massive.

So the chart on the left is basically almost around 30 gigawatts of commitments just in the last couple of years. That's the equivalent of committing to pay for the construction of 30 one-gigawatt nuclear power plants. And you can see who the counterparties are here.

And the chart on the right is about the hyperscaler revenue backlogs. You've got like a $2 trillion revenue backlog of the big hyperscalers, half of which is coming just from OpenAI and Anthropic. So the success of OpenAI and Anthropic and their ability to make good on all these capital commitments is a massive concentration risk that has been driving the US equity markets and will continue to do so.

So the question is, is there anything out there that could change the way we think about Anthropic and OpenAI?

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Slide: Some enterprises may seek to avoid frontier lab token price increases by migrating to cheaper open models. Two graphs. The left graph, titled Silicon Data LLM token expenditure index, Price (US$) per million tokens, runs from December 2025 to June 2026 with the vertical axis from 1.0 to 2.2. A single line fluctuates and trends upward toward 1.8-2.0 before dipping near the end. Source: Bloomberg, JPMAM, June 19, 2026. The right graph, titled Weekly token consumption of top 9 models through OpenRouter API calls, Trillions of tokens, is a stacked area chart running from late 2025 to mid-2026 with the vertical axis from 0 to 18. A legend lists Unspecified/unknown, Chinese models, US models, with total consumption rising steeply near the end, US models forming the base band and Chinese models a large upper band. Source: OpenRouter LLM Ranking Leaderboard, JPMAM, June 8, 2026.

(SPEECH)

And there's a lot of sticker shock taking place right now amongst companies in their tech spend. And some of them may be seeking to avoid some of the token price increases that the frontier labs are now putting into place. And there are some evidence that some companies are starting to migrate to cheaper models, whether the US models or Chinese models.

And there are some examples that we cite in the paper of companies that have migrated some of their agentic AI products from Claude to DeepSeek, and citing similar performance and savings of millions of dollars. And then Brian Armstrong of Coinbase tweeted the other day that he expects that 80% of all these AI workloads are going to be working on 99% cheaper models over the next couple of years.

And there's a chart that I just wanted to show you. But before I do, just remember think about what China has done to the price of solar panels and to the price of hydrogen electrolyzers, and to the price of a lot of other electrical equipment. And even think about something as complicated as nuclear power. The last plant that was built in the United States was the Vogtle Plant, nuclear plant in Georgia. China routinely builds boiling water reactors at 20% to 25% of the cost of that Georgia plant.

So you really have to twist yourself into a bit of a pretzel to believe that China, which has been so successful at scale and reducing cost, wouldn't eventually do the same thing here with respect to agentic AI.

And so that's why we spent so much time on this dot plot chart. So let me just spend a minute on this, because I think it's probably one of the most important three minutes of this webcast.

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Slide: Many tokens consumed in the future may not come from frontier models but from smaller open models that are up to the tasks at hand. Slide: A scatter plot labeled Artificial Analysis Intelligence Index score vs cost to run by model, Score on composite benchmark of ten evaluations across math, science, coding and reasoning.. The horizontal axis is labeled Cost to run Artificial Analysis Intelligence Index, US$, log scale, running from $10.00 to $10,000.00, and the vertical axis runs from about 20 to 60 for the intelligence score. A shaded green band along the left side is labeled Green quadrant: maximizing intelligence-per-dollar, marking models that score well at low cost. Each point is a model, shaded by company per a legend listing Anthropic, OpenAI, Google, xAI, Amazon, NVIDIA, Mistral, DeepSeek, MiniMax, Kimi, Xiaomi, Alibaba, Z.ai, with Chinese models drawn as triangles and US models as circles. The highest scorers sit near the top, around 55-60, including GPT-5.5 (high), Claude Fable 5 (with fallback), Claude Opus 4.4, and GLM-4.5 (max), spread from the mid-cost range toward the right at higher cost. A dense cluster of models scoring in the 40-50 range fills the middle, including Gemini 3.1 Pro Preview, MiniMax M3, Qwen3.7 Max, Kimi K2.8, Claude Sonnet 4.6, GPT-5.4, Nemotron 3 Ultra, and Grok 4.1. Lower-scoring and cheaper models gather toward the lower left around 25-35, including Gemma 4 31B, gpt-oss-20B, Gemma 4 26B A4B, gpt-oss-120b (high), Nova 2.0 Pro Preview (medium), DeepSeek V4 Flash (max), Claude 4.5 Haiku, and Mistral Medium 3.5. Cost rises from left to right while the green band highlights the cheapest strong performers. Source: Artificial Analysis, June 2026.

(SPEECH)

This chart, take it on faith that the y-axis is a proxy for how good the models are. There's a lot of debate about gaming benchmarks and contamination, and I get that. But let's just assume that the people at Artificial Analysis have done a pretty good job at assessing the ability of these different models to do certain tasks related to coding and mathematics and agentic AI processes.

The x-axis is the cost of executing those set of tasks, and it's in logs. So what you're getting here is an increasing picture that the upper left quadrant here is a good enough quadrant for certain companies to start thinking about, which is that they will be able to get their AI tasks done at 10% of the cost of some of the frontier models, and without that much of a sacrifice in terms of quality.

And recently, one of the Chinese models has made its way into the middle top of the chart, which is, in other words, only 10% of the cost of the frontier labs at comparable performance. And so it would be very surprising to me if you didn't start seeing more and more companies, a lot of whom I've already talked to already about this, trying to figure out ways if they can use turnkey solutions that don't require them to migrate their data over to Chinese servers, but can still either run them in-house or on AWS and access these cheaper open source models instead.

And so this is, I think, probably the most important thing that we're going to have to watch over the next 12 to 18 months, because that is a direct threat to the growth rates in terms of revenue of the big frontier labs. And we go into more detail on this thing in the piece.

And the reason this is all so important, as I mentioned earlier, for three of the last five quarters, tech equipment and software has contributed more to GDP than the whole rest of the economy combined. And in three of those quarters, the contribution from the rest of the economy was negative. So

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Slide: For three of the last five quarters, tech equipment and software has contributed more to GDP than the rest of the economy combined. A line graph titled Quarterly contributions to real GDP growth, US$, billions. Two lines track quarterly data from Q3 '21 to Q1 '26, with the vertical axis running from negative $150 to $350 billion. A gold line labeled Contribution from the rest of the economy swings widely, peaking above $300 billion and plunging below negative $100 billion in places. A blue line labeled Information processing equipment & software stays steadier near $0 to $100 billion, rising above the gold line in several recent quarters. Source: Bloomberg, BEA, JPMAM, Q1 2026.

(SPEECH)

the Trump administration is extremely lucky to be governing at a time when this AI boom is taking place. Because if that AI boom weren't taking place, we would be looking at a very different set of growth, and employment, and capital spending fundamentals.

