LSEG Rolls Royce AstraZeneca and Rightmove Spotlighted as JPMorgan Eyes Potential Winners for 2026

As the year draws to a close, JPMorgan’s London-based equity research team has outlined its core investment views for 2026, identifying artificial intelligence adoption, a recovery in mergers and acquisitions, and a more fertile environment for stock selection as the primary forces likely to shape market returns over the coming twelve months.

The American investment bank’s year-ahead outlook adopts a cautiously constructive stance. More sectors are rated positively than negatively, upgrades outnumber downgrades, and analysts appear to favour companies where earnings momentum or specific catalysts are expected to materialise over the next twelve to eighteen months.

Artificial intelligence remains the dominant cross-sector theme, although the emphasis has evolved. JPMorgan’s analysts contend that the market is transitioning beyond early-stage enthusiasm towards practical implementation, where AI investment translates directly into productivity gains, margin expansion and revenue growth. Concurrently, easing financial conditions and strategic imperatives are anticipated to revive corporate dealmaking following a relatively subdued period.

Against this backdrop, JPMorgan has refreshed its list of high-conviction Overweight and Underweight recommendations, highlighting instances where consensus expectations appear either excessively optimistic or unduly cautious heading into 2026.

AI adoption extends beyond conceptual frameworks to tangible earnings contributions across multiple sectors covered in JPMorgan’s outlook. The common thread involves companies embedding AI into operations, data platforms and infrastructure rather than merely discussing technological possibilities.

Within financial markets infrastructure, London Stock Exchange Group is highlighted as a beneficiary of this transition. JPMorgan regards the group’s integration of data and analytics capabilities into AI platforms as a potential growth catalyst not yet fully reflected in the share price. The analysts identify scope for new distribution channels and product use cases to emerge as customers increasingly engage with financial data through AI-driven tools.

Telecommunications equipment represents another area where AI infrastructure demand is expected to underpin earnings performance. Nokia Corporation is a preferred name within an otherwise challenged sector. JPMorgan points to the company’s exposure to optical networks and IP routing, which prove central to managing the expanding volumes of data generated by cloud computing and AI workloads. The bank anticipates these divisions could deliver mid-teens earnings growth should management achieve its stated targets.

In semiconductors, JPMorgan’s analysts maintain a constructive view on capital equipment suppliers as the memory cycle turns. They expect capital spending by chipmakers to recover alongside pricing improvements, with ASML Holding identified as the principal beneficiary of any upturn in fabrication plant investment.

Alongside artificial intelligence, JPMorgan identifies improving conditions for mergers and acquisitions activity in 2026. Corporate balance sheets exhibit greater strength than in previous cycles, whilst management teams face mounting pressure to deliver growth within a slower macroeconomic environment.

Whilst the bank does not construct its investment thesis around speculative activity, it observes that several sectors could witness increased consolidation, including telecommunications, mining and segments of the industrials complex. In these areas, scale and cost efficiency assume greater importance, potentially favouring companies with robust cash generation or differentiated asset bases.

The analysts also note that an uptick in transaction activity often attracts renewed investor interest towards sectors that have been overlooked, creating opportunities beyond immediate deal-related headlines.

JPMorgan’s sector outlook demonstrates a modest skew towards optimism. Financials, industrials and portions of the technology sector are viewed more favourably, whilst consumer staples, chemicals and certain insurance subsectors remain under pressure.

Within European banking, JPMorgan identifies value in names where returns on equity show improvement despite valuations remaining subdued. Barclays is cited as a stock where expectations could reset higher as management articulates its strategy for the next phase of business development.

The industrials sector features prominently in the analysis. Rolls-Royce Holdings stands as one of JPMorgan’s preferred UK equities, with the bank pointing to continued margin improvement, stronger cash generation and the potential for enhanced capital returns. The analysts expect the group’s self-help measures to remain a key driver of earnings into 2026.

Conversely, the chemicals sector represents an area where JPMorgan maintains caution at a sector level. Weak demand, excess capacity and pricing pressure continue to weigh on earnings performance. BASF carries an Underweight rating, with JPMorgan’s forecasts positioned below consensus expectations. The bank stresses, however, that exceptions exist even within challenged sectors. Croda International is highlighted as a top conviction Overweight position, supported by its focus on higher-margin speciality ingredients and evidence of more resilient organic growth.

One of the clearest messages from JPMorgan’s 2026 outlook suggests that dispersion between individual stocks is likely to remain wide. Analysts expect returns to be driven less by broad market movements and more by company-specific execution quality.

In pharmaceuticals, AstraZeneca remains a preferred holding. JPMorgan anticipates the group will deliver another year of double-digit core earnings growth, supported by existing products and a pipeline that includes several late-stage trial readouts during 2026.

Within payments processing, Adyen is positioned as a recovery candidate. JPMorgan believes the worst of the company’s growth slowdown lies behind it, with easier comparisons and operational investment establishing foundations for improved performance. The stock has been placed on Positive Catalyst Watch, reflecting expectations of better-than-feared updates.

On the bearish side, JPMorgan continues to identify stocks where expectations appear stretched. UK motor insurer Admiral Group carries an Underweight rating, with concerns centred on valuation and margin sustainability. Rightmove represents another name where the bank maintains caution, citing a muted growth outlook as the company continues to invest whilst the housing market remains subdued.

JPMorgan’s message heading into 2026 conveys selective optimism. Artificial intelligence adoption and a potential revival in dealmaking activity provide support for earnings growth trajectories, yet the bank emphasises that not all sectors or stocks will benefit equally. Instead, analysts favour companies where visibility on execution remains clear, identifiable catalysts exist, or valuations fail to reflect the anticipated business trajectory.

As markets reopen in the new year, these investment recommendations are likely to form a significant component of investor discussions well beyond the holiday period.