By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
IndebtaIndebta
  • Home
  • News
  • Banking
  • Credit Cards
  • Loans
  • Mortgage
  • Investing
  • Markets
    • Stocks
    • Commodities
    • Crypto
    • Forex
  • Videos
  • More
    • Finance
    • Dept Management
    • Small Business
Notification Show More
Aa
IndebtaIndebta
Aa
  • Banking
  • Credit Cards
  • Loans
  • Dept Management
  • Mortgage
  • Markets
  • Investing
  • Small Business
  • Videos
  • Home
  • News
  • Banking
  • Credit Cards
  • Loans
  • Mortgage
  • Investing
  • Markets
    • Stocks
    • Commodities
    • Crypto
    • Forex
  • Videos
  • More
    • Finance
    • Dept Management
    • Small Business
Follow US
Indebta > Investing > AI stock moves have ‘clearly been extreme,’ but the ‘kicker’ they provide prompts Citigroup to upgrade U.S. equities
Investing

AI stock moves have ‘clearly been extreme,’ but the ‘kicker’ they provide prompts Citigroup to upgrade U.S. equities

News Room
Last updated: 2023/05/27 at 3:35 PM
By News Room
Share
4 Min Read
SHARE

Citigroup strategists has raised their recommendation on U.S. equities to neutral from underweight as recent advances in artificial intelligence (AI) boosts tech shares, while signs that the Federal Reserve is nearing the end of its interest rate-hiking cycle are also expected to drive U.S. stocks outperformance. 

While price moves for AI-related stocks have “clearly been extreme,” the frenzy may continue to remain a “kicker,” given that it is not far enough developed to disappoint expectations yet, said a team of Citi strategists led by Dirk Willer, global head of emerging market strategy. “Given that AI is mostly a U.S. mega large cap theme, this should also reduce the risk of any U.S. underperformance.”

“We implement this view by moving the U.S. back to neutral, and in the sector section, going overweight the tech sector,” wrote Citi’s strategists in a Friday note. 

The strategists said the U.S. equity market has not “necessarily outperformed other markets” after the central bank was done hiking rates in the past cycles, but the weight of rate-sensitive growth stocks is relatively high when compared to past episodes. 

The market sensitivity to interest rates will increase “even further” as the current stock-market rally is mostly powered by the AI theme. Willer and his team therefore expect a U.S. outperformance at the end of the Federal Reserve’s monetary tightening cycle. 

The recovery of the U.S. stock market this year has been led by megacap technology stocks as volatility in the banking-sector earlier this year ignited a rush into Big Tech shares to the extent that they are now seen as a safe-haven trade. The outperformance has extended to the second quarter after the craze around AI, expectations of the Fed pausing its rate rises, and a possible debt-ceiling deal in Congress continue driving bullish sentiment on tech stocks. 

See: Nvidia barrels toward rare $1 trillion valuation after putting a dollar figure on AI boost

Citi’s upgrade to its rating on U.S equities came a day after Nvidia’s stock
NVDA,
+2.54%
soared toward all-time high following the chipmaker’s stronger-than-expected revenue guidance for its fiscal second quarter, which was driven by demand for its AI chips. On Thursday alone, the company’s total market capitalization added nearly $184 billion, putting it within sight of becoming only the seventh U.S. company to top a valuation of $1 trillion, according to Dow Jones Market Data.

See: ‘Ride the Nvidia wave.’ Wall Street says the ‘undeniably pricey’ stock can keep roaring

Citi strategists in January decided to cut its recommendation on the U.S. to underweight from overweight with expectations that recession concerns and Fed hawkishness on monetary policy will peak during the first half of 2023. 

“Equity markets bottom during a recession, not before it has even started,” strategist explained in the Friday note. “However, we must admit that the long-awaited recession is still not overly close and the expected credit crunch – fallout from the March banking turmoil – has also so far not materialized in a significant form.” 

Citi economists are calling for a start to the recession in the fourth quarter of 2023, though they think risks are for this to be pushed out, rather than for it starting earlier.

U.S. stocks finished higher on Friday, with the Dow Jones Industrial Average
DJIA,
+1.00%
recovering from five consecutive sessions of losses to end 1% higher. The S&P 500
SPX,
+1.30%
advanced 1.3%, and the Nasdaq Composite
COMP,
+2.19%
added 2.2%. 

Read the full article here

News Room May 27, 2023 May 27, 2023
Share this Article
Facebook Twitter Copy Link Print
Leave a comment Leave a comment

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Finance Weekly Newsletter

Join now for the latest news, tips, and analysis about personal finance, credit cards, dept management, and many more from our experts.
Join Now
Jamie Dimon tells Europe: ‘You’re losing’

Unlock the White House Watch newsletter for freeYour guide to what Trump’s…

An Apollo-backed insurer is coming for the UK’s pensions

Apollo has used its in-house insurer Athene to remake US private capital,…

Trump’s ‘intelligent’ copper tariffs will ‘wake people up’, says mining billionaire

Unlock the White House Watch newsletter for freeYour guide to what Trump’s…

Market volatility recedes as investors brush off Donald Trump’s tariff threats

Unlock the White House Watch newsletter for freeYour guide to what Trump’s…

Delta offers rosier outlook as flight demand ‘stabilises’

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects…

- Advertisement -
Ad imageAd image

You Might Also Like

Investing

Nursing Home Stocks Could Suffer from this Medicaid Spending Remedy

By News Room
Investing

Bitcoin Drops Below $90,000 Again. What Could Move It Next.

By News Room
Investing

These Stocks Are Moving the Most Today: Marvell, Nvidia, Broadcom, GM, Tesla, MongoDB, Burlington, and More

By News Room
Investing

Nvidia Stock Falls as Marvell Earnings Compound AI Gloom. The Rising Risks for Chips.

By News Room
Investing

This analyst says Tesla deliveries will be 16% below expectations. Musk is part of the problem.

By News Room
Investing

BP CEO was awarded no bonus pay from oil giant’s financial performance

By News Room
Investing

Shares of Starlink’s European competitor have tripled. CEO says it can do the job in Ukraine.

By News Room
Investing

GE Vernova Stock Rises as Analyst Flips to Upgrade After Rating Cut

By News Room
Facebook Twitter Pinterest Youtube Instagram
Company
  • Privacy Policy
  • Terms & Conditions
  • Press Release
  • Contact
  • Advertisement
More Info
  • Newsletter
  • Market Data
  • Credit Cards
  • Videos

Sign Up For Free

Subscribe to our newsletter and don't miss out on our programs, webinars and trainings.

I have read and agree to the terms & conditions
Join Community

2023 © Indepta.com. All Rights Reserved.

Welcome Back!

Sign in to your account

Lost your password?