Citadel Securities Warns AI Trade Leaves Markets Little Room for Error as Capex Cuts, Rising Costs Pose Two-Way Risk

Citadel Securities warned that markets have virtually no margin for error given the economy's deepening reliance on AI, with AI capital spending now cutting both ways, according to a research note by Nohshad Shah, the firm's head of fixed income sales for EMEA. Shah said cutting investment could undermine confidence in the growth cycle, while continued spending faces financing, execution and return pressures. A sustained pullback in AI investment and financing would threaten the growth momentum and household wealth that have helped the U.S. economy absorb high costs, he added. Tech stocks have sold off sharply as investors grow more skeptical that massive AI capex will translate into sufficient profit. AI-related positions were liquidated rapidly last week, dragging tech shares lower and pushing credit-hedging signals to their highest level in more than a year. Anthropic filed for an IPO on Monday, becoming the first large-model AI developer to seek a listing. The warning echoes comments last week from founder Ken Griffin on bubble risk, while Blackstone President Jon Gray said demand growth is near-parabolic. Shah also cited tariffs, fiscal stimulus and elevated energy prices as raising financing and operating costs.