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Michael skips a slide. Slide: Hyperscaler debt is very manageable, other than Oracle. A bar graph titled Hyperscaler net debt to trailing 12m EBITDA, with a subtitle reading Multiple, includes bonds, loans and SPV triple net leases. Bars for Alphabet, Microsoft, Meta, Amazon, IBM, and Oracle show the multiple, with the vertical axis running from 0x to 5x. A legend marks Q1 2026 bars and Q1 2027 dots that assume previous year's debt financing rate of projected capex + R&D. A dashed horizontal line marks the S&P 500 median near 2x. Alphabet, Microsoft, Meta, and Amazon stay well below 1x, while IBM rises to about 3.5x and Oracle highest above 4x. Source: Bloomberg, JPMAM, June 15, 2026.

(SPEECH)

So let me just jump ahead. There's a lot of discussion about the hyperscalers and all the debt they're issuing. We've run all the numbers on this. Even if you assume aggressive increases in the debt, their cash flows are growing at such a rate that their debt ratios are not anywhere near the S&P median. And other than Oracle, the hyperscaler debt situation looks fine.

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Slide: Frontier lab appreciation as a share of hyperscaler profits. A bar graph titled AI hyperscaler other income share of total profits, Percent. Bars for each year from 2016 to 2026 (Q1) show the share, with the vertical axis running from negative 20% to 40%. A text box reads In Q1 2026, other income was 60%, 51% and 27% of Google, Amazon and NVIDIA profits; it includes marked up positions on frontier labs like OpenAI and Anthropic. Most years stay between 0% and 12%, with 2022 dipping below negative 10%, and the final 2026 (Q1) bar, shaded gold, rising highest near 34%. Source: Goldman Sachs, May 2026.

(SPEECH)

The thing that's more puzzling is this, which is in the first quarter of 2026, markups on the frontier labs like Anthropic and OpenAI represented 40% of the hyperscaler profits. So there's obviously questions about the recurring nature of some of the profits that we're seeing at the hyperscalers. And so that's something we're going to have to watch as well, because that's extremely unusual.

Now,

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Slide: 5, Productivity.

(SPEECH)

another part of this sell America theme is related to questions around US productivity. But that said, when you look across the G10, the United States has the highest productivity numbers. Now,

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Slide: Productivity. Two bar graphs. The left graph, titled Growth in labor productivity per hour worked, 2010-2025, Annualized growth rate, has a vertical axis from negative 2% to 3%. Bars for countries including United States, Switzerland, Japan, Sweden, Germany, Canada, United Kingdom, Netherlands, Belgium, France, Italy, China, India, Russia, Brazil, Saudi Arabia, with a legend marking G10 and Emerging markets. China and India rise highest, labeled 6.8% and 4.1% with arrows, while Saudi Arabia falls below negative 1%. Source: The Conference Board, JPMAM, 2025. The right graph, titled Total factor productivity growth from 2010-2025, Annualized growth rate, has a vertical axis from negative 1.0% to 1.0%. Bars for a similar set of countries show India and China highest near 0.5-1.0%, most developed countries clustered near 0% or slightly negative, and Saudi Arabia lowest at negative 3.2% with an arrow. Source: The Conference Board, JPMAM, 2025.

(SPEECH)

whether you're looking at that at total factor, productivity growth, or labor productivity on its own. So the United States is still leading a lot of the other candidates for where people think they would be investing in terms of productivity.

And

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Slide: Productivity. A table titled Productivity gains, pre-COVID vs post-GPT. The header reads Real GDP method (annualized), with three period columns running From Q1 2016 To Q1 2020, From Q4 2022 To Q4 2025, and From Q3 2023 To Q4 2025. Rows list Non-financial corporate at 1.1%, 2.9%, 3.3%; Information sector at 5.0%, 9.9%, 7.8%; Data processing at 8.0%, 15.3%, 14.4%. Source: BLS, Bloomberg, JPMAM, Q4 2025.

(SPEECH)

then more specifically, it's way too soon to tell, but the productivity numbers for the overall business sector, for the information sector, and then for the data processing subset, the productivity numbers have jumped from pre-COVID to post-GPT. You have to strip COVID out because it messed up all the productivity numbers. But the point is, we don't all the reasons for it yet, but there has been a significant jump in productivity. We're going to get the first quarter productivity numbers in a couple of days. We'll update these tables, but there does seem to be something taking place that's positive from a productivity perspective.

(DESCRIPTION)

Slide: 6, On China and Taiwan.

(SPEECH)

So what's the other thing in terms of concentration risk that we have to keep an eye on that could upset this apple cart that we all have been so comfortable investing in, despite its concentrations, has to do with China and Taiwan. And a lot of this is material that we went over already in the outlook. But just let me go through some of it again.

China

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Slide: China innovation. Four graphs. The top-left graph, titled China breaks into top 10 most innovative economies, Global Innovation Index, country rank, (1 = highest innovation), runs from 2012 to 2026 with the vertical axis inverted from 35 up to 0. A blue US line holds near the top while a red China line climbs steadily toward the top 10, with an arrow marking More innovative. Source: World Intellectual Property Organization, 2025. The top-right graph, titled China GPU self-sufficiency, Percent, runs from 2021 to 2030 with the vertical axis from 0% to 100%. A line rises from low single digits, turning to a dashed projection climbing toward 90%. Source: Morgan Stanley Asia Technology, May 10, 2026. The bottom-left graph, titled Frontier language model intelligence, Score, runs from 2022 to 2026 with two stepped lines labeled US and China, both rising, the US line leading toward 60 and China following toward 50. Source: Artificial Analysis, May 18, 2026. The bottom-right graph, titled Total cost of ownership (TCO) and per token, has bars for TCO, US$ mm per MW, and dots for Cost per token, US-cents, grouped under NVIDIA, Huawei, and Cambricon with chip labels including H200, A100, H20, H100, 910C, 990PR, MLU370, MLU590. NVIDIA bars sit highest on the cost axis. Source: Morgan Stanley Asia Technology, May 10, 2026.

(SPEECH)

is moving up the food chain in terms of innovation that we talked about. One of the comments that we tend to get from clients is, why is everybody so worried about Taiwan, doesn't China require TSMC semiconductors the same way that the US does? Yes, they do, but look at that chart at the upper right. Just in the last couple of years, China has gone from 10% GPU self-sufficiency to 40% and is pouring capital into certain domestic national champions to develop their own chips, their own DRAM, their own high bandwidth memory, their own lithography machines, because they've been frozen out by ASML, which is that Dutch company. And so China, so far, has been pretty effective at building out their own domestic complements.

Now they're not always as efficient and they're not always as fast. But that's why China is also pouring money into electricity generation to deal with some of the less efficient, power hungry versions of their alternatives to what NVIDIA and TSMC have to offer. And as you can see on the lower left here, the frontier language model intelligence numbers are pretty similar across the US and China.

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Slide: Chip trade now larger than oil trade. A line graph titled Oil and semiconductor trade share of global GDP, Percent. Two lines track shares from 1990 to past 2022, with the vertical axis running from 0% to 5%. A gold line labeled Oil rises to peaks above 4% around 2008 and 2012, then declines toward 2%. A blue line labeled Semiconductors & integrated circuits climbs more steadily, overtaking the oil line in recent years to reach near 3%. Source: UN Comtrade, World Bank, IMF, JPMAM, 2024.

(SPEECH)

And the reason this is also important is I understand why people are concerned about the Strait of Hormuz. I'm concerned about the Taiwan Strait. At this point, global semiconductor and integrated circuit trade is as big as oil trade. And so we have to be equally focused on both of those things.

