Citigroup downgrades U.S. equities to ‘neutral’ on AI concerns
The brokerage also lowered its stance on global and European technology sectors
Citigroup strategists downgraded US equities to “neutral” from “overweight,” saying they were looking for cleaner positioning and more stable sentiment around AI stocks after a sharp selloff on concerns about soaring AI spending and tougher regulation.
“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 in a note on Monday.
The brokerage also lowered its stance on global and European technology sectors to “neutral” from “overweight.”
Democratic wins in U.S. midterm elections last week, including in states where opposition to new data centers has mounted, fueled concerns that tighter regulation could slow the AI infrastructure buildout that has helped lift stocks to record highs this year.
The sell-off evaporated US$3-trillion in stock market value from S&P 500 companies.
Citi raised its stance on European equities excluding UK, helped by less exposure to tech volatility and more sensitivity to falling oil prices than peers.
“Volatility has now turned more broad-based, with a sizable sell-off across regions and sectors in past days,” Citi said.
On the sector front, Citi upgraded Global Health Care to “overweight” from “neutral” and raised European Food & Beverage to “overweight” from “neutral.”