The Nasdaq 100 continues to outperform broader growth benchmarks as investors seek concentrated exposure to artificial intelligence-driven growth and semiconductor companies tied to the AI buildout. Citi Research says strong earnings momentum and improving growth expectations continue to support the index despite elevated valuations.
BNN Bloomberg spoke with Scott Chronert, managing director at Citi Research, about why the Nasdaq 100 remains a preferred way to gain exposure to AI infrastructure and semiconductor demand, how current valuations compare with the dot-com era, and what risks could threaten the rally.
Key Takeaways
- Citi views the Nasdaq 100 as a concentrated way to gain exposure to semiconductor companies and mega-cap firms benefiting from the AI buildout.
- Strong earnings growth from semiconductor and memory-chip companies has helped support the Nasdaq 100’s outperformance against broader growth indexes.
- Citi says current valuation metrics differ from the dot-com era because earnings growth is keeping pace with share-price gains.
- The firm believes investor concerns about the durability of AI-related growth are helping keep PEG ratios historically low despite the rally.
- Citi says one of the biggest risks to the AI trade would be an unexpected external shock, such as regulatory action or another disruption that weakens confidence in AI spending.
Read the full transcript below:
ROGER: Citi is out with a fresh take on the Nasdaq 100, pointing to strong earnings momentum, AI-driven growth and renewed focus on valuation. For more on what it means for investors, we’re joined by Scott Chronert, managing director at Citi Research. Scott, thanks very much for joining us.
SCOTT: Hey, Roger.
ROGER: All right, it sounds like you’re liking the Nasdaq 100 over broader growth indices like the S&P 500.
SCOTT: Yeah. So the way we’re discussing this is there are many different ways that you can get AI-related exposure through an index or size-and-style approach. Typically, you look at the Nasdaq 100 and compare it to the S&P 500 Growth or the Russell 1000 Growth. What we’re arguing here is that the setup for the Nasdaq 100 still looks pretty good to us from a fundamental perspective.
It isn’t too often you see a traditional index approach to growth and valuations, which is what we’ve done in this latest research note. The high-level takeaway here is that, from a fundamental perspective, the AI playbook is full throttle. The composition of the Nasdaq 100 is such that you get outsized exposure to the bigger semiconductor companies that are driving a lot of the price action right now.
When we look at the growth dynamics, honestly, the PEG ratio for the Nasdaq is at levels we haven’t seen going back to 2010. So we think the underlying growth profile of the Nasdaq 100 continues to look pretty attractive.
ROGER: Are you surprised at those numbers? Saying we haven’t seen them since 2010, is there anything you can compare that to or point to as the reason why?
SCOTT: Yeah, really it’s the surge we’ve seen, specifically from the semiconductor component. The earnings growth we’ve gotten from these companies has been spectacular.
And it’s not just the traditional AI chip companies. It’s also those with more traditional DRAM memory exposure, which historically has been viewed as cyclical. But when you look at the surge we’ve seen in that part of the index from a fundamental perspective, the fact is the price action has been very strong, but it has not kept pace with how quickly earnings have been growing.
ROGER: And do you feel this is a healthier balance in the Nasdaq 100? It’s not just all those earnings being pushed by the Magnificent Seven or a select few companies. It feels more balanced.
SCOTT: I think what you get here is a best-of-all-worlds scenario. You get semiconductor exposure, but you still have to acknowledge that when you look at the top weights, you’re going to capture Apple alongside Alphabet, for example.
But the way we’re looking at this is that you still have optionality should we begin to see the software component of the index kick back in, which it really hasn’t yet.
What I would say is so important is that we get caught up in these discussions about 2000 analogies and bubble frameworks. What I would remind people is that back in the 2000 era, PEG ratios were actually rising. Stocks were moving faster than the fundamentals. That’s not the case right now.
So the question really becomes one about the persistence of this growth driver. What we’re seeing coming out of the first-quarter reporting period is that there is still very good visibility over the next couple of years.
ROGER: Does it almost feel like these companies are becoming utilities? I mean, we need them and they’re not going anywhere.
SCOTT: Well, utilities is an interesting connotation. I think there’s some of that. But really, the way we would frame it is more as the picks-and-shovels component of the AI buildout.
Certainly, you’re going to want the hyperscalers. But I think the easiest play here is to own an array of semiconductor companies that feed into this. You still want the potential for longer-term return on investment from the hyperscalers, and you also want exposure to the companies that are going to be deploying AI initiatives over the next several years.
So overall, what I’m arguing here is more of a traditional picks-and-shovels approach. I wouldn’t quite call it utilities, but it’s pretty close.
ROGER: All right. Any potential headwinds you’re watching? What are you keeping an eye on?
SCOTT: Yeah, I think this is the obvious issue. We’re always going to be looking for what could disrupt this.
Going into the first-quarter reporting period, the return-on-investment discussion had been lingering. There were questions about whether it would cause some of these companies to reconsider their strong capital expenditure profiles. But we haven’t seen that.
In fact, what we’ve seen is more conviction that demand for AI computing is outstripping supply right now.
So what we’re probably most attuned to is what could come out of left field to disrupt this, whether it’s something regulatory related to AI or another unexpected development that isn’t really in the line of sight right now.
It’s interesting because we get a lot of discussion about higher oil prices and the implications of the Iran conflict for the U.S. equity market in general. What we would say is that may matter for part of the market, but the weighting of this mega-cap growth AI cohort is such that it’s outstripping the importance of the Iran conflict.
So to answer your question simply, we’re focused on what could emerge unexpectedly and disrupt the AI narrative, and that’s pretty hard to identify right now.
ROGER: All right, we’ll leave it on that note. Scott, thanks very much for joining us.
SCOTT: You bet.
ROGER: Scott Chronert, managing director at Citi Research.
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This BNN Bloomberg summary and transcript of the May 11, 2026 interview with Scott Chronert are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