And

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Slide: US AI related imports: Taiwan is #1 source. A line graph titled US AI related computer imports, Billions, US$, monthly annualized, includes large comp, GPUs & parts. Multiple colored lines track imports from 2021 to past 2026, with the vertical axis running from $0 to $250 billion. A legend lists Taiwan, Mexico, Thailand, Vietnam, All other countries, Malaysia, South Korea, China. Taiwan rises sharply ahead of the rest, reaching above $200 billion, while Mexico climbs to around $140 billion and the remaining countries stay clustered below $60 billion. Source: USITC, JPMAM, April 2026.

(SPEECH)

when we look at where the US gets its AI-related imports from, it's not even close. It's overwhelmingly Taiwan. And this, a lot of you have heard me talk about before, the US is now scrambling. And I agree here, there's a bipartisan effort to build on the Biden CHIPS bill to repatriate some of the semiconductor advanced node production that the US used to do.

(DESCRIPTION)

Slide: US scrambles to rebuild what it once had: domestic semiconductor fabrication. A stacked bar graph titled US might reach 30%-35% of advanced node (< 5 nm) production by 2028-2030. A single tall bar labeled Wafer starts per month stacks segments valued 24,000, 24,000, 50,000, 145,000, 27,200, 50,000, with the vertical axis running from 0 to 350,000. A legend identifies each segment: Estimated future Intel production in Arizona and Oregon, Estimated future Samsung production for Qualcomm and Tesla in Texas based on TSMC Phase 1 $/wspm and Samsung $17 bn cost, Existing Intel production; 290k global of which 50% is US based, TSMC Arizona Phase 3, 2 nm - 4 nm, TSMC Arizona Phase 2, 2 nm - 4 nm, TSMC Arizona Phase 1, 2 nm - 4 nm. Source: JPMAM, 2025.

(SPEECH)

Based on the numbers as we understand them, a couple of years ago, before the CHIPS bill, the US was only 10% self-sufficient in terms of advanced node production, which let's just define that as less than 5 nanometers. It looks like that the US may get to, and this is Lutnick's target, something like 35% by the end of the decade, which would be very impressive, a very welcome development, but still makes the US very dependent on what happens with Taiwan and TSMC specifically.

And

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Slide: Taiwan: the most blockadable country in the world. A bar graph titled Net imports of fossil fuels as a share of primary energy consumption. Bars for countries descend from left to right, with the vertical axis running from 0% to 100%. Singapore and China Hong Kong SAR sit highest near 100%, followed by Taiwan, shaded gold, around 90%, then Morocco, Cyprus, Philippines, Belarus, Luxembourg, North Macedonia, Japan, South Korea, Estonia, Ireland, Belgium, Lithuania, Sri Lanka, Greece, Italy, Netherlands, Croatia, declining toward 70%. Source: Energy Institute, JPMAM, 2025.

(SPEECH)

again, Taiwan on a blank sheet of paper is by far the most blockadable country in the world. They import 90% of their energy through imported fossil fuels. A combination of coal, gas, and oil. They used to have a lot of nuclear power. They shut that all down. And they also import 60% to 70% of their food, defined in terms of their caloric intake. So this is a very blockadable place. I think they have 11 days of natural gas storage domestically, which is like your son's college refrigerator, which has a couple of White Claws and a bag of Cheetos. And that's it for the weekend. So there's not a lot of energy storage domestically.

And

(DESCRIPTION)

Slide: Chinese military assets are mostly focused on one thing. A bar graph titled Share of Chinese assets deployed near the Taiwan Strait (in the PLA Eastern and Southern Theater Commands), %. Bars for asset types run with the vertical axis from 0% to 100%, color-coded by a legend listing Surface vessels, Submarines, Air force. Amphibious assault ships and Coastal patrol top out near 100%, followed by Medium landing ships, Corvettes, Frigates, Destroyers, Cruisers, Aircraft carriers among surface vessels, Nuclear ballistic subs highest at 100% among submarines with Attack subs and Nuclear attack subs lower, and Special mission aircraft, Bombers/attack, Fighters, Transport among air force declining toward the right. Source: CSIS, DOD, September 2025.

(SPEECH)

when we look at what China is doing with all of the money, it's investing in its military assets. An increasingly large share of them are focused either in or near the Taiwan Strait. And it's very clear that China's military is mostly focused on one thing.

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Slide: 7, Security and Resilience Investing.

(SPEECH)

And that leads us to this discussion of security and resilience Investing, which dovetails with the firm's $1.5 trillion initiative to both invest in terms of equity and lend to companies that are repatriating some of the most important supply chains that the US has to rebuild. And those are very profitable places for US investors to also position themselves in.

(DESCRIPTION)

Michael skips a slide. Slide: Key themes. A line graph titled Security & Resilience stocks by industry, Index (Dec 2024 = 100). Multiple colored lines track industries from January 2025 to June 2026, with the vertical axis running from 80 to 180 and a dashed horizontal line at 100. Lines are labeled Energy independence & resiliency, Aerospace & defense, Frontier & strategic technologies, Advanced manufacturing & supply chain, and Pharma & healthcare resiliency, with markers also noting S&P market cap weighted index and S&P equal weighted index. Most industries climb well above 100 toward 150-175, while Pharma & healthcare resiliency lags below 100 for much of the period. Source: Bloomberg, JPMAM, June 15, 2026.

(SPEECH)

And so what do we mean by that? The key themes in terms of the security and resilience stuff is energy independence and resiliency, aerospace and defense, frontier and strategic technologies, advanced manufacturing, and healthcare. And even over the last year, four out of those five themes have done extremely well and outperformed the broad equity markets. And so I think these particular strategies have legs and make a lot of sense for investors to continue to think about as the US rebuilds a lot of those supply chains.

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Slide: Pure play defense contractors showing signs of supply chain stress. A line graph titled US defense prime contractor capacity constraints, Book-to-bill ratio. Multiple colored lines track the ratio from 2010 to 2025, with the vertical axis running from 0.0 to 3.0 and a dashed horizontal line at 1.0 labeled At capacity. Lines are labeled Raytheon, Lockheed, Northrop, Honeywell, Caterpillar. Raytheon, Lockheed, and Northrop rise above 2.0 toward the end, well above capacity, while Honeywell and Caterpillar stay below 1.0 for most of the period before climbing toward it. Source: JP Morgan Industry & Policy Thematics, June 8, 2026.

(SPEECH)

To me, the most interesting aspect of the aerospace and defense thing is the following, the United States used to have a more diverse set in the '70s of providers in terms to the Defense Department, and then this massive concentration set in so that the largest three or four defense contractors are doing all the business.

