Yardeni Discusses Shift on Magnificent Seven Tech Stocks

Bloomberg

Watch Yardeni Discusses Shift on Magnificent Seven Tech Stocks - Bloomberg on Dailymotion

Transcript

00:00is now recommending effectively going underweight the mega cap tech stocks versus the rest of the

00:06S&P 500. Veteran strategist Ed Yadani says he sees more competitors coming for the juicy profit

00:14margins of the Max 7. Yadani is also seeing little reason to stay overweight on the US

00:20in the all country world MSCI portfolio. Some global peers have outperformed the S&P 500 this

00:26year on cheaper valuations and the weaker dollar. Let's talk to the man himself. Ed Yadani is

00:32president at Yadani Research. And Ed, why that change? It is a massive change for you.

00:38Well, it's always time to think about the future when you get to the end of a year.

00:442025 is almost over. We're now thinking about 2026. I've been recommending overweighting

00:50information technology communication services since 2010. The problem is it's worked all too

00:57well. The two sectors now account for a humongous 45% of the market cap of the S&P 500. Of course,

01:07their earning share has also increased, but nowhere near as far. And the same thing can be said about

01:14looking at the US versus the global economy. When you look at the US MSCI relative to the world MSCI

01:22index, what you see is the US now accounts for 65% of the market cap of the world stock market.

01:29So it's hard to recommend overweighting something that's already quite overweight. I mean, if you just

01:35told people just to maintain the current weight of the index, that would still be an overweight position

01:41relative to what most people would think would be a diversified portfolio.

01:47And what's fundamentally changed? Because when we talk about overstretched valuations,

01:54they've been that way for a very long time now. And when you take a look at the AI cycle,

01:58people still point to how it is still at the nascent stage.

02:02Well, I would say with regards to the Magnificent Seven, what I think has changed is they're competing

02:09more aggressively against each other and they've got more competition coming out of nowhere and

02:15somewhere on a regular basis here. We recently saw that Google introduced Gemini 3, which suddenly

02:23made everybody kind of reconsider just how strong the position is of open AI and open AI's relationship

02:30to lots of other AI-related companies. And then just at the same time, DeepSeq came back. Remember,

02:38DeepSeq, when it introduced its model back in January of this year, kind of shocked everybody

02:46because they were able to put together a pretty good AI model that worked as well as some of the other

02:53ones in the United States. But apparently it was trained on chips that cost a lot less.

02:58And now it looks like they're doing it again. And there's some talk that the latest version

03:02of the DeepSeq model is just as good as Gemini 3. So there's a lot of competition. The profit margins

03:09have been awfully high for the Magnificent Seven. That usually invites a lot of competition. And that's

03:16exactly what's happening. And by the way, once you look at the S&P 500 and look outside of the

03:23Magnificent Seven, there's what I call the impressive 493. There's still plenty of good

03:29stocks out there of companies that are going to be using all these technologies, are using all these

03:35technologies to increase their productivity and to increase their profit margins. So I think

03:41broadening out a portfolio from the Magnificent Seven to the 493 makes sense to me.

03:47So I think that's the best way.

03:49So I think that's the best way.

03:51So I think that's the best way.

03:52So I think that's the best way.

03:53So I think that's the best way.

03:54So I think that's the best way.

03:55So I think that's the best way.

03:56So I think that's the best way.

03:57So I think that's the best way.

03:58So I think that's the best way.

03:59So I think that's the best way.

04:00So I think that's the best way.

04:01So I think that's the best way.

04:02So I think that's the best way.

04:03So I think that's the best way.

04:04So I think that's the best way.

04:06So I think that's the best way.

04:07So I think that's the best way.

04:08So I think that's the best way.

04:10So I think that's the best way.

Category

Transcript

Be the first to comment

Recommended