Citi flag: Reconstruct the United States stock big disk positioning framework and replace Mag 7 with "cluster" to capture the AI growth narrative
On 21 July, Citi released a report that the Mag 7 concept had lapsed and promoted the “cluster” analytical framework. According to Citi, “Mag 7” (the seven giants of technology in the United States) is no longer an effective construction for assessing the growth dynamics of large capitalization. As the development of the AI infrastructure progressed, more equities, including access, U.S.U. and AMD, became key drivers of exponential gains and profitable growth. Cititime advocates a framework that divides the P 500 index into “Growth”, “Cyclicals” and “Defensives” clusters to capture more fully the impact of the AI wave. Growing-up clusters dominate the 500 standard of performance and profitability. Growing-up clusters now account for 55 per cent of the market value of the Standard 500 index, contributing nearly 48 per cent of the profits. Analysts expect the cluster to grow 42 per cent per share (EPS) in 2026, which is the main driving force behind the overall EPS growth of 24 per cent of the 500 index. Despite a one-quarter retreat, the growth cluster (YTD) has been at the forefront of performance since the beginning of the year. The valuation, supported by a robust profit correction, is not relatively expensive. Although the absolute valuation of growth clusters is higher than that of cyclical and defensive clusters, their valuation has not been overstretched relative to their own history over the past 30 years. Its forward earnings (NTM P/E) are at 66th percentile in history, and have benefited from the ongoing profit correction dynamic of the “betat-and-raise” increase. Consensus expectations indicate that growth-oriented clusters have increased their estimates by 30 per cent in 2026 over the past year. Index volatility will continue to be high and traditional valuations will require more caution. The increase in the weight of growth clusters in the index (from less than 20 per cent 30 years ago to 54 per cent today) has changed the market structure. This means that the Standard 500 index no longer directly reflects the wider United States economy, as one would assume. As growth units usually have higher Beta values, the volatility of the index is expected to remain above historical levels. In addition, long-term historical index valuations are less relevant owing to structural changes。
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