Because of some pushing from Palantir and other companies, that's now changing. And with the pure play defense contractor showing signs of some supply chain stress, there's a deliberate effort, and I'm kind of surprised at how clear and tangible they've been about this. The

(DESCRIPTION)

Slide: Security and resilience: commercial-first approach. A bullet point list. Text: The 2026 National Defense Authorization Act (NDAA) enforces a commercial-first approach that requires research and formal documentation before opting out of commercial products, and reduces compliance burdens by limiting defense-unique clauses in contracts. Other similar pro-commercial efforts: The DoD is increasingly using non-traditional acquisition pathways like Commercial Solutions Openings and Other Transaction Agreements, bypassing the bureaucratic Federal Acquisition Regulation framework. The Modular Open Systems Architecture (MOSA) acquisition criteria requires new programs to maximize use of modular components that are more easily produced by commercial manufacturing processes. On software, the FY26 NDAA creates more flexibility to pay contractors with a commercial-style subscription model, adding flexibility to refine the goals of the product throughout the life of the contract. The Joint All Domain Command and Control (JADC2) initiative seeks to connect sensors across land, sea, air, space and cyber domains into one network that automatically matches threats to the best available response, opening the door for new software, AI and modular hardware.

(SPEECH)

government wants a commercial-first approach. So think about what that means. It means you must try to work with commercial defense providers before you go to the pure play defense companies, and the National Defense Authorization Act last year or earlier this year, enforces a whole bunch of policies that are designed to facilitate that.

I'm not going to go through that here. A lot it's kind of boring and only interesting to people that are participating in defense procurement. But the bottom line is that they have moved mountains to try to make defense procurement accessible, and doable, and viable for regular commercial providers. And that's a pretty big deal.

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Slide: iRobot. A stacked bar graph titled Private capital invested in US robotics and drones, US$, billions. Bars for each year from 2015 to 2025 show investment, with the vertical axis running from $0 to $21 billion. A legend lists Strategic/M&A, PE spend, VC spend. VC spend, shaded gold, makes up the bulk of each bar, with most years ranging from about $2 to $10 billion, and the final 2025 bar rising sharply to nearly $21 billion. Source: JP Morgan Industry & Policy Thematics, June 8, 2026.

(SPEECH)

A huge part of that is for robotics and drones. And I don't have to repeat all the drone stuff now. I was reading the other day about Ukrainian drones that can travel on a fiber optic line for 40 kilometers, where the fiber optic line is skinnier than a fishing line. And where because it's connected via this fiber optic cable, it's unjammable. So that's the kind of work that's being done in this space. And it's going to take a lot of time and money to reverse this chart.

So

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Slide: This will take a lot of effort to reverse. A Sankey flow diagram tracing drone components from Technology origin on the left, through Drone component in the middle, to Country of manufacture on the right. Origin nodes list US, Japan, UK, Europe, Russia. Component nodes list Lithium polymer batteries, Power distribution board, Brushless DC motors, Propellers, Global Navigation Satellite System module, Inertial Measurement Unit module, Camera, Antenna, Video transmission, Remote control systems, Flight controller, Micro controller unit, Electronic speed controllers, Airframe. Flowing bands connect them to manufacture nodes US, China, Europe, UK, with the large majority of flows converging on China. Source: MIT Technology Review, JPMAM, July 2024.

(SPEECH)

you're going to see these kinds of charts a lot. This is called a Sankey chart. What you see on the left is where all this drone technology was invented. And then all the individual drone components in the middle. This one's from MIT. And then you see on the right where all this drone stuff is being manufactured. That is obviously not a sustainable position. And that's something that the US Defense Department is rapidly working on changing.

And then it's also going to take a lot of time and money to rebuild the defense pipelines in terms of weapons that were expended during the Iraq war.

(DESCRIPTION)

Slide: This will take a lot of time and money to reverse. A table titled Key munition stockpiles and timelines to rebuild. Columns read Estimated use in Iran War, FY 2027 request, Deliveries in FY 2026, Annual production capacity (current maximum rate / framework agreement goal), Estimated return to prewar inventory. Rows list Tomahawk, Terminal High Altitude Area Defense (THAAD), Patriot, Standard Missile (SM) 3, Standard Missile (SM) 6, Joint Air-to-Surface Standoff Missile (JASSM), Precision Strike Missile (PrSM), each with figures across the columns and rebuild timelines ranging from Late 2026 to early 2031. Source: CSIS, May 27, 2026.

(SPEECH)

The Trump administration recently invoked the Defense Production Act, which is an implicit acknowledgment that the depletion rate on Tomahawk missiles and anti-ballistic missiles, and the other things shown on this page, have reached levels that are jeopardizing national security. So these supply chains are going to have to be rebuilt.

In terms of the Iran war itself. All of us on this call have our own opinions. In the piece that we published, I didn't share any of my own, but I did share a pretty long list of articles from foreign policy, foreign affairs, Brookings, Peterson Institute, you name it. And the takeaways are pretty consistent, which is the United States faces mostly a set of difficult choices right now as the administration tries to disengage before you start seeing more damage to the economy.

So

(DESCRIPTION)

Slide: 8, The Rule of Law.

(SPEECH)

I want to talk about the rule of law because I get a lot of questions on this. And is rule of law important? Yes, over the long run.

Can the United States survive individual acts by the administration that appear to violate long-standing norms with respect to the business community and interference in certain things? Yes, every country's equity markets can survive isolated individual things.

But as a broad principle, I wanted to take a look at this whole rule of law question. And I wanted to start in a place that some of you may not like, but I think is the right place to start, which is let's start with all the stuff that is most likely and has been deemed constitutionally legal.

(DESCRIPTION)

Slide: 8, Let's start with what is most likely constitutionally legal. A bullet point list. Text: General Policymaking Discretion. Repealing Biden Executive Orders. Pausing implementation of gov’t programs such as renewable energy subsidies to develop new priorities, as long as funds are spent within the broad boundaries of the related congressional appropriation. Allowing states to use federal education block grants for public school choice programs. Foreign and International Affairs. Withdrawing from organizations such as the WHO, particularly in the absence of Congressional legislation mandating US membership. Designating foreign drug cartels as foreign terrorist organizations. Imposing increased duties on certain foreign imports, though the use of the IEEPA to impose tariffs was deemed invalid. Immigration and Border Policies. Aggressively deporting undocumented aliens pursuant to standard statutory procedures. Temporarily suspending refugee admissions and temporarily barring admission to foreign nationals from countries with screening procedures determined insufficient from a national security perspective. Ending temporary protected status for refugees from certain countries, though many remain in litigation. Managing the Executive Branch. Restructuring or eliminating agencies not created by federal statutes and whose independent existence is not otherwise statutorily required. Stripping away as much authority and as many employees as legally possible from statutorily established agencies like the Dep’t of Education. Abolishing DEI offices and programs in federal agencies, and rescinding executive orders requiring affirmative action by federal contractors. Terminating or transferring federal employees who currently are not subject to federal civil service protections.

(SPEECH)

And so there's a lot of stuff on this page. I'm not going to go through the details, but having to do with general policy making, and foreign affairs, and the federal workforce, and managing the executive branch. There are a lot of things that are happening here that may be unpopular, they may be unprecedented. But given the increasingly broad scope of tools that the Supreme Court has been giving to the executive branch over the last, let's say, 10 years or 15 years, I'm not surprised that people are reacting like this to some of these things, but to me, and the constitutional law experts I talked to, these things are constitutionally legal. And not every unprecedented thing is demonstrative that there is an erosion in the rule of law.

