Citi cuts tech stock weighting: 'Difficult to see how everyone in AI/Tech path wins'

The tech trade is becoming rocky, and Citi thinks it's time for investors to trim positions in the sector. Strategist Scott Chronert downgraded the bank's tech weighting recommendation to market weight from overweight. "The Mag 8 have been trading idiosyncratically all year. Semi earnings momentum is undeniable but creates an eventual playbook where it is difficult to see how everyone in AI/Tech path wins," he said to clients. Other investors may be thinking the same as Chronert. Tech led broad market declines on Friday after The New York Times reported that OpenAI was considering delaying its initial public offering until next year. Chip stocks in particular took a hit, with Nvidia dropping around 1%, while Micron shed about 4%. The VanEck Semiconductor ETF (SMH) pulled back by 3%. SMH 5D mountain SMH 5-day chart "There is little doubt that this component of the AI play will continue to drive S & P 500 earnings," Chronert said. "The shorter-term issue is one of strength here exacerbating the ROI debate for AI-related capex." Chronert's comments come as Wall Street gets ready to wrap up a strong quarter, with Tuesday being the last day of June. The S & P 500 has risen more than 13% in Q2, putting it on pace for its best quarterly performance since the second quarter of 2020. Despite Chronert growing more cautious on tech, he's still bullish equities. His 8,100 year-end S & P 500 target is tied for the highest in the CNBC Market Strategist Survey . …