After the rest of the world outperformed the US in 2025, Rob Citron predicts that the country’s stocks will become even more relatively weak going forward. The billionaire hedge fund manager said he is short the U.S. market and long stocks in certain international markets. Appearing on CNBC’s “Squawk Box” on Tuesday, the Discovery Capital Management founder and portfolio manager explained why he believes overseas emerging markets, particularly some markets in Latin America, have further upside potential in 2026. Some of that is simply the already high valuations of U.S. stocks, he said. “The U.S. is trading at a premium of more than 40% compared to other countries,” Citron said. “There should be a premium, but 40% is a little too much.” But he is particularly concerned about the uncertainty of the return on investment that companies will receive from high capital expenditures, primarily investments in artificial intelligence and data centers. Recent earnings reports from major hyperscalers alone predict that capex spending will increase by 70% to $600 billion in 2026. However, emerging equity sector groups are exposed almost daily to concerns that AI will stifle future growth, raising questions about whether companies will reap higher returns from AI or whether they will be replaced by AI. .SPX ACWX YTD Line .SPX vs. ACWX year-to-date chart. “I don’t know who’s going to be a winner. I don’t think everyone’s going to be a winner, but that’s part of the problem,” he said. “Sectors and companies are making significant adjustments every day because people are afraid of what the future holds.” Citron prefers emerging markets because companies in emerging markets are often monopolies or oligopolies, meaning they are better able to protect their businesses and are shielded from the potential risks of investing because they don’t have to rush to compete with AI. He said his top choice is Mexico, which he said looks strong because of the country’s focus on strengthening ties with the United States and the low valuations of Mexican companies, which often have few competitors due to their dominance in their industries. Citron added that Argentina has strong upside thanks to the prospect of further government policy reforms after midterm elections strengthened President Javier Millei’s powers. Citron also said he continues to short digital asset treasury companies, including Michael Saylor’s Strategies. These companies have fallen sharply as Bitcoin has fallen more than 40% since October. “These Treasury crypto companies were trading at a high premium, and that didn’t make sense to me,” he said. “I think short selling is still a better option than shorting actual Bitcoin.”