Similarly, and this may strike some of you as odd. And it strikes me as odd, but there is no federal constitutional provision that bans partisan redistricting. So

(DESCRIPTION)

Slide: Also not unconstitutional: partisan redistricting. A stacked bar graph titled New 2026 House seats that may result from state redistricting and Voting Rights Act decision. Two bars, Republicans and Democrats, stack seat gains by state, with the vertical axis running from 0 to 16. The Republican bar reaches about 15, segmented into Texas, 5, Ohio, 2, N. Carolina, 1, Alabama, 1, Florida, 4, Missouri, 1, Tennessee, 1, Louisiana, 1. The Democrat bar reaches about 6, segmented into California, 5, Utah, 1. A legend distinguishes 2026 Redistricting: Subject to judicial challenge or voter referendum from 2026 Redistricting: State legislation enacted with no further challenges expected. Source: JPMAM, 2026.

(SPEECH)

all the redistricting efforts that have been taking place in red and blue states, there is no federal ban against that.

As a matter of fact, the Constitution and even most state constitutions don't have provisions against partisan gerrymandering, although a few of them do. So heading into the midterms, it looks like the Republicans will be picking up net anywhere from 8 to 12 seats from this effort. It may not be enough to save them the House, but it's certainly a meaningful number in the context of politics.

I think more of the blue states will catch up by the 2028 election and reverse some of this. We're going to end up in a weird place because we're going to end up with a lot of states whose voter populations are 55-45, where the Congressional balances are going to be much more skewed than that. I don't think that's a great thing. But again, it's not in and of itself unconstitutional.

That

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Slide: UCLA/Bright Line survey of 21 Article III Federal judges, 113 lawyers and 193 law professors. A line graph titled Legal expert ratings of the US rule of law, Mean rule of law rating. Multiple lines track ratings from 2014 to 2026, with the vertical axis running from 40 to 90. Lines are labeled Federal judges, Lawyers, Overall legal experts, Law professors. All start near 84 around 2015, dip and partly recover near 2021, then decline through 2026, with Federal judges holding highest near 67 at the end while the others fall to around 52. Source: UCLA Democracy Project, 2026.

(SPEECH)

said, if we try to do this empirically and not by anecdote, there does seem to be evidence that there are some rule of law issues to be concerned about for the Business Roundtable and other investor groups to focus on. One of them is a UCLA survey of Article III federal judges and constitutional lawyers, and law professors about the rule of law ratings, which have declined.

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Slide: Substantial concerns about constraints on Executive Branch power, compliance with court orders, politicized law enforcement and fear of reprisals. UCLA/Bright Line survey of 21 Article III Federal judges, 113 lawyers and 193 law professors. Retaliation. Nine in ten say Trump administration has used the DoJ to go after enemies and provide benefits to allies. Presumption of good faith. Only one in five agree the federal government still merits the “presumption of regularity” — courts should presume government officials act lawfully and in good faith absent evidence to the contrary. Compliance with judiciary. Eight in ten report that federal officials fail to comply with court orders somewhat or very often, and nearly nine in ten say Trump DoJ appointees mislead federal judges “somewhat” or “very often.” Legal representation and harassment. Nearly one in five lawyers report that representation decisions by their firms have often been affected by fear of adverse action by government officials or agencies. Almost half of federal judges are concerned about harassment if they rule against the federal government. Core legal principles. Only 25% believe in the following principles: that US government agencies do not punish political opponents; that law enforcement is not exploited for political purposes; that investigations of public officials are not compromised; that government officials face sanctions for misconduct; and that government officials do not use public office for private gain.

(SPEECH)

I'm not going to go through too much of the details here, but the categories that popped up most in those surveys where things related to retaliation, presumption of good faith, compliance with judicial orders, legal representation, and harassment. For me, that's the most important one, which is will certain law firms not represent certain clients because if the administration doesn't what those clients have done, the law firm itself may suffer. And then some questions on legal principles.

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Slide: Varieties of Democracy Project hosted by the University of Gothenburg. A line graph titled Legislative checks on government, Index (legislature/govt agency ability to question, investigate & oversee the executive). Multiple colored lines track countries from 1990 to 2025, with the vertical axis running from 0.0 to 1.0. A legend lists Germany, Brazil, Poland, US, Hungary, India, China. Most countries hold high near 0.9-1.0 for much of the period, with Hungary declining steadily toward 0.5, the US dropping sharply near 2025 toward 0.6, India easing downward, and China staying lowest and flat around 0.15. Source: V-Dem, Our World In Data, JPMAM, 2025.

(SPEECH)

There's a variety of democracies project hosted by the University of Gothenburg in Sweden. They measure for each country legislative checks on government here, and the US, which is the blue line in this chart, has fallen sharply into Victor Orban territory according to this particular assessment. Again, this is a third-party, non-US look from the outside.

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Slide: World Justice Project, founded in 2006 as a presidential initiative of the American Bar Association. Two line graphs. The left graph, titled WJP Constraint on Government Powers: US rank, Rank, N = 140, runs from 2013 to 2025 with the vertical axis inverted from 0 down to 40. A single line worsens over time, falling from a rank near 18 to about 37, with shaded bands marking Trump 1.0 and Trump 2.0. Source: World Justice Project, 2025. The right graph, titled WJP Government Powers Effectively Limited by Legislature: US rank, Rank, N = 140, runs from 2013 to 2025 with the vertical axis inverted from 0 down to 60. A single line declines from near rank 8 to about 52, also marked with Trump 1.0 and Trump 2.0 bands. Source: World Justice Project, 2025.

(SPEECH)

This is the World Justice Project, which was founded in 2006 as a presidential initiative of the American Bar Association, and their scores on constraints on government powers, the extent to which government powers are limited by the judiciary and the legislature. Those things are all tumbling. And so we do see some empirical evidence that there are some rule of law issues that need to be focused on.

The other thing, too, that I wanted to mention, for a law and order administration or ones that claims to be, there's a remarkable spike in cases terminated by the Department of Justice. And I wrote about this a couple of months ago. But when you get a chance, look at the chart and the accompanying table.

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Slide: For a law & order administration, this looks odd as well. A line graph and a table. The left graph, titled Cases terminated by the Department of Justice, Number of criminal cases terminated, monthly, runs from 2004 to past 2024 with the vertical axis from 0 to 12,000. A jagged line fluctuates throughout, with a spike near the end labeled Trump 2.0, Bondi DoJ. Source: Ken Morales (ProPublica), March 31, 2026. The right table, titled Referred cases that the DOJ declines to prosecute, First six months of each administration, has columns Case type, Avg of prior 3 administrations, Trump (2025), Change in declined cases. Rows list Labor, National security, Organized crime, White-collar crime, Drugs, Corruption, Violent crime, Civil rights, Other, Immigration, with changes ranging from 129% down to negative 22%. Source: Ken Morales (ProPublica), March 31, 2026.

(SPEECH)

A bunch of cases referred to the Department of Justice on organized crime, white collar crime, drugs, corruption, violent crime, civil rights, dropped with little explanation by the Department of Justice.

