Citigroup shifts to neutral view on US stock risk amid AI slowdown
In the United States, Citigroup has shifted to a neutral assessment of US stock risk amid calls by leaders of major artificial intelligence companies to slow AI development for safety reasons. A potential slowdown in the development of AI models could limit revisions to earnings-per-share forecasts, the bank’s strategists believe, MarketWatch reports.
AI’s role in market growth
The Citigroup team led by Stuart Kaiser, head of US equity trading strategy, said that doubts about further growth in corporate earnings could weaken a key pillar of the stock market rally. Nearly 12% of the S&P 500’s gain since the beginning of the year has been driven by increased optimism about companies linked to investment in artificial intelligence.
Anthropic CEO Dario Amodei called for AI development to be slowed. This position was supported by OpenAI chief Sam Altman, Elon Musk, and Google DeepMind head Demis Hassabis. Altman also said that OpenAI does not plan an initial public offering this year and that strengthening AI safety will require significant costs.
After the calls to slow the technology’s development, shares of companies from Marvell to Hewlett Packard Enterprise declined. Samsung, SK Hynix and Japan’s SoftBank also lost value, while CrowdStrike and Palo Alto Networks shares rose.
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Elections, oil and bonds
Among other factors behind Citigroup’s more cautious stance, the bank cited the US midterm elections in November, a sharp rise in bond yields, and higher oil prices. Oil rose by more than 2% after Saudi Arabia shut down a major pipeline. The yield on 10-year US Treasury bonds remained slightly below 5%.
According to the strategists’ assessment, the S&P 500 may remain between 2% below and 2% above its August highs. A decline of about 3–5% could attract buyers who purchase assets after a fall, while more active demand would require the market to test its all-time highs.
Citigroup believes that companies related to electricity generation and data centers may react more strongly to election-related news than semiconductor and memory manufacturers. At the same time, the strategists allow for further market growth if there are only two or three Federal Reserve rate hikes, strong corporate earnings growth, a resilient labor market and relatively stable inflation.
