Citigroup has issued a warning to clients regarding the potential impact of artificial intelligence safety concerns on the earnings of major technology companies, including Meta Platforms. In a note reported by MarketWatch, a team led by Stuart Kaiser, head of U.S. equity trading strategy at Citigroup, suggested that a slowdown in AI model development could "crimp" earnings-per-share (EPS) revisions.
The bank identified growing safety concerns as a factor that could threaten the impact of AI on corporate earnings. The strategists noted that last week saw a 0.8% drop in the S&P 500, driven by stocks falling prey to macro risks without the support of earnings. They predict a challenging period for equities, citing the lack of earnings, a seasonally weak September, and a summer pullback as factors that set a "higher bar to re-engage."
Regarding specific companies, Citigroup highlighted Microsoft Corp., Alphabet Inc., Meta Platforms Inc., and Amazon.com Inc. as names to watch. The bank noted that companies tied to power generation and data centers could be more sensitive to midterm election-related news flow than semiconductor and memory stocks. They also expect the S&P 500 to remain within 2% of its August highs, keeping investors on the sidelines, though a 3% to 5% pullback could attract dip buyers.
