Seasoned Wall Street investor Ed Yardeni founder and CEO of Yardeni Research, has boldly renamed the Magnificent Seven giants the ‘Magnificent One’, referring only to Nvidia Corp. (NASDAQ:NVDA) as the main driver of this year’s market gains.
Yardeni noted that the semiconductor giant is up 115% this year, more than three times as much as Meta Platforms Inc. (NASDAQ:META) – the best performer among the “Magnificent Six” – and more than 10 times the broader S&P 500 index, as tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY).
“Nvidia is currently the only clear beneficiary of the AI boom, as anyone who wants to play has to pay for the company’s expensive GPU chips,” Yardeni said.
However, he warned that the high capital expenditure could hurt the profitability of Nvidia’s customers, not all of whom may emerge as winners from the AI competition.
Also read: AI-powered rally will spread to energy, commodities and utilities: ‘It’s not just about Nvidia anymore’
Chart: Nvidia is playing its own league in the year-to-date rankings
Economic Implications of the AI Expansion: The Roaring 2020s
“In our Roaring 2020s scenario, the tech boom should continue to shake off the Fed and boost productivity, economic growth and the stock market.”
Yardeni explained that the Fed’s monetary policy is just one of many economic drivers, and that they do not need to cut rates to support economic growth as productivity rises.
Nvidia recently reported an “incredible earnings report,” with quarterly net income rising to $14.9 billion from $2.0 billion in the previous year.
“That further confirms our thesis” of a Roaring 2020 scenario, Yardeni said.
The Wall Street veteran believes that the market began to reflect the Roaring 2020 scenario on November 30, 2022, with the release of OpenAI’s ChatGPT. Since then, Nvidia has pushed the S&P 500 semiconductor indexes to new heights.
Yardeni assigns a 60% probability to the Roaring 2020 scenario, contrasting with a 20% probability of a “market meltdown in the 1990s” and another 20% probability of a “repeat in the 1970s”.
“Our Roaring 2020 scenario is right on target,” he said.
Yardeni’s Roaring 2020s scenario projects above-average S&P 500 earnings, GDP and productivity growth. Higher productivity is expected to lower unit labor costs and inflation, continuing a trend that started last year . This continued trend should, as predicted, push profit margins to unprecedented levels.
Last week, the veteran investor predicted that the Dow Jones Industrial Average would reach 60,000 points and the S&P 500 would rise to 8,000 points by the end of the decade, assuming the Roaring 2020 scenario materializes.
Read now: Dow Hits 60,000, S&P 500 Hits 8,000 by 2030 in Wall Street Veterans’ ‘Roaring 2020s Scenario’
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This article Magnificent 7 Becomes ‘The Magnificent One’: Wall Street Guru Hailes Single Tech Stock as Market Leader originally appeared on Benzinga.com
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