LSEG, Rolls-Royce, AstraZeneca and Rightmove spotlighted as investment bank eyes potential winners for 2026

JPMorgan’s London analysts present a cautiously constructive 2026 outlook, highlighting AI adoption, a likely recovery in M&A and a return to stock-picking where company-specific catalysts drive returns. The bank spots winners including LSEG (AI-enabled data distribution), Nokia (optical/IP routing; potential mid‑teens earnings growth), ASML (fab capex beneficiary), Rolls‑Royce (margin improvement and potential capital returns) and AstraZeneca (another year of double‑digit core earnings growth), while flagging underweights such as BASF, Admiral and Rightmove. Sectors with upside bias include financials, industrials and parts of technology, whereas consumer staples and chemicals remain constrained.

Analysis

Market structure: AI as an earnings lever favors data owners (LSEG), high-end semiconductor equipment (ASML) and networking vendors exposed to optical/IP routing (NOK). Winners gain pricing power on proprietary data and order backlog visibility; losers include cyclical chemicals, online housing portals (Rightmove) and margin-sensitive insurers where demand and pricing are muted. Improved M&A prospects should compress IG spreads modestly (10–30bp) for large banks and lift equity multiples in targeted sectors over 6–18 months.

Risk assessment: Key tail risks are AI/data‑licensing regulation (EU AI Act amendments within 3–9 months), a renewed semiconductor capex pause, or a deal-driven credit shock from aggressive leverage. Immediate (days) moves will be headline-driven; short-term (3–6 months) depends on December–Q1 product launches and Q1 guidance; long-term (12–24 months) ties to adoption curves and trial readouts (AZN). Hidden dependency: LSEG upside is contingent on >10% incremental revenue from AI-distributed products within 12–18 months.

Trade implications: Establish selective longs in LSEG and ASML and prefer earnings-catalyst names (AZN) while trimming staples/chemicals. Use 9–12 month call spreads on ASML to cap premium (target 25–50% spread return if capex re-acceleration occurs). Implement pairs (industrial cyclical long vs housing portal short) to isolate sector rotation risk; size positions 1.5–3% each and set 12–18 month targets/stops.

Contrarian angles: Consensus underestimates near-term monetization of financial data into AI interfaces — a 20–40% re-rating is plausible if LSEG secures platform partnerships or >10% rev contribution by end‑2026. ASML is priced for sluggish capex; a memory cycle recovery could deliver a >20% EPS surprise. Unintended consequence: faster dealmaking may boost bank ROEs but raise systemic leverage and episodic equity volatility.

Key Decisions for Investors

• Establish a 2–3% long position in LSEG (LSE:LSEG) within the next 30–60 days, targeting +30% upside over 12–18 months and a hard stop at -15%; increase to 4% if LSEG announces AI distribution partnerships or reports >10% revenue contribution from AI products within 12 months.
• Allocate 1–1.5% of portfolio to a 9–12 month ASML (ASML) bull-call spread (buy 10–15% OTM call, sell 25–30% OTM call) to capture capex recovery; exit if order visibility does not improve or management cuts capex guidance within 6 months.
• Implement a pair trade: go long Rolls‑Royce (RR., 2% position) and short Rightmove (RMV, 1.5%) sized to equal dollar risk; target the pair to outperform by 30% over 12 months, place individual stops at -20%, and reassess on H1 2026 cash flow updates.