Summary of Key Points from Citi Research Call Industry and Company Focus - **Industry**: US Equity Strategy with a focus on AI and Cyclicals - **New Baskets Introduced**: - Small/Mid AI Enablers (CGRBSAIE) - Falling Dollar Beneficiaries (CGRBDUSD) [27] Core Insights and Arguments - **Barbell Strategy**: Emphasis on owning select Growth and Cyclicals to navigate a volatile bull market [4][7] - **Growth Exposure**: - Large Cap Growth is favored for its defensive nature amid macro weakness, with earnings revisions trending higher [8] - AI at a Reasonable Price (CGRBAIRP) is highlighted as a core growth basket [5][13] - **Cyclical Exposure**: - Small Cap Value is expected to show the strongest earnings growth inflection, providing a margin of safety for EPS estimates [9] - Positive ROE Trend (CGRBGROE) is recommended for core cyclical exposure [6][64] Performance Metrics - **Year-to-Date Returns**: - S&P 500 Growth: 0.50% - S&P 600 Value: 2.36% - Small Cap Value: 4.75% [11] - **Core Baskets Performance**: - Core Baskets: 3.11% - Core+ Baskets: 1.08% - Russell 3000: 1.47% [16] New Basket Details - **Small/Mid AI Enablers**: - Focus on companies under $40B market cap that are AI Enablers, with a strong revision backdrop and premium growth expectations [28][30] - **Falling Dollar Beneficiaries**: - Targeting exporters of goods and services, with a quantitative approach to identify fundamental beneficiaries [49][50] Earnings and Valuation Insights - **Earnings Growth**: - AI Enablers are expected to see premium EPS growth compared to the broader market, with a narrowing fundamental gap [36][37] - **Valuation Metrics**: - Small/Mid AI Enablers have the most attractive PEG ratio compared to their Large Cap peers [37][40] Market Trends and Risks - **Dollar Sensitivity**: US equities are not overly sensitive to dollar movements unless tied to economic breakdowns [49] - **Cyclical Recovery**: The current earnings season indicates a recovery from the EPS growth recession, with expectations for improved business models [77][78] Recommendations for Investors - **Focus on Quality**: Emphasizing operational improvements and forward-looking ROE trends in investment decisions [66][90] - **Diversification**: Consider non-US AI opportunities for thematic value and growth exposure [99][100] Notable Stocks and Ratings - **Citi Buy-Rated Stocks**: - Top expected total return stocks include Intuit Inc, Palantir Technologies Inc, and Global Payments Inc [95][96] - **Market Cap Focus**: - Stocks with significant market caps like NVIDIA Corp and Amazon.com Inc are highlighted for their growth potential [97][98] This summary encapsulates the key insights and recommendations from the Citi Research call, focusing on the US equity strategy, particularly in the context of AI and cyclical investments.

Core Viewpoint - Investors are increasingly cautious about Big Tech's AI spending, expecting substantial growth in return for record investments, particularly following the launch of ChatGPT over three years ago [1]. Group 1: Company Performance - Meta Platforms reported a 24% revenue increase in the December quarter, driven by enhanced online ad targeting through AI, and forecasts a further 33% growth in the current quarter [2][10]. - Microsoft experienced only slight growth in its Azure cloud-computing business, which fell short of expectations despite record spending [3]. - Tesla plans to double its capital expenditure to over $20 billion this year, focusing on AI and autonomous vehicles, although this raised concerns about the alignment of corporate AI ambitions with investor expectations [12][13]. Group 2: Investor Sentiment - Investors reacted negatively to Microsoft’s earnings, leading to a 6.5% drop in its shares, while Meta's shares surged by 10% due to its strong revenue guidance [6]. - The market is increasingly questioning whether the significant capital expenditures by tech companies will yield adequate returns, reflecting a growing divide between AI ambitions and Wall Street's patience [13][14]. Group 3: AI Investment and Risks - Microsoft disclosed that its investment in OpenAI accounts for 45% of its backlog, raising concerns about concentration risk as the startup faces challenges in maintaining momentum in the AI race [4]. - Meta's aggressive investment strategy in AI and data centers is expected to lead to a 43% increase in total expenses this year, reaching $169 billion [10][11].

