Ed Yardeni Sounds Alarm on Magnificent Seven After 15-Year Bull Run
Veteran strategist recommends underweighting mega-cap tech for the first time since 2010, citing broadening earnings growth across other sectors.
In a significant strategy shift, veteran market analyst Ed Yardeni has advised investors to underweight the ‘Magnificent Seven’ stocks, reversing a bullish stance on mega-cap technology that his firm has held for nearly 15 years. The call marks a potential inflection point for a market that has been overwhelmingly driven by a handful of industry titans.
In a research note released Sunday, Yardeni Research recommended reducing exposure to the technology and communication services sectors to a 'market-weight' position. This is the first time Yardeni has advised stepping back from a tech-focused strategy since 2010, a period during which names like Apple, Microsoft, and Nvidia have delivered astronomical returns and reshaped the global economy.
The Magnificent Seven—comprising Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla—have been the primary engine of the S&P 500's performance. Since the end of 2019, the group has surged over 600%, dwarfing the 113% gain of the broader S&P 500 index over the same period, according to recent analysis. This outperformance has led to extreme market concentration, with the group now accounting for roughly a third of the S&P 500's total market capitalization.
Yardeni’s pivot is not a bet against technology itself, but rather a bet on its proliferation. The core of his thesis is that widespread technological adoption is set to boost productivity and profitability across a much wider range of industries. "Every company is becoming a technology company," his firm noted, suggesting that the earnings growth that once defined the Magnificent Seven will become more broadly distributed.
As Seeking Alpha reported, Yardeni anticipates that increased competitive pressures may begin to weigh on the profit margins of the mega-cap leaders. To capitalize on this expected market rotation, the firm suggested reallocating capital towards the financials and industrials sectors, while maintaining an overweight position in healthcare.
The recommendation adds a prominent voice to a growing debate on Wall Street about market breadth. For months, analysts have pointed to the risks of a market propped up by just a few stocks. While the Magnificent Seven posted a cumulative return of 25% for 2025 as of early December, there are signs that other sectors are beginning to participate in the rally. Data from the third quarter showed significant gains in small-cap indices like the Russell 2000, signaling that investors are beginning to look for value outside of big tech.
For investors who have benefited from the long-running tech boom, Yardeni's call serves as a crucial reminder to review portfolio concentration. While the Magnificent Seven’s growth story is far from over, the argument for a more diversified strategy is gaining considerable momentum.