AI Rally Fades as Citi Warns of Profit-Taking

The artificial intelligence-fueled market rally that has captivated investors appears to be running on fumes, according to analysis from Citigroup. The warning comes as market participants assess whether the extraordinary gains in AI-related stocks can sustain their momentum. Citi’s caution signals a potential turning point for a rally that has driven significant market appreciation, with analysts pointing to increasing signs of exhaustion among the very stocks that have led the charge higher.

The growing influence of OpenAI in particular has sparked comparisons to dot-com era mania, raising concerns among seasoned market observers. The pattern of rapid valuation expansion and widespread market enthusiasm around artificial intelligence companies bears striking resemblance to the technology bubble of the late 1990s. This dot-com déjà vu has prompted careful scrutiny of whether current AI valuations reflect sustainable business fundamentals or speculative excess that could unwind rapidly when sentiment shifts.

Billionaire investor Ken Griffin, founder of Citadel, has characterized the U.S. economy as being on a “sugar high,” suggesting the current economic conditions may not reflect sustainable, organic growth. This assessment from one of finance’s most influential figures adds weight to concerns about the underlying health of the economic expansion. Griffin’s characterization implies that temporary factors rather than fundamental strength are driving economic performance, raising questions about what might happen when these stimulative effects wear off.

Perhaps more concerning to Griffin is the noticeable flight to gold that has emerged in recent market activity. The movement toward the traditional safe-haven asset typically signals growing investor anxiety about economic stability or market volatility. This trend toward gold suggests that despite the apparent strength in equity markets, particularly in technology and AI sectors, a significant cohort of investors is positioning defensively in anticipation of potential turbulence ahead.

While concerns mount about the sustainability of the AI rally, Trilogy Metals provides a contrasting narrative of market opportunity. The company’s shares rocketed higher after Washington took a 10% stake in the metals firm, demonstrating continued government interest in strategic resource investments. This significant move by government entities highlights the ongoing importance of critical materials and metals in both economic and national security contexts.

The dramatic surge in Trilogy Metals shares underscores how specific catalysts can drive exceptional performance even amid broader market concerns. The government’s strategic investment signals confidence in the company’s assets and prospects, while also reflecting broader policy priorities around securing supply chains for essential materials. This development serves as a reminder that market opportunities exist beyond the high-profile AI sector, particularly in industries receiving direct government support or strategic recognition.

The convergence of these developments—Citi’s profit-taking warning, Griffin’s economic concerns, and the divergent performance between AI stocks and strategic metals—paints a complex picture for investors. Market participants face the challenge of navigating between sectors showing signs of potential correction and others benefiting from structural tailwinds. The caution from established financial institutions like Citi suggests that professional money managers are preparing for a potential rotation away from the year’s biggest winners.

For investors tuning into “Bloomberg Open Interest” with hosts Matt Miller and Dani Burger, the current environment demands careful position sizing and risk management. The potential for profit-taking in AI stocks, combined with economic concerns expressed by influential figures like Ken Griffin, creates a backdrop where defensive positioning may prove prudent. Meanwhile, the strong performance of companies like Trilogy Metals demonstrates that selective opportunities continue to emerge, particularly where government support or strategic importance provides fundamental backing.