After the rest of the world outperformed the U.S. in 2025 , Rob Citrone forecasts more relative weakness ahead for the country’s equities. The billionaire hedge fund manager said he is short the U.S. market and long equities in certain international markets. In an appearance Tuesday on CNBC’s ” Squawk Box ,” the Discovery Capital Management founder and portfolio manager explained why he thinks emerging foreign markets — particularly some in Latin America — have more room for upside in 2026. Part of that is just the already high valuation of U.S. stocks, he said. “The U.S. trades at over a 40% premium to the rest of the world,” Citrone said. “It should be at a premium, but 40% is a bit excessive.” But particularly concerning to him is the uncertainty regarding the return on investment companies will receive from high capital expenditures, driven primarily by investments in artificial intelligence and data centers. Recent earnings reports from major hyperscalers alone project a 70% increase in capex spending in 2026 to $600 billion. Yet almost daily a new stock sector group is being hit on fears AI will disrupt their future growth, raising questions about whether companies will see higher returns from AI or be displaced by it. .SPX ACWX YTD line .SPX vs. ACWX year-to-date chart. “We don’t know who the winners are going to be. I don’t think everybody’s going to be a winner and that’s one of the problems,” he said. “You see sectors and companies, every day significant adjustments, because people are afraid of what the future upholds.” Citrone likes emerging markets because the companies there often are monopolies or oligopolies, meaning they have more protection of their own businesses and don’t have to rush to beat the competition on AI, thus being insulated from the investment’s potential risks. His top pick is Mexico, which he says looks strong thanks to its focus on strengthening ties with the U.S. and the low valuations of its companies which often have few competitors thanks to their dominance in their respective industries. Citrone added Argentina has significant upside thanks to the prospect for further government policy reforms following a midterm election that strengthened the power of President Javier Milei. Citrone also said he remains short digital asset treasury companies, including Michael Saylor’s Strategy . Those companies have fallen sharply as Bitcoin has tumbled more than 40% since October. “These treasury crypto companies were trading at big premiums, which didn’t make any sense to me,” he said. “I think it’s still a better way to short than to short the actual bitcoin.”