And

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Slide: 9, Federal government defunding of science. This year also marks another milestone: the 80th anniversary of “Science, The Endless Frontier”, a document prepared for President Truman which argued for sustained government funding for scientific research after WWII to ensure national security, health and prosperity. The National Institutes of Health dates back to 1948. The NIH spearheaded efforts to eradicate smallpox, to develop modern antiretroviral therapies and to map the human genome. The NIH has also played a critical role in the advancement of US science: NIH funding supported basic or applied research related to 99% of newly approved medicines, and funded research which supported clinical trials for 62% of these drugs. As for the NSF, its history includes decades of research laying the groundwork for the internet, Doppler radar, supercomputing, 3D printing and artificial intelligence.

(SPEECH)

then the other medium-term thing that a lot of us are aware of is the administration's approach to the defunding of science and sidelining of scientific expertise. In addition to the 250th anniversary of the Declaration of Independence, this is also the 80th anniversary of a piece that was written for President Truman called Science, the Endless Frontier. And it was the basis for the establishment of the National Science Foundation. And also dovetailed with the creation of the National Institutes of Health. And those kinds of entities have been responsible for the creation of 90-something percent of the drugs that have gone through the FDA pipeline. And for two-thirds of all the clinical trials that have ever taken place on those drugs.

And in terms of the National Science Foundation, they've been responsible for the usual suspects supercomputing, 3D printing, artificial intelligence, the internet. So they've all been involved in some pretty important stuff. And

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Slide: NIH and NSF grant declines. Four bar graphs. The top-left graph, titled Decline in number of competitive grants issued by NIH, Percent decline, 2025 vs 2015-2024 average, has bars for categories including Aging, Diabetes, Neurological disorders and stroke, Cancer, General medicine, Heart, lung and blood, Allergy and infectious disease, declining from about 30% downward. Source: NYT, JPMAM, December 2, 2025. The top-right graph, titled Decline in competitive grant funding issued by NIH, same subtitle, has bars for a similar set including Neurological disorders and stroke, Cancer, Aging, Heart, lung and blood, Allergy and infectious disease, Diabetes, General medicine, ranging from about 35% down. Source: NYT, JPMAM, December 2, 2025. The bottom-left graph, titled Decline in number of new grants issued by NSF, same subtitle, has bars for Biology, Geosciences, STEM education, Computer science, Engineering, Math and physics, Technology and innovation, ranging from about 40% down. Source: NYT, JPMAM, December 2, 2025. The bottom-right graph, titled Decline in new grant funding issued by NSF, same subtitle, has bars for Technology and innovation, Computer science, Geosciences, Biology, STEM education, Engineering, Math and physics, ranging from about 35% down. A block of body text sits to the right of the top row, partly cut off. Source: NYT, JPMAM, December 2, 2025.

(SPEECH)

to see massive spikes in grant declines and to see-- I'm going through this quickly-- and to see massive changes in agency staffing labels on everything having to do with science and health is not a big confidence builder.

And

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Slide: Science related staffing. A line graph titled Change in agency staff levels from previous year, Percent. Multiple colored lines track agencies from 2016 to 2025, with the vertical axis running from negative 30% to 15%. A legend lists Centers for Disease Control and Prevention, National Institute of Standards and Technology, National Oceanic and Atmospheric Administration, National Institutes of Health, National Science Foundation, Department of Energy, Food and Drug Administration, NASA, Environmental Protection Agency. Lines hover near 0% to 5% through most of the period, then drop sharply in 2025, with several falling toward negative 15% to negative 25%. Source: Nature, January 22, 2026.

(SPEECH)

the quote that I thought was the most important that we cite in this piece comes from the Information Technology and Innovation Foundation, which is one of the beating think tank hearts inside the US VC system. And

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Slide: What happens next. “Downstream effects are not limited to academia. Biotechnology start-ups, private sector R&D and clinical innovation pipelines all depend on federally funded basic research and a steady influx of NIH-trained scientists. Without that flow of talent, the entire US innovation engine, from basic discovery to commercial drug development, risks slowing down and jeopardizing progress on diseases that affect millions of Americans.” Sandra Barbosu of the Information Technology and Innovation Foundation.

(SPEECH)

what they talk about are the downstream effects of this are not limited to academia. And when you look at biotech startups and private sector R&D, clinical innovation, all of these pipelines rely a lot on federally funded research and NIH-trained scientists. And that's being rapidly eroded according to that particular source.

And then just a word on vaccines.

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Slide: Vaccines are arguably among the greatest achievements in biomedical science and public health. A table titled Vaccine preventable diseases in the US, split into PRE-VACCINE and POST-VACCINE sections. Columns read VPD, Annual cases, Annual deaths, Vaccine decade, Cases (2006), Deaths (2004), Case decline. Rows list Diphtheria, Measles, Mumps, Pertussis, Polio (acute), Rubella, Smallpox, Hepatitis A, Tetanus, with pre-vaccine annual cases in the thousands to hundreds of thousands falling to near zero post-vaccine, and case declines ranging from 87% to 100%. Source: Roush and Murphy, JAMA, 2007.

(SPEECH)

They are arguably the greatest achievements in the history of biomedical science. And we have-- there's tons of data here that goes back decades on what happened to vaccine-preventable deaths before and after vaccines were introduced.

A lot of you have seen this kind of information already, but this is an interesting way to think about it, in the 1870s had the beginning of this medical revolution that started with antiseptics and hospital, and then eventually was joined in by vaccines and antibiotics.

And

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Slide: Antiseptics, vaccines and antibiotics. A line graph titled Life expectancy by year of birth, Years. A single gold line rises from 1750 to past 2000, with the vertical axis running from 20 to 80. The line climbs from around 35 years to near 80, with annotations marking milestones including Antiseptics in medicine, Pasteurization of milk, Routine immunization for diptheria, pertussis and whooping cough, Antibiotics era, Mass produced penicillin, streptomycin, tetracycline, and cephalosporins, Polio vaccine, MMR vaccine, and a note reading Life expectancy: 28-36 years during Bronze Age (1200 BC). Source: Riley (2005); Zijdeman (2015); HMD (2025); UN WPP (2024); OWID.

(SPEECH)

look what happens to life expectancy here, life expectancies were high 20s, early 30s from the Bronze Age in 1200 BC, all the way to 1850. So that's a very long period of time of very little change in life expectancies. And then these kinds of things like vaccines and antibiotics, are coincident with these things improving.

So

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Slide: RFK Jr. October 2025 OpEd entitled “Six surgeons general: It’s our duty to warn the nation about RFK Jr” was written by surgeons general serving under Bush I, Clinton, Bush II, Obama, Trump and Biden. Their concern: RFK’s “profound, immediate and unprecedented threat to public health”… “science and expertise take a back seat to ideology and misinformation.” In June 2025, Kennedy fired all 17 members of the Advisory Committee on Immunization Practices. FDA officials delayed or blocked publication of several studies supporting safety of widely used vaccines against Covid and shingles. The studies, conducted by scientists at the FDA that analyzed millions of patient records, found serious side effects to be very rare. Scientists directed to withdraw Covid vaccine studies accepted by medical journals, including one by career CDC scientists that Covid vaccine sharply cut odds of hospitalizations and emergency room visits. Aaron Kesselheim, Harvard University professor who studies FDA regulation: “at any other time in history, this would be a major scandal that would lead to congressional hearings and resignations of leadership.” In a prior piece I explained why I consider Secretary of Defense Robert McNamara and Attorney General John Mitchell to be the two most controversial cabinet members of the last sixty years. I concluded by saying that they could rest easier now that RFK is poised to replace them. Little has changed since then.

