AI has been carrying the stock market. An industry pause could pull the rug out, warns this Wall Street giant.

The warning from Citigroup that a slowdown in artificial-intelligence model developments could lead to earnings revisions is significant for the fund industry, as it highlights the potential risks associated with the current market rally. The fact that AI has been a key driver of stock market gains this year means that any pause in its development could have a ripple effect on the broader market. This is particularly relevant for fund managers who have been investing in companies that are heavily reliant on AI technology.

A slowdown in AI development could lead to a reevaluation of earnings expectations, which in turn could impact stock prices. This could be particularly challenging for funds that have been betting on the continued growth of AI-driven companies. The fund industry has been increasingly investing in companies that are at the forefront of AI innovation, and any disruption to this trend could lead to a rebalancing of portfolios. As such, fund managers will need to closely monitor developments in the AI space and be prepared to adjust their strategies accordingly.

As the market continues to evolve, it will be important to watch how fund managers respond to any potential slowdown in AI development. Will they continue to invest in AI-driven companies, or will they start to diversify their portfolios to mitigate potential risks? Additionally, it will be worth monitoring the earnings revisions and stock price movements of companies that are heavily reliant on AI technology. Any significant changes in this space could have a broader impact on the market and the fund industry as a whole, making it essential for fund managers to stay vigilant and adapt to changing market conditions.

Originally reported by marketwatch.com. FundNews adds analysis for finance & markets readers.