The tech giants that dominated markets for years might be about to learn an uncomfortable lesson: sometimes your best ideas become everyone's ideas. Ed Yardeni, president of Yardeni Research, thinks the artificial intelligence boom that initially benefited the Magnificent 7 is now breaking down their competitive advantages and spreading opportunity across what he calls the "Impressive 493."

When Your Moat Becomes a Battleground

Yardeni laid out his thesis in a CNBC interview, using a vivid analogy that actually makes sense. He compared the previous tech landscape to "Game of Thrones," where the Magnificent 7 operated as "seven independent kingdoms" protected by their own unique business moats. Each had its own territory, its own strengths, its own way of printing money.

But generative AI changed the game completely. Those protective barriers have crumbled, and now these deeply entrenched companies find themselves competing directly with each other in ways they never had to before. Google's building AI tools that compete with Microsoft's productivity suite. Amazon's cloud services are battling it out with similar offerings from competitors. Everyone's suddenly in everyone else's business.

The result? Yardeni argues this intensified competition "is going to start to narrow some of their profit margins." When you go from king of your own castle to fighting in the streets, profitability tends to suffer.

Here's how the Magnificent 7 stocks have actually performed in 2025:

The Companies That Actually Use AI Beat the Ones That Build It

Yardeni's core insight is that the market's next phase will reward AI adoption over AI creation. There's a difference between building the technology and actually using it to run your business better, and he thinks the latter group is about to have their moment.

The math here is straightforward. Information Technology and Communication Services already comprise nearly 45% of the S&P 500's market capitalization. That's an enormous concentration in just two sectors. It's tough to justify piling even more money into an area that already dominates the index to that degree.

Instead, Yardeni believes the "real beneficiaries of AI" moving forward will be "everybody else" in the index that effectively utilizes new technologies to improve their existing businesses. That's the remaining 493 companies—the ones making cars, processing payments, manufacturing widgets, and doing all the other things that keep the economy humming.

Where the Smart Money Should Rotate

So if you're rotating away from mega-cap tech, where should you go? Yardeni recommends looking toward "real economy stuff."

He continues to advise overweighting Financials, which perform well when the underlying economy is solid. Banks, insurers, and payment processors all benefit when business activity is strong and credit is flowing.

He also likes Industrials, which are currently benefiting from massive capital spending on building new manufacturing facilities. There's a genuine construction boom happening as companies rebuild supply chains and invest in domestic production capacity.

Despite predicting this rotation away from big tech leadership, Yardeni remains incredibly bullish on the overall market. He's not calling for a crash or even a correction. He forecasts the S&P 500 hitting 7,700 next year, which would mark a potential fourth straight year of double-digit gains. Looking further ahead, he projects the index could reach 10,000 by the end of the decade.

Where Markets Stand Today

After navigating federal and economic headwinds, the stock market has remained resilient in 2025, with all three major U.S. benchmark indices advancing substantially over the course of the year.

The S&P 500 was 17.74% higher, whereas the Nasdaq Composite and Dow Jones gained 22.20% and 14.27%, respectively, on a year-to-date basis.

The SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust ETF (QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, closed higher on Tuesday. The SPY was up 0.46% at $687.96, while the QQQ advanced 0.47% to $622.11.

The futures of Dow Jones, S&P 500, and Nasdaq 100 indices were lower on Wednesday.