Citigroup downgrades US equities to 'neutral' over AI spending and regulation fears
Citigroup has downgraded US equities to 'neutral' from 'overweight', citing concerns over soaring AI spending and tougher regulation. The move follows a sharp selloff that erased $3 trillion from S&P 500 companies. Global and European tech sectors were also cut to 'neutral'.
Citigroup strategists have downgraded US equities to “neutral” from “overweight,” citing concerns about soaring artificial-intelligence (AI) spending and the prospect of tougher regulation. The move follows a sharp selloff that erased $3 trillion in stock market value from S&P 500 companies, the brokerage said in a note on Monday.
“We worry that positioning on key indices, such as the Nasdaq, could reset lower into net-short territory,” Citigroup strategists led by Beata Manthey said. The brokerage also lowered its stance on global and European technology sectors to “neutral” from “overweight.”
Democratic wins in US midterm elections last week, including in states where opposition to new data centers has mounted, fuelled concerns that tighter regulation could slow the AI infrastructure buildout that has helped lift stocks to record highs this year, according to the note.
“Volatility has now turned more broad-based, with a sizable sell-off across regions and sectors in past days,” Citi said. The strategists said they were looking for “cleaner positioning and more stable sentiment” around AI stocks.
In contrast, Citigroup raised its stance on European equities excluding the UK, helped by less exposure to tech volatility and more sensitivity to falling oil prices than peers. On the sector front, Citi upgraded Global Health Care to “overweight” from “neutral” and raised European Food & Beverage to “overweight” from “neutral”.