You don’t need to own shares of Nvidia (NVDA) or Tesla (TSLA) individually to have a sizable bet on Big Tech.
Anyone who owns an S&P 500 index fund already owns both, along with other stocks that comprise the Magnificent Seven. Collectively, those seven companies account for nearly 35% of the benchmark.
Truth be told, for the better part of the past three years, that concentration was a good thing. Big Tech powered the market higher, driving record gains in retirement and brokerage accounts.
For perspective, Fidelity Investments reported that average 401(k) balances reached a record $155,800 in Q2 2026, up 13% year over year, backed by market gains and continued savings.
Also read: 40-year market veteran shares S&P 500 outlook for 2027
But something has changed in 2026.
Wall Street veteran Ed Yardeni, who has spent years favoring major technology stocks, says the S&P 500’s other 493 companies are now outperforming the celebrated seven.
And he thinks the shift has a lot to do with who’s paying for the AI boom, and who’s positioned to profit from it.
The Magnificent Seven are no longer running away from the S&P 493
For years, especially since the AI boom took off following the release of OpenAI’s ChatGPT, betting on America’s biggest tech companies has been one of the easiest ways to outperform the broader stock market.
The Magnificent Seven, which includes Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), Amazon (AMZN), Alphabet (GOOGL), Meta Platforms (META), and Tesla (TSLA), were almost unstoppable.
In 2023, the group surged 76%, compared with just 11% for the other 493 companies in the S&P 500, according to J.P. Morgan Asset Management.
The dominance persisted in 2024, when the seven gained 48% versus 14% for the rest. In 2025, they won again, returning 23% compared with 13%.
That’s a tremendous run, particularly given how much these stocks influence the retirement accounts and index funds owned by millions of Americans.
But 2026 is telling a different story.
In his October 19 market commentary, veteran Wall Street strategist Ed Yardeni reported that his “Impressive 493” had gained 14.1% year-to-date, outperforming the Magnificent Seven’s 10.2%, based on his ETF comparison.
Yardeni foresees a shakeup coming.
In December 2025, after roughly 15 years of favoring major technology stocks, he recommended underweighting the Magnificent Seven, anticipating stronger competition and better opportunities elsewhere in the market, as reported by Reuters.
Interestingly, the shift isn’t happening because Big Tech’s profits have fallen off a cliff.
J.P. Morgan Private Bank expects Magnificent Seven earnings to grow 59% in 2026, far exceeding the 23% projected for the remaining S&P 500 companies. So, even with explosive earnings growth, Yardeni believes investors have become less enthusiastic about the usual suspects.
Yardeni sees AI’s biggest companies facing an expensive new problem
Yardeni argues that the bigger an AI company gets, the fiercer the competition it faces, often from rivals that are just as big.
According to him, AI has basically turned the Magnificent Seven’s once-protected businesses into a costly battleground. Microsoft, Amazon, Alphabet, and Meta are pouring billions into chips and data centers, raising questions about how much of that spending will eventually translate into profits and free cash flow.
Yardeni Research explained the opportunity for other companies back in December:
“The winners may not be among the Mag-7 at all but the S&P 500’s Impressive 493 and the economy at large.”
Meanwhile, lenders are beginning to scrutinize the AI spending boom more closely.
In a recent CNBC interview, Yardeni talked at length about concerns surrounding AI infrastructure provider CoreWeave (CRWV) and how they have prompted bond investors to reassess the risks of financing these projects.
“Well, the bond market is finally paying attention to credit quality in the bond market for AI credits, which is good. I mean, it’s good if the bond market gets ahead of the credit rating agencies and really assesses the riskiness.”
Yardeni considers that a healthy development. More expensive financing might discourage riskier projects and help prevent another technology bubble.
The other 493 companies, meanwhile, may have an advantage. Businesses across healthcare, finance, and manufacturing can adopt AI to improve productivity and profit margins without spending billions on the underlying infrastructure.
Some, including Broadcom (AVGO) and Advanced Micro Devices (AMD), are themselves major AI suppliers.
Yardeni’s market outlook raises a new question for investors
That said, Yardeni hasn’t abandoned his long-term bull case for stocks. He’s just less certain how much investors will pay for future earnings.
In his CNBC interview, he warned that higher oil prices, stubborn inflation, and rising bond yields could pressure stock valuations, even as corporate profits remain strong.
He now targets 7,900 for the S&P 500 by year-end 2026, with 8,400 more realistic by mid-2027. He’s still looking for 10,000 by the end of the decade, although those forecasts are far from guaranteed.
For everyday investors, the bigger question may be how much Big Tech they already own.
Traditional S&P 500 index funds give the largest companies the biggest weight, leaving investors heavily exposed to the Magnificent Seven. Equal-weight funds or strategies excluding those seven offer broader exposure, although they carry their own risks.
Yardeni’s outlook also gives investors something to watch as they look to reassess their portfolios.
Interestingly, Jim Cramer recently raised a similar concern about investors being overly exposed to the tech stocks. I covered the October 12 episode of Mad Money, where Cramer pointed out to a caller that owning several familiar companies doesn’t necessarily mean having a diversified portfolio.
He pointed out that stocks tied to the same investment themes can fall together, even when their businesses differ.
Cloud revenue, AI spending commitments, corporate borrowing costs, and Treasury yields will help determine whether the technology boom remains sustainable. Rising earnings estimates and improving market breadth outside Big Tech would strengthen his rotation thesis.
Related: Bank of America sees a costly catch in America’s strong economy