Roundhill CEO Dave Mazza may follow the Magnificent Seven stocks more than the average investor thanks to the Roundhill Magnificent Seven ETF (BATS:MAGS) , which launched in 2023. When it comes to looking at the Magnificent Seven stocks in 2026, Mazza shares with Benzinga his top picks based on setups. • Alphabet stock is showing upward bias. What’s ahead for GOOGL stock?Top Magnificent Seven Stocks For 2026Mazza recently told Benzinga that he wasn't concerned about the underperformance of the Magnificent S ...

On Wednesday, a U.S. judge ruled that Elon Musk's lawsuit accusing OpenAI of abandoning its founding nonprofit mission in favor of profit-driven restructuring will proceed to a jury trial. Judge Clears Path For Jury Trial In OpenAI Lawsuit Speaking at a hearing in Oakland, California, U.S. District Judge Yvonne Gonzalez Rogers said there is sufficient evidence for a jury to hear the case, Reuters reported. She said jurors should decide whether OpenAI violated commitments it allegedly made to remain a non ...

Group 1 - RTX Corporation experienced significant stock volatility following comments from President Trump regarding defense spending and corporate buybacks, with a notable drop when he proposed banning buybacks and a subsequent spike when he announced plans to increase the defense budget from $1 trillion to $1.5 trillion [11] - The average purchase price for RTX was $80.70, and it is currently trading at $192.47 in premarket [11] - President Trump aims to fund the increased defense spending through tariffs, which generated $195 billion in fiscal year 2025, with estimates for fiscal year 2026 ranging from $191 billion to $247 billion [11] Group 2 - The article highlights a surge in productivity in Q3 at 4.9%, with labor costs declining by 1.9%, indicating positive trends for the U.S. economy and stock market [11] - Job openings reported in the JOLTS data were at 7.146 million, down from 7.449 million previously, suggesting a potential slowdown in job growth [11] - The ISM Non-Manufacturing Index came in at 54.4, above the consensus of 52.2, indicating strong non-manufacturing activity [11]

Summary of US Equity Strategy Conference Call Industry Overview - The focus is on the US equity market, particularly the S&P 500 index and its performance outlook for 2026, with a target set at 7700 based on projected earnings of $320 per index share [1][2][21]. Core Insights and Arguments - **Earnings Projections**: The base case for the S&P 500 is set at 7700, with a bull case of 8300 and a bear case of 5700, reflecting varying expectations for earnings growth and valuation [2][8][21]. - **AI Impact**: The ongoing integration of AI is expected to drive productivity improvements, shifting focus from AI enablers to adopters, which may lead to increased performance dispersion among stocks [3][12][71]. - **Sector Performance**: Strong corporate earnings are anticipated, particularly in Value, Cyclical, and Small/Mid Cap sectors, with growth estimates expected to exceed consensus [4][51]. - **Valuation Risks**: The current high valuation presents a challenge, with a slight expected multiple compression from 25x to 24x. Factors such as lower 10-year yields and a supportive Federal Reserve are crucial for maintaining valuation levels [5][57][59]. Additional Important Points - **Market Volatility**: The fourth year of the current bull market is expected to bring bouts of volatility, influenced by macroeconomic conditions and potential geopolitical developments [9][20][71]. - **Earnings Growth Dynamics**: The growth cohort needs to consistently outperform expectations to support valuations, while broader market participation in earnings growth is anticipated as headwinds dissipate [51][54]. - **Defensive and Cyclical Sectors**: The defensive sector has shown negative revisions, while cyclical sectors are expected to recover as tariff concerns ease [37][51]. - **Geopolitical Considerations**: The report does not specifically account for geopolitical developments in its base case, acknowledging the unpredictability of such events [20][71]. - **Investor Sentiment**: The current market sentiment is described as euphoric, which historically correlates with premium valuations and potential for corrective phases [70][71]. Conclusion - The outlook for 2026 is cautiously optimistic, with expectations for strong earnings growth driven by AI and sectoral broadening. However, the high valuation and potential for volatility necessitate careful stock selection and monitoring of macroeconomic indicators [71].

