Nasdaq Hits New Record High as Citi Highlights AI's Economic Support

The Nasdaq Composite index climbed to a new record high, concluding its fifth consecutive session of gains on the back of sustained investor enthusiasm for artificial intelligence. The tech-heavy index gained 0.45% to close at 27,244.28, according to market data.

Citi's AI-Driven Outlook

According to an analysis from Citi, the current excitement around AI is providing a dual benefit to the U.S. economy. The investment bank noted that this dynamic helps offset the drag from elevated interest rates on other sectors.

Citi's note highlights two key effects:

• Economic Growth: Direct investment spending on AI-related infrastructure and projects is a primary driver of economic activity.
• Consumer Spending: Rising equity wealth, largely from the appreciation of AI-related stocks, strengthens consumer balance sheets and supports spending.

Ad

Interest Rates and Equity Risk

Citi's analysts believe that moderately higher borrowing costs are unlikely to significantly deter investment in AI infrastructure, provided that equity valuations remain high. The bank expects elevated interest rates to have a more pronounced slowing effect on the non-AI segments of the economy.

However, Citi cautioned that this positive economic feedback loop is highly dependent on market valuations. A significant decline in equity prices was identified as the main risk, which could trigger a substantial reduction in both AI-related investment and overall consumer spending.