Ed Yardeni says the center of gravity in the stock market is shifting, and the Magnificent 7 no longer holds the uncontested lead investors assume.
Speaking in a Bloomberg interview, Yardeni explains that the competitive landscape has intensified faster than most analysts projected.
He points to Google’s latest model release as the first shock to the system, noting that Gemini 3 altered how investors view OpenAI’s position and the companies tied to its ecosystem.
“They are competing more aggressively against each other, and they have got more competition coming out of nowhere and somewhere on a regular basis here. We recently saw that Google introduced Gemini 3, which suddenly made everybody kind of reconsider just how strong the position is of OpenAI and OpenAI’s relationship to lots of other AI-related companies.”
Zooming out, Yardeni highlights the reemergence of DeepSeek, a firm that surprised markets earlier in the year with a low-cost model that performed on par with US competitors. According to Yardeni, the new version threatens to disrupt the race again.
“Remember, DeepSeek, when it introduced its model back in January of this year, kind of shocked everybody because they were able to put together a pretty good AI model that worked as well as some of the other ones in the United States. But apparently, it was trained on chips that cost a lot less. And now it looks like they are doing it again. And there is some talk that the latest version of the DeepSeek model is just as good as Gemini 3.
The profit margins have been awfully high for the Magnificent 7. That usually invites a lot of competition, and that is exactly what is happening.”
Yardeni says he’s also looking at the broader stock market, where companies outside of the AI trade are poised to generate productivity gains with the adoption of the technology. He says the “Impressive 493” stocks look juicier because of their relatively cheap valuations.
“Once you look at the S&P 500 and look outside of the Magnificent 7, there is what I call the Impressive 493. There are still plenty of good stocks out there of companies that are going to be using all these technologies, are using all these technologies, to increase their productivity and to increase their profit margins.”
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