Core Insights - The quantum computing sector is experiencing significant volatility, with many quantum ETFs declining while some, like Defiance Quantum ETF (QTUM), remain resilient [1][4][6] - Rigetti Computing Inc (RGTI) and D-Wave Quantum Inc (QBTS) have seen substantial stock declines, with RGTI down 11.63% and QBTS down 10.71% on a recent trading day [2][3] - The market's initial excitement over quantum computing is shifting towards a more cautious and strategic investment approach, focusing on established players rather than speculative stocks [5][7] Company Performance - Rigetti Computing's stock has dropped significantly after a brief rally fueled by speculation about U.S. government investment, which was later denied [2] - D-Wave Quantum has faced a more severe decline, losing nearly 50% of its market cap in two weeks due to disappointing earnings and increasing losses [3] - The Defiance Quantum ETF (QTUM) has shown resilience, only falling 1.02% recently, and has crossed $3 billion in assets under management, indicating strong investor confidence [4] Investment Strategies - QTUM's diversified portfolio, including established tech companies like NVIDIA and Microsoft, has helped mitigate losses from more volatile quantum stocks [5] - The Defiance Daily Target 2X Short RGTI ETF (RGTZ) has gained over 23% in a single day, serving as a tactical hedge against the downturn in the quantum sector [6] - The evolving investor sentiment reflects a shift from blind optimism to a more nuanced approach, focusing on tangible results rather than speculative promises [7]

Group 1: Market Reactions - Shares of Nvidia Corp and Tesla Inc. increased by 3.57% and 2.61% respectively during pre-market trading after President Trump softened his stance on China tariffs [1] - Other "Magnificent Seven" stocks, including Amazon, Apple, and Microsoft, also saw gains of 2.05%, 1.68%, and 1.57% respectively, while Alphabet and Meta Platforms rose by 1.68% and 1.5% [2] Group 2: Trade Relations - China reiterated its position on the trade war, indicating they do not seek conflict but are not afraid of it, in response to the U.S. decision to ease tariff escalation [3] - A spokesperson for the Chinese Ministry of Commerce clarified that new export controls on rare earths are regulatory measures rather than outright bans, highlighting a disparity in export controls between the U.S. and China [5] Group 3: Company Performance - Tesla reported a significant 25.15% month-over-month growth in its sales in China, underscoring the importance of the Chinese market amid ongoing trade tensions [4]

Core Insights - The article highlights concerns regarding Oracle Corp's (NYSE: ORCL) ability to meet gross margin expectations from AI infrastructure rentals, indicating potential overvaluation in the sector [14]. Group 1: Oracle Corp Analysis - Oracle generated $125 million in gross margins from $900 million in rentals over the last three months, resulting in a gross margin of 14%, which is below the expected 25% from credible analysts [14]. - The article suggests that if a well-established company like Oracle struggles to achieve expected margins, projections for smaller players in the AI space may be overly optimistic [14]. Group 2: Circular Financing Concerns - The article raises red flags about circular financing, where the same dollars are counted multiple times among different companies, potentially leading to inflated valuations [14]. - Examples of circular financing include Nvidia's $2 billion investment in Elon Musk's xAI, which subsequently purchases Nvidia chips, creating a loop of financial transactions that may distort actual revenue figures [14]. Group 3: Market Context - The article notes that the FOMC minutes are scheduled for release, which could impact market movements, particularly in the context of AI investments [14]. - It emphasizes the importance of maintaining sufficient cash reserves to capitalize on new opportunities while adjusting hedge levels for stock positions [15].

Core Insights - The software industry is experiencing significant growth driven by increased enterprise AI spending, which is projected to reach 12% of IT budgets in 2025, up from 10% in January [1][4] - Nvidia's chips and cloud services are pivotal for AI deployments, with a reported $8-$10 impact on the tech ecosystem for every $1 spent on Nvidia [2] - A notable 70% of companies have raised their AI budgets, indicating robust tech spending despite economic uncertainties [2] Group 1: AI Adoption and Spending Trends - The analyst has been monitoring AI adoption across various sectors, including financial services, healthcare, transportation, and manufacturing, with a focus on large-scale deployments [3][4] - There has been a shift from strategy to implementation of high-priority AI use cases in 2025, highlighting a rapid acceleration in AI adoption [4] Group 2: Key Players in the Software Sector - Palantir Technologies Inc and Salesforce Inc are identified as top software companies benefiting from the AI Revolution in 2025, alongside other notable vendors like Oracle, IBM, Snowflake, Elastic, MongoDB, and Pegasystems [5] - IBM's cloud services have shown strong penetration, presenting significant monetization opportunities, and the company has been added to the Wedbush Best Ideas List, reflecting increased confidence in its prospects [6]