(SPEECH)

that's why all the surviving Surgeon Generals that are still alive wrote an op-ed last October called It's Our Duty to Warn the Nation about RFK Jr. So some of you have seen this before, but I'm not going to go through the details. But their concern was his profound, immediate, and unprecedented threat to public health, and that science and expertise are taking a back seat to ideology and misinformation. So that's not a great thing for the innovation pipeline within the healthcare space.

I'm

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Slide:10, Energy. Michael skips various slides.

(SPEECH)

not going to talk a lot about energy. I did that on the energy paper that we did this year. I will say the saving grace that probably needs more attention than it gets is that the oil intensity of the US economy and of US profits have collapsed since 1990, and I picked 1990 because that was the Schwartzkopf Gulf War, Iraqi invasion of Kuwait. And

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Slide: The decline in energy intensity. A line graph titled Oil intensity of the US economy, Index (100 = 1990). Three lines track intensity from 1990 to 2025, with the vertical axis running from 0 to 140. A line labeled Oil intensity of S&P 500 profits spikes early above 120 then falls toward 20-30 with sharp swings. A red line labeled Oil intensity of GDP declines steadily from 100 to about 47. A gold line labeled Oil intensity of NIPA profits falls lowest toward 20. Source: Energy Institute, S&P, BEA, JPMAM, 2025.

(SPEECH)

so if the spikes in commodity prices in the US that have taken place had happened back in 1990, it would have really derailed things. But every single year, due to some increased efficiencies in gas and oil to gas switching, the oil intensity of the US economy and profits is declining. And so thank God for that.

Let me just close with a discussion of IPOs and get back to this whole American exceptionalism semiquincentennial thing. This

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Slide: [Appendix] IPO calendar, supply, demand, free float timelines and performance. A bubble graph titled Creation of new public companies in the 21st century, Cumulative market cap in trillions of US$. The horizontal axis is Number of companies from 0 to over 200, and the vertical axis runs from $0 to $25 trillion. Clustered bubbles rise in a curve, color-coded by a legend listing US, China, Europe, Japan. Labeled companies include Japan Post Bank, Recruit Holdings, Infineon, Industria de Diseno Textil, Airbus, Meta, Tesla, Broadcom, Alphabet for the US cluster reaching highest near $20 trillion, and CATL, Construction Bank, Agr Bank, Ind & Comm Bank for the China cluster. Source: Bloomberg, JPMAM, June 15, 2026.

(SPEECH)

is a chart that I adapted from a Mario Draghi presentation that was originally designed to argue for greater productivity and entrepreneurship in Europe. I don't think it's done any of those things, but it looks at the number of companies that have gone public and the cumulative market cap they've created.

And so what's clear here is that the United States, and this is in the 20th century, the United States is not the only game in town, but kind of close to it. A large step behind them is China, and then Europe, Japan bringing up the rear.

And so in terms of value creation in IPO markets, the US is really where it's at. And

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Slide: US IPO revival. A line graph titled Market cap of IPO companies as % of US total market cap, IPO market cap at first close / US total market cap. A blue line tracks the share from 1975 to past 2025, with the vertical axis running from 0% to 5%. The line is labeled IPO share of market cap, excluding SPACs, REITs, closed end funds, ADRs, banks, LPs and penny stocks, fluctuating with peaks above 4% around 2000 and dipping low between. A red dot near the top right is labeled SpaceX, Anthropic, OpenAI estimated, and a gold dot near the bottom is labeled Jan-Apr '26 IPOs. Source: Jay Ritter (U Florida), World Bank, Bloomberg, JPMAM, June 15, 2026.

(SPEECH)

so what do we make of this IPO revival? Everybody has a different version of this chart. I like to look at the IPO markets not by looking at proceeds raised, but by looking at the total market cap of the companies coming public, because within 6, 9, 12, 18 months, eventually all the rest of that market cap is going to have free float as well.

So this chart looks at the total market cap of IPO-ing companies as a percentage of all the market cap that's outstanding. So for example, in the year 2000, around 4.5% of the market cap of the whole equity market were new companies going public in that year. If SpaceX, Anthropic, and OpenAI go public will hit a similar level. But to be clear, without them, the January through April numbers were still really, really low.

I think the IPO markets are still suffering a bit of a SPAC hangover for understandable reasons. And it's a tighter window to get through. The quality of the companies that investors are willing to accept going public right now are higher than they historically have been. And there's some great data from Jay Ritter at the University of Florida who tracks, profitability of companies going public and things like that.

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Slide: Enough demand? A line graph titled US equity mutual fund cash balances, % of total assets, Percent. A single blue line tracks the balance from 2009 to past 2025, with the vertical axis running from 1% to 7%. The line starts near 6%, drops quickly to around 4%, then declines gradually with fluctuation toward 1.5-2% by the end, with a brief uptick near 2023. Source: ICI, JPMorgan Flows & Liquidity, March 2026.

(SPEECH)

And so some of the questions we get is there enough demand for all these mega IPOs, mutual fund cash balances are low? I think the right question to ask is, what's the net supply and demand of new equity supply versus stock buybacks? Those numbers will take a hit with these mega IPOs, but will still be positive. So

(DESCRIPTION)

Slide: Probably. A line graph titled US equity net demand share of Russell 3000 market cap, Gross buybacks less equity issuances & shares from expiring lockups. A blue line tracks the share from 1995 to past 2025, with the vertical axis running from negative 2% to 3%. The line dips below 0% around 2000, then mostly stays positive between 0% and 3% through the 2010s and 2020s, with a dashed segment dropping toward 0% at the very end. Source: Goldman Sachs Global Investment Research, May 29, 2026.

(SPEECH)

in other words, we do think there's going to be more buyback liquidity and M&A liquidity because I think something like 70% of all the consideration that's being paid in announced M&A this year is being paid in cash. There appears to be plenty of cash for these IPOs.

The thing to understand that's so important is about IPO timelines. If

(DESCRIPTION)

Slide: Free float share timelines. Two line graphs. The left graph, titled Average free float shares of the 10 largest IPOs since 2010, Free float share of publicly traded share class, plots against Number of trading days after IPO from 0 to over 250, with the vertical axis from 45% to 80%. A single line holds near 45% early, then steps up sharply around day 120 to about 78% before leveling near 80%. Source: JP Morgan Flows & Liquidity, May 13, 2026. The right graph, titled Free float shares of the 10 largest IPOs since 2010, same subtitle and horizontal axis, has the vertical axis from 0% to 100%. Multiple stepped lines track individual companies per a legend listing Meta, Airbnb, Coinbase, Snowflake, Palantir, DoorDash, Lyft, Rivian, Uber, Snap, each jumping at different points as lockups expire. Source: JP Morgan Flows & Liquidity, May 13, 2026.

(SPEECH)

you can get into an IPO syndicate, that's great, right? There is a widely understood first-day pop. We've done a lot of research on it. Over time, I think the mean first-day pop is like 20%, and the median is 8%. So pretty reliable over since 1980, advantage to being in the syndicate.

