U.S. Equity Thematic Monthly: Positive on SpaceX, Alphabet, and Healthcare; IBM Risks Partly Priced In

Overview

This report is a monthly compilation by J.P. Morgan's North America equity research team, summarizing U.S. equity thematic research, key short views, initiations, rating changes, the Analyst Focus List, and Catalyst Watch. The core content focuses on SpaceX's long-term growth opportunity, IBM's risk-reward after weakness in its mainframe business, healthcare's allocation value relative to crowded AI trades, and Alphabet's AI commercialization returns amid higher capital expenditure.

Core views

The report advocates selective allocation within U.S. equities. SpaceX has potential for high growth and margin expansion through launch capabilities, rapid Starship reusability, deep vertical integration, and a vision for orbital computing power; Alphabet's cloud and search growth validates returns from AI investments, making the share-price pullback a buying opportunity; IBM is pressured in the short term by mainframe and transaction processing businesses, but valuation discount and potential buybacks provide support; after years of underperformance, lower positioning, and valuation compression, healthcare is nearing a more durable inflection point as earnings growth may accelerate in 2027.

Analysis framework

The report combines bottom-up company fundamental forecasts, top-down sector allocation, analyst surveys, relative valuation, sum-of-the-parts valuation, earnings multiples, and positioning percentiles. The monthly report itself is a summary of multiple company and strategy reports, and a single-stock rating should not be treated as a unified view on the entire U.S. equity market.

Methodology notes

• Valuation methodsSum-of-the-parts valuation

  Evaluating different business segments separately and aggregating enterprise value

  The assessment of IBM references sum-of-the-parts valuation multiples to distinguish the quality and potential downside of mainframe, consulting, and other businesses.

• Valuation methodsForward P/E ratio

  Deriving valuation based on future-year earnings per share and a target multiple

  SpaceX's price target is based on approximately 41x 2028E EPS, while Alphabet's price target is based on 25x 2028E EPS.

• Fundamental forecastingRevenue CAGR and margin scenarios

  Assessing revenue expansion, changes in business mix, and operating leverage

  The SpaceX forecast emphasizes revenue growth and margin expansion from the migration of the connectivity business toward AI and orbital computing power, but it is highly dependent on long-term execution.

• Sector strategyRelative valuation and positioning percentiles

  Comparing a sector's valuation, holdings, and historical performance relative to the market

  The positive view on healthcare is based on combined evidence of low positioning, relatively low valuation, long-term underperformance, and improving future earnings growth.

• Stock selectionHigh-conviction analyst survey

  Aggregating sector analysts' structural and tactical views

  The report surveys U.S. equity research analysts to screen for the most attractive short ideas entering the third quarter of 2026, and combines initiations and rating changes to form a monthly watchlist.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• SpaceX (SPCX)

  Initiated with an Overweight rating

  Strengths

  Leading launch frequency and cost, rapid rocket reusability, deep vertical integration, engineering culture, and long-term growth potential in connectivity and AI businesses.

  Weaknesses

  Current valuation already embeds high growth expectations, and business expansion requires sustained large-scale capital investment.

  Comparison

  Approximately 41x 2028E EPS, above the average of the large technology companies listed in the report and PLTR at approximately 38x.

  Risks

  Starship mass production and launch ramp-up, execution in mobile communications and data centers, heavy capital expenditure, financing needs, and uncertainty in long-term forecasts.

• International Business Machines

  Maintains Overweight rating but lowers forecasts and price target

  Strengths

  Red Hat, Confluent, Hashicorp, and distributed infrastructure are performing relatively healthily, margins are resilient, and there is approximately $2B of unused buyback authorization.

  Weaknesses

  Mainframe, transaction processing, and consulting businesses are under pressure, and forecasts for revenue, EPS, and free cash flow have been lowered.

  Comparison

  The share price is below sum-of-the-parts valuation multiples and trades at below 18x lowered 2027E EPS.

  Risks

  Large transactions may be canceled rather than delayed, customer capital expenditure may shift toward AI infrastructure, cybersecurity matters may distract management, and cyclical demand may deteriorate further.

• Alphabet

  Maintains Overweight rating and recommends buying the pullback

  Strengths

  Cloud and search continue to grow strongly, and full-stack AI capabilities can be monetized across cloud, search, subscriptions, and other businesses.

  Weaknesses

  Capital expenditure is rising sharply, while third-party compute transition arrangements, hardware sales, M&A, depreciation, and legal expenses may pressure margins.

  Comparison

  The price target is estimated at 25x 2028E EPS of $16.66.

  Risks

  Insufficient realization of compute demand, lower returns on capital, margins below expectations, model competition, and legal and regulatory pressure.

• U.S. healthcare sector

  Reiterates a positive allocation view

  Strengths

  Demand and growth are relatively durable, profitability is close to the technology sector, valuation is lower, and it can diversify concentrated AI-theme risk.

  Weaknesses

  It has continuously underperformed the S&P 500 since 2022, while policy uncertainty and funding pressures have weighed on sentiment for a long time.

