Citi cuts US stocks and tech to neutral, upgrades Europe ex-UK on AI turbulence
Beata Manthey's team is still positive on AI longer term but warns crowded positioning and further selling could keep tech under pressure.
By Marcus Rodriguez ·
Why it matters: European equities excluding the UK get the upgrade partly for lower AI concentration as investors reassess the tech trade.
For information only, not investment advice. Prices delayed.
Tickers: C
Citigroup ($C) is stepping back from Wall Street's AI-heavy tape without calling a bear market. Strategists led by Beata Manthey tactically cut US equities, global technology and European tech to neutral from overweight, and raised European equities excluding the UK to overweight, according to open summaries of the note.12
The timing is the post-midterm AI rethink. Headtopics' Yahoo Finance account said Manthey acted after a dramatic week tied to the Democratic sweep and concerns over tighter AI regulation.3 Citi's team pointed to the S&P 500's biggest weekly decline since April 2025 and about $2.3 trillion wiped from the Nasdaq 100 last Thursday, while Europe's Stoxx 600 ended the week up 0.2%, Euro2day reported.1 Those index figures come from coverage of the note, not from Sainteur market data.
Manthey wrote that positioning on key indices such as the Nasdaq could reset lower into net-short territory, and that while the move has been most aggressive in tech, volatility has been broad-based.3 Crowded positioning, elevated valuations and slowing EPS growth leave US and tech more exposed to downside risk, Tiger Brokers summarized.2 Citi remains positive on the AI outlook but sees scope for further declines before sentiment stabilizes and earnings revisions firm.3
Europe is the relative-value call. Manthey's case, as relayed by Euro2day, is lower exposure to AI-related stocks, more diversification across industrials, banks and defensives, and a larger benefit from falling oil prices.1 Citi is also upgrading healthcare to overweight alongside materials.1 Tiger Brokers said the shift is a tactical reallocation rather than a bearish call, and that Citi still sees economic data and earnings as resilient enough to support markets.2
A separate Goldman Sachs note cited in the same coverage underscores why Europe can look like a hedge when the AI trade reverses: AI infrastructure is about 15% of the Stoxx 600 and under a quarter of forecast 2027 earnings growth, versus about 40% of the S&P 500 and more than two-thirds of expected growth, and Europe outperformed the US in each of the eight largest AI-led selloffs since 2023, Goldman said.3
Sources
Tags: banks · ai · markets-moves · europe