{"id":14562,"date":"2023-05-27T07:20:18","date_gmt":"2023-05-27T11:20:18","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/ai-stock-moves-have-clearly-been-extreme-but-the-kicker-they-provide-prompts-citigroup-to-upgrade-u-s-equities\/"},"modified":"2023-05-27T07:20:19","modified_gmt":"2023-05-27T11:20:19","slug":"ai-stock-moves-have-clearly-been-extreme-but-the-kicker-they-provide-prompts-citigroup-to-upgrade-u-s-equities","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=14562","title":{"rendered":"AI stock moves have \u2018clearly been extreme,\u2019 but the \u2018kicker\u2019 they provide prompts Citigroup to upgrade U.S. equities"},"content":{"rendered":"
\n

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.\u00a0<\/p>\n

While price moves for AI-related stocks have \u201cclearly been extreme,\u201d the frenzy may continue to remain a \u201ckicker,\u201d 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. \u201cGiven that AI is mostly a U.S. mega large cap theme, this should also reduce the risk of any U.S. underperformance.\u201d<\/p>\n

\n

\u201cWe implement this view by moving the U.S. back to neutral, and in the sector section, going overweight the tech sector,\u201d wrote Citi\u2019s strategists in a Friday note.\u00a0<\/p>\n

<\/p>\n
<\/p>\n
<\/div>\n<\/figure><\/div>\n

The strategists said the U.S. equity market has not \u201cnecessarily outperformed other markets\u201d 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.\u00a0<\/p>\n

The market sensitivity to interest rates will increase \u201ceven further\u201d 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\u2019s monetary tightening cycle.\u00a0<\/p>\n

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.\u00a0<\/p>\n

See:<\/strong> Nvidia barrels toward rare $1 trillion valuation after putting a dollar figure on AI boost<\/p>\n

Citi\u2019s upgrade to its rating on U.S equities came a day after Nvidia\u2019s stock
\n NVDA,
\n +2.54%<\/bg-quote>
\n soared toward all-time high following the chipmaker\u2019s stronger-than-expected revenue guidance for its fiscal second quarter, which was driven by demand for its AI chips. On Thursday alone, the company\u2019s 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.<\/p>\n

See:<\/strong> \u2018Ride the Nvidia wave.\u2019 Wall Street says the \u2018undeniably pricey\u2019 stock can keep roaring<\/p>\n

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.\u00a0<\/p>\n

\u201cEquity markets bottom during a recession, not before it has even started,\u201d strategist explained in the Friday note. \u201cHowever, we must admit that the long-awaited recession is still not overly close and the expected credit crunch \u2013 fallout from the March banking turmoil \u2013 has also so far not materialized in a significant form.\u201d\u00a0<\/p>\n

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.<\/p>\n

U.S. stocks finished higher on Friday, with the Dow Jones Industrial Average
\n DJIA,
\n +1.00%<\/bg-quote>
\n recovering from five consecutive sessions of losses to end 1% higher. The S&P 500
\n SPX,
\n +1.30%<\/bg-quote>
\n advanced 1.3%, and the Nasdaq Composite
\n COMP,
\n +2.19%<\/bg-quote>
\n added 2.2%.\u00a0<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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.\u00a0 While price moves for AI-related stocks have \u201cclearly been […]<\/p>\n","protected":false},"author":1,"featured_media":14563,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-14562","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"\nAI stock moves have \u2018clearly been extreme,\u2019 but the \u2018kicker\u2019 they provide prompts Citigroup to upgrade U.S. equities | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Citigroup 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