By Katy Barnato
Citigroup strategists raised their rating on U.S. stocks to neutral and went overweight on the tech sector, citing booming AI demand and the prospective end to the Federal Reserve's rate-hiking cycle.
"AI may continue to remain a kicker, given that it is not far enough developed to disappoint expectations yet. Given that AI is mostly a U.S. mega large cap theme, this should also reduce the risk of any U.S underperformance," Citi's global strategy and macro team said Friday.
Their report came a day after Nvidia's stock hit a new high]. Other chipmakers tied to the AI frenzy, such as Advanced Micro Devices and Taiwan Semiconductor Manufacturing, also rose alongside the tech sector.
Citi raised its rating on non-China Asia stocks to overweight, citing the high-tech component of Taiwanese and Korean indexes.
Meantime, markets are pricing in a 30% likelihood of another rate rise by the Fed at its June meeting, according to Citi's economists.
"While the market has priced out many of the Fed cuts for later this year, given that a banking crisis, and, possibly, a debt-ceiling crisis done hiking," they said.
More on the debt-ceiling negotiations:
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(END) Dow Jones Newswires
May 26, 2023 10:00 ET (14:00 GMT)
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