If you can't, sometimes it pays to wait. And the reason is because of these timelines. So if we look at the 10 largest IPOs since 2010, on average, they in the IPO floated around half the company. And then the rest of it became public over the next, let's say 180 days. And

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Slide: SpaceX. A line graph titled Estimates of SpaceX free float timeline, % of SpaceX market cap. Two stepped lines track from June 2026 to past July 2027, with the vertical axis running from 0% to 100%. A gold line labeled Early unlock schedule and a blue line labeled Normal unlock schedule both rise in steps, starting at IPO near 0%, climbing through Standard lockups and Extended lockups, then jumping sharply to 100% at Elon Musk lockups near mid-2027. Source: Rand Group Research, June 2026.

(SPEECH)

with SpaceX, you're even getting a more exaggerated version of that. 5% gets floated, by the end of the year, it could be 50%. And then next year, with Musk's shares being free to trade, who knows what will happen then.

But there is a reason why stocks tend to trade a little bit sloppy after the first couple of days on the way to the lockup expiry. And if we look at what happened to those 10 largest IPOs in the US since 2010, this is what it looked like.

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Slide: What happens after the first day IPO pop? A line graph titled 10 largest IPOs since 2010 relative performance, Avg price performance relative to Nasdaq 100, index (1 = first close). A single line tracks Days after IPO from 0 to over 350, with the vertical axis running from 0.7 to 1.1 and a dashed horizontal line at 1.0. A dashed vertical line near day 180 marks Lock-up expiry. The line rises above 1.0 early, peaks near 1.1 around day 60, then declines below 1.0 and trends down toward 0.75 by the end. Source: Bloomberg, JPMAM, June 10, 2026.

(SPEECH)

Starting around day 50, see some weakening price action on the order of maybe 15% or so heading into the lockup expiry, at which point things tend to stabilize. If we look individually at all of these companies, it's a pretty consistent story that certainly starting around day 70 or 80, you start seeing selling pressure, either from insiders hedging or other people speculating about future sales.

(DESCRIPTION)

Slide: What happens after the first day IPO pop? A line graph titled 10 largest IPOs since 2010 relative performance (ex PLTR), Price performance relative to Nasdaq 100, index (1 = first close). Multiple colored lines track Days after IPO from 0 to over 350, with the vertical axis running from 0.2 to 1.4, a dashed horizontal line at 1.0, and a dashed vertical line near day 180 marking Lock-up expiry. A legend lists ABNB, SNOW, DASH, UBER, META, SNAP, COIN, RIVN, LYFT. Most lines start near 1.0 and spread downward over time, with several declining toward 0.4-0.6 by the end. Source: Bloomberg, JPMAM, June 10, 2026.

(SPEECH)

And here's another look at an even broader universe of all IPOs over the last 10 years, or all IPOs since 2023. Same

(DESCRIPTION)

Slide: Impact of lockup expiry. A line graph titled Cumulative return around IPO lock-up expiration, Percent, US IPOs greater than $25 million in value since 2017. Two lines track Calendar days around IPO lock-up expiration from negative 180 to 120, with the vertical axis running from negative 12% to 4% and a vertical line at day 0. A gold line labeled Average IPO during last 10 years stays mostly positive, dipping near day 0 then recovering. A blue line labeled Average IPO since 2023 declines well below 0% before day 0, bottoming near negative 10%, then climbs back toward positive after expiration. Source: Goldman Sachs, April 2026.

(SPEECH)

story, you start heading into the lockup expiry, the prices are weakening. And then things once that selling goes through, the prices tend to pick up again.

And

(DESCRIPTION)

Slide: 2026 IPOs. A table titled Ten largest US IPOs in 2026 by proceeds raised. Columns read Proceeds raised, Days since IPO, IPO price, First close, Curr price, Gain vs IPO, Gain vs first close. The ten companies listed are Space Exploration Technologies Corp., Cerebras Systems Inc., Innio N.V., Madison Air Solutions Corporation, Fervo Energy Company, Blackstone Digital Infrastructure Trust Inc., Quantinuum Inc., Forgent Power Solutions, Inc., Axis, Inc., X-Energy, Inc., with proceeds ranging from 75 billion at the top to about 1 billion at the bottom and gains vs IPO running from negative 12% to 129%. An Average row reads 37% and 14%, and a Median row reads 28% and 11%. Source: Bloomberg, JPMAM, June 22, 2026.

(SPEECH)

when we look at the IPOs that have been done so far this year, very similar story, which is the gain versus the IPO price look pretty good. You look at the gains versus the first close, they're markedly lower. And all of these stocks haven't even reached their 180-day lockup expiry yet. So anyway, I just wanted to give everybody a little bit of a primer on the IPO market, given these mega IPOs outstanding.

But to wrap up, we're still comfortable with the US representing the lion's share of investment portfolios. But I think it's important for all of us to understand that at this point, the AI boom and the changing dynamics of the accelerator market for NVIDIA, and for agentic AI revenues for OpenAI and Anthropic, are really the two most important trends to watch over the next 12 to 18 months for the reasons we've discussed.

Please see the written version of our semiquincentennial report for more details. Thank you very much for dialing in. And we plan to be back in July or early August. I'm going to be working with the people that are working on Project Glasswing within J.P. Morgan, who are testing Mythos, to share with you all of the things that we've learned and the steps that large, medium, and small companies can take to protect themselves in a world of increasingly capable tools to do some very nasty things. So thank you for dialing in, and we'll see you next time. Bye.

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Disclosures. Important information. IMPORTANT INFORMATION. This material is for information purposes only. The views, opinions, estimates and strategies expressed herein constitutes Michael Cembalest's judgment based on current market conditions and are subject to change without notice, and may differ from those expressed by other areas of JPMorgan Chase & Co. ("JPM"). This information in no way constitutes J.P. Morgan Research and should not be treated as such. Any companies referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by J.P. Morgan in this context. GENERAL RISKS & CONSIDERATIONS. Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. **NON-RELIANCE.** Certain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/ reference purposes only. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events. Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees,. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions. For J.P. Morgan Asset Management Clients: J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://am.jpmorgan.com/global/privacy.

(SPEECH)

Thank you for joining us. Prior to making financial or investment decisions should speak with a qualified professional and your J.P. Morgan team. This concludes today's webcast. You may now disconnect.

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For J.P. Morgan Wealth Management Clients: Purpose of this material: This material is for informational purposes only. The views, opinions, estimates and strategies expressed herein constitutes Michael Cembalest's judgment based on current market conditions and are subject to change without notice, and may differ from those expressed by other areas of J.P. Morgan. This information in no way constitutes J.P. Morgan Research and should not be treated as such. J.P. Morgan is committed to making our products and services accessible to meet the financial services needs of all our clients. If you are a person with a disability and need additional support, please contact your J.P. Morgan representative or email us at accessibility.support@jpmorgan.com for assistance. J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment advisor, member FINRA and SIPC. Annuities are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states. This material is intended for your personal use and should not be circulated to or used by any other person, or duplicated for non-personal use, without our permission. If you have any questions or no longer wish to receive these communications, please contact your J.P. Morgan representative.

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