Banking giant Citi says investors in the AI trade should start looking at other sectors of the market, especially those that are poised to benefit from the boom.
In a Fox Business interview, Citi head of US equity trading strategy Stuart Kaiser says the market has become saturated with AI positioning, and his team now prefers a less crowded way to express the AI thesis.
According to Kaiser, the infrastructure behind the buildout offers a stronger risk-reward profile than chasing headline stocks.
“Everybody’s in the AI trade in some form or fashion. We’ve generally liked the power generation side of it. We believe that’s kind of the best Sharpe ratio or lowest risk way to have the AI trade on.”
He points to recent market action as a reason to be cautious about concentrating exposure in marquee AI names, even when the news is positive.
“As you’re seeing today, you know, Nvidia gets some good news, and that stock moves higher. Through earnings season, if you take an Oracle, a Meta, an Nvidia, a Palantir, some of these high-flying AI stocks didn’t behave the way they normally would, given the results they posted.”
So we do think you need a diversified approach. And we kind of like focusing on that power generation story, not only the utilities, but the construction and the electricity that all goes behind that.”
His comments suggest that as AI becomes a consensus trade, the lowest-risk opportunities may be shifting away from the most celebrated stocks and toward the less glamorous infrastructure that must expand for the boom to continue.
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