The head of US equity strategy at Citi says the market is setting up for a two-stage recovery, starting with a narrow, earnings-driven surge in one key sector before conditions emerge for a broader rally later in the year.
In a new CNBC interview, Scott Chronert says the “Mag 7 plus one” names are looking good again as the market gears up for the tech sector’s upcoming earnings season.
According to Chronert, Wall Street expects a continuation of a pattern investors have already seen for several quarters.
“So I think what happens here, and again, we’ve been talking about this in terms of you’re getting your sort of Mag 7 plus leadership again around the AI trade. I think what ends up happening here is that as you go into the end of the month, we begin to get that tech cohort of the market reporting earnings. And there, you’re looking for a confirmation of what’s been ongoing for the past several quarters now, which is a pretty notable beat and raise.”
At the moment, Chronert says not all parts of the tech sector are in the same position heading into earnings, noting that while semiconductors have held up well, other areas have been under pressure. According to Citi’s top equity strategist, hyperscaler names have been lagging, and the underperformance offers a golden opportunity for stock pickers.
“But interestingly, when you look at the components of the tech sector, we’re all on board with semis, have been with some time. But the software sector has been under duress, as have the hyperscalers.
And so what you have here is sort of an interesting, I’m going to say, reverse perfect storm, where as these companies then come through with solid earnings, it should perpetuate this narrow leadership right now, which then begins to set the stage for more time to pass around oil prices in Iran and get us back to a broadening thesis perhaps coming into play as we go further into the summer months.”
The hyperscalers have been beaten down over the past few months amid concerns of overinvestment in AI. But the stock group has come roaring back, led by Oracle’s (ORCL) over 30% rally from its 2026 lows at $134. Meta (META) is also on the up and up, rallying close to 30% from its 2026 low, followed by Amazon (AMZN) with an over 27% surge.
Meanwhile, Microsoft is up about 18% from its 2026 low of $356.
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