  Comparison

  Sector weight has declined from a peak of approximately 16% to approximately 9%, with positioning and relative valuation near the historical 14th and 26th percentiles, respectively.

  Risks

  Drug pricing reform, reimbursement pressure, Medicaid cuts, ACA policy, tariffs, and AI disruption risk.

• U.S. equity high-conviction short portfolio

  Used to complement long allocations and control downside risk

  Strengths

  Screened by sector analysts from both structural and tactical perspectives, and can be used to identify names with deteriorating fundamentals or vulnerable valuations.

  Weaknesses

  The current input does not retain the full individual stock list or item-by-item rationale, so specific positions cannot be reconstructed from it.

  Comparison

  Together with the Overweight views in the report, it reflects a long-short approach that emphasizes stock-level differentiation.

  Risks

  Short squeezes, catalyst timing deviations, securities borrowing costs, and a rapid rebound in market risk appetite.

Key data

• SpaceX price target$225December 2027 price target, with initiation at Overweight.
• SpaceX revenue forecast$19B in 2025 to $470B in 2030Corresponds to an approximately 91% five-year CAGR and is a report forecast rather than an achieved result.
• SpaceX operating margin forecast-14% in 2025 rising to approximately 50% in 2030Depends on Starship, connectivity, AI infrastructure, and orbital computing power expanding as planned.
• Starship launch forecastA small number in 2026 rising to approximately 5,000 in 2031The report uses this to envision 75GW of orbital computing power in 2031.
• Alphabet price target$420December 2027 price target, maintaining an Overweight rating.
• Alphabet second-quarter growthConstant-currency revenue growth of 23%, cloud growth of 82%, search growth of 17%The report views this as evidence that AI investment is beginning to generate commercial returns.
• Alphabet capital expenditure forecast$195B-$205B in 2026; $378B in 2027The 2027 forecast represents 85% year-over-year growth and may pressure depreciation and margins.
• IBM valuationBelow 18x 2027E EPSBased on lowered forecasts, the report believes the incremental risks have largely been reflected in the share price.
• IBM fiscal 2026 business forecastSoftware growth of 7.2%, consulting growth of 1.7%, infrastructure decline of 0.8%Within this, transaction processing is expected to decline 6.7%, and mainframe is expected to decline 20%.
• IBM free cash flow forecast$15.2BLowered due to weakness in mainframe and related software businesses.
• Healthcare index weightApproximately 9%Below the historical peak of approximately 16%, with its ranking in the S&P 500 falling from the second-largest sector to the fifth-largest sector.
• Healthcare positioning and valuationPositioning is around the historical 14th percentile, and valuation is around the 26th percentile relative to the marketLow positioning and lower valuation provide a basis for potential rerating.
• Number of initiations in July21 itemsBased on the initiation table listed in the report.
• Number of rating upgrades and downgrades in July9 upgrades, 15 downgradesBased on the rating-change table listed in the report.

Impact & implications

At the portfolio level, investors may consider reducing excessive concentration in a single popular AI trade while retaining platform companies that can demonstrate AI commercialization returns, and increasing exposure to healthcare, where valuations and positioning are both low. SpaceX represents a long-term opportunity with high growth, high capital needs, and high execution risk; Alphabet reflects positive feedback between AI investment and monetization of core businesses; IBM is closer to a valuation-repair opportunity, with upside depending on large transactions being delayed rather than permanently lost. The short list and downgrades also indicate that risk differentiation within the market remains significant.

Risks

• AI-related investment remains crowded, and capital expenditure growth may outpace revenue and cash flow returns.
• SpaceX's long-term forecasts for launches, orbital computing power, revenue, and margins are highly sensitive to execution and financing conditions.
• IBM mainframe transactions may be permanently lost rather than merely delayed, leading to further downward revisions to earnings and cash flow.
• Healthcare still faces uncertainty around drug prices, reimbursement, healthcare spending, tariffs, and election policy.
• High-valuation growth stocks are sensitive to interest rates, regulation, model competition, and changes in market risk appetite.
• The monthly report summarizes multiple research pieces from different dates, and views and price targets may be updated in subsequent company reports.

What to watch

• Starship launch cadence, reusability efficiency, capital needs, and progress in orbital computing power construction.
• Whether IBM's large mainframe orders are delayed or canceled, and the scale of adjustments to software, consulting, and free cash flow guidance.
• Whether Alphabet's 2027 capital expenditure is revised up further, and the impact of depreciation growth on operating margins.
• Whether Alphabet's cloud, search, and subscriptions can continue to demonstrate commercial returns from AI investment.
• Healthcare's 2027 earnings growth, institutional positioning replenishment, and relative valuation repair.
• Policy checks and balances that may arise from the U.S. midterm elections, as well as changes in drug pricing, Medicaid, and ACA policy.
• Whether the Analyst Focus List, Catalyst Watch, and rating changes show further sector concentration trends.