JPMorgan Research Analysis: Retail Leveraged Fund Flows Return, Short Covering and Buybacks Continue to Support Tech Stocks

Written by: Rita

Over the past two weeks, retail inflows into leveraged equity ETFs hit a record high. This buying supported a stabilization in AI-related stocks. In its October 28, 2026 flows report, JPMorgan viewed this force as an important support for year-end liquidity.

JPMorgan also noted that institutional equity positioning has fallen from elevated levels, some short positions still require covering, and technology company buybacks have remained resilient. The report grouped these sources of buying together and concluded that tech stocks still have funding support ahead. The forces driving the market are shifting from earnings discussions to positioning and liquidity.

Retail Position Building Occurred After Deleveraging

The latest round of retail buying was led by leveraged ETFs. These products amplify the daily moves of the underlying stocks, and inflows reflect investors actively increasing risk-taking. The report linked this to the recent stabilization of AI stocks.

Before this buying, assets under management in leveraged equity ETFs had declined further. The size of single-stock leveraged ETFs, relative to the market value of their underlying shares, fell to the lowest level since the end of May. Of the April-to-May increase, about two-thirds had already been given up from the peak.

Therefore, JPMorgan sees this as a return of flows after deleveraging. The earlier lower asset base created room for subsequent inflows. The combination of retail position building and the earlier decline in existing positions is an important basis for the report's view that short-term buying can continue.

The report specifically distinguished between capital flows into leveraged ETFs and the products' own rebalancing flows. The former reflects active subscriptions by investors, while the latter is related to the routine adjustments of leveraged products. When assessing actual position-building appetite, JPMorgan tracks these sources of flows and their impact on stocks.

Options and Short Covering Can Still Provide Buying

In the week ending October 23, retail small-account clients' buying of individual-stock call options had not yet recovered to earlier strong levels. JPMorgan noted that this trading had contracted sharply during the deleveraging in June and July. The report therefore believes retail participation can still strengthen through the options channel toward year-end.

This complements inflows into leveraged ETFs. ETF buying has already accelerated, while options activity remains relatively behind. JPMorgan views the two together and expects a recovery in retail risk appetite to continue generating incremental demand.

The institutional side has provided similar clues. JPMorgan's composite equity positioning indicator shows that speculative investors, including hedge funds, are positioned well below the recent peak in mid-September. The earlier reduction in exposure gives institutions room to increase their allocation to tech stocks.

The short interest ratio for QQQ has risen to its highest level since 2023, with the latest observation date of October 27. JPMorgan believes this batch of short positions could provide support when covered. Retail active buying and institutional passive covering therefore represent two different potential sources of buying.

Corporate Buybacks Have Not Yielded to Capacity Expansion

This year, technology companies significantly increased capital expenditures, yet buybacks remained resilient. JPMorgan estimates that, as of October 26, announced global buybacks totaled about $1.55 trillion. Annualized at the prior monthly pace, the full-year figure would be about $1.7 trillion, higher than last year.

The report linked this resilience to the funding capacity of the technology sector. JPMorgan estimates that the global technology sector still has about $400 billion of financing surplus this year and retains relatively smooth access to funding. High capital spending and ongoing buybacks can therefore coexist under current financing conditions.

According to JPMorgan's credit team, investment-grade technology companies can still access public and private debt markets. Unsecured debt, bank loans, data center project financing through special purpose vehicles, and GPU asset-backed debt are all available channels. The diversity of financing methods supports both capital expenditures and shareholder returns.

Financing conditions have also diverged. Some new cloud service providers and highly leveraged technology companies have found it more difficult to access the unsecured debt market. JPMorgan believes these companies have a smaller share of the AI ecosystem and are not major sources of corporate buybacks, so they have not yet changed the funding support available to large technology companies.

The Funding Relay Still Depends on Market Conditions

JPMorgan's positive view on the path ahead comes from the alignment of several forces. Retail investors have already increased leveraged ETF inflows, options trading still has recovery potential, and institutions have room to cover after reducing positions. Corporate buybacks provide a source of ongoing demand that differs from trading flows.

Meanwhile, the report noted position adjustments among trend-following funds. After the October semiconductor pullback, the momentum signal for S&P 500 futures fell from about +1.3 at the start of the month to about +0.9, while the signal for Nikkei futures fell to about +0.4. Some trading funds have already unwound part of their previously elevated long exposure.

The behavior of different flows has therefore not been fully synchronized. Retail investors are adding positions, trend-following funds had previously reduced some long exposure, and institutional short positions have yet to be covered. Viewing them separately helps explain why JPMorgan still sees potential equity demand after the market correction.

The report's key caveat is that financing channels continue to function. If access to funding becomes materially constrained, technology companies may adjust share buybacks and capital expenditure plans. JPMorgan currently believes pressure is concentrated among more fragile companies, while higher-rated companies generally remain able to access financing.

This flows report provides a positioning-level explanation for the stabilization of AI stocks. Retail re-entry, institutional short covering, and corporate buybacks have set the stage; whether year-end momentum can continue ultimately depends on whether the financing environment can continue to provide a tailwind.

Disclaimer

This article is a compilation and interpretation by 潮向研究 of a third-party broker research report (JPMorgan, Oct. 28, 2026), combined with publicly available market information. The ratings, target prices, earnings forecasts, and related judgments cited herein are the views of the broker's analysts, represent only the positions of their affiliated institution, do not represent the views of 潮向研究, and do not constitute investment advice.

Markets carry risks, and decisions should be made independently. This article should not be used as a basis for buying or selling any securities.

Source: 深潮 TechFlow