Independent Financial Research & Analysis
Daily briefings, 7,300+ real-time charts, and macro insights from Dr. Ed Yardeni and his research team.
Research
Latest Research
Recent insights from our research team
INDUSTRIES: Mag-7 Isn't The Only AI Game In Town
Since ChatGPT was introduced in late November 2022, the AI trade has been mostly focused on the Magnificent-7, especially the big cloud companies, i.e., the "hyperscalers” (chart). For a while, they were all viewed as AI dominators until DeepSeek was released by a Chinese software company in late January 2025. Increasing confidence that US Large Language Models (LLMs) would remain competitive revived the Mag-7's stock market performance during the spring and summer of 2025. Then, late last year, a growing concern that the AI boom was turning into an AI capital spending arms race among the Mag-7 was heightened by Michael Burry’s warnings that the hyperscalers' massive AI capex might prove unprofitable for various reasons. But those concerns have diminished in response to significant beats by the hyperscalers during the Q1 earnings season in April. Their cloud earnings continue to soar, confirming that rapidly growing demand for "compute" might justify all the AI capital spending after all. Since late last year, investors have come to realize that while there may be uncertainty about the profitability of hyperscalers’ AI capex, there is no doubt that their massive capex will boost demand for semiconductors and related AI components. As a result, the prices of ETFs investing in semiconductors soared to new record highs in April (chart). Leading the way higher have been the memory chip companies in the US and South Korea. We wrote about them with a positive tilt in our March 24 QuickTakes titled, "Thanks for the Memory." Their stock prices have continued to rise since. SK Hynix, Samsung, SanDisk, Micron, and Western Digital have all moved sharply higher (chart). As long as AI compute continues to outpace supply, we expect these names to remain strong. We also wrote about the photonics companies. Their stock prices have also continued to soar (chart). Investors have clearly concluded that the Mag-7 isn't the only AI trade in town. Indeed, so far this year, almost every major semiconductor stock price (in the "AI-11") has beaten all the Mag-7 names, except Broadcom (chart). Here is a quick review of how the AI-11 fits into the AI supply chain: (1) Foundry and lithography (TSMC, ASML). TSMC fabricates the leading-edge logic for everyone. ASML owns the EUV lithography chokepoint. (2) Logic and custom silicon (AMD, Broadcom, Intel). AMD is taking a significant share in AI inference. Broadcom is the custom ASIC partner for hyperscalers and the incumbent in networking silicon. Marvell rounds out its custom silicon, networking, and optical connectivity offerings. Intel is the foundry comeback story with CPU exposure to the AI server cycle. (3) Memory (Micron, SK Hynix, Samsung). Micron, SK Hynix, and Samsung supply the high-bandwidth memory that is the actual bottleneck for AI training. SK Hynix leads the HBM market globally. (4) Enterprise NAND and storage. SanDisk has emerged as the pure-play beneficiary of NAND and enterprise SSDs. Western Digital provides the HDD complement. Every dollar of hyperscaler capex for AI infrastructure flows through this supply chain before reaching a server rack. No wonder that high-tech now accounts for a record 55% of US capital spending (chart). The Mag-7 still dominates the S&P 500 by every concentration metric, accounting for 30.6% of S&P 500 market capitalization, 25.1% of forward earnings, and 13.7% of forward revenues (chart). But the label may be outliving its cachet as discussed above. Mag-7 forward earnings growth is currently 25.4% versus 17.9% for the S&P 500 excluding Mag-7 (chart). That spread was wider a year ago. The S&P 493 is catching up in this growth derby. The premium the Mag-7 enjoyed on the basis of earnings growth scarcity is becoming less distinctive as growth broadens. The Mag-7 dominance is priced in. The marginal dollar of investor attention has moved on to what extends the AI trade beyond the original seven.
Productivity Booms As Labor Market Shows Signs Of Revival
When the labor market sneezes, ADP, Paychex, and ManpowerGroup catch colds. The stock prices of all three sold off sharply as hiring cooled starting early last year (chart). But on balance, the latest batch of labor market data suggests that employment conditions may be improving, and employment-related stocks may be bottoming (chart). We disagree with the widely-held notion that AI is a net job killer. In our opinion, AI will create jobs on balance. Humans will use AI to achieve greater output at lower cost, creating a wealthier society that needs more and newer types of human labor. We agree with Jevons' Paradox: Making a production input more efficient lowers the cost of the final product, stimulates demand for it, and ultimately results in greater demand for the input itself, despite the productivity gain. Let's review the latest productivity, labor costs, and employment data: (1) Productivity. Productivity is measured as nonfarm business output divided by labor hours worked. Output increased 3.3% y/y in Q1-2026, solidly above the comparable 2.7% rise in real GDP. Hours worked rose only 0.4% y/y. So productivity increased 2.9% y/y, exceeding its historical average of 2.1% (chart). In our Roaring 2020s scenario, productivity growth is likely to increase to 3.5%-4.0% over the remainder of this decade and continue at that pace through the Roaring 1930s. (2) Unit labor costs & inflation. Unit labor costs is measured as hourly compensation divided by productivity. It rose by 1.2% y/y in Q1-2026, the slowest pace of growth since Q3-2023 (chart). This confirms our view that the labor market isn't currently a source of inflation but rather disinflation. For now, the latter is being offset by other inflationary pressures, i.e., higher energy prices and tariff-related increases in durable goods prices. (3) Productivity & real hourly compensation. Inflation-adjusted hourly compensation is determined by productivity (chart). Businesses can only sustainably raise real pay when productivity gains provide the underlying economic value. We expect productivity growth to rise close to 4.0% by the end of the decade, supporting equivalent real hourly compensation growth (chart). (4) Corporate profitability. Strong productivity growth tends to widen profit margins. Profit margins are currently at record highs, and boosting corporate profits (chart). S&P 500 earnings growth has been surprisingly strong as a result. (5) Jobless claims. Initial unemployment claims ticked up modestly to 200,000, following the prior week's drop to 190,000, the lowest reading since 1969 (chart). The four-week moving average of initial jobless claims also fell to its lowest since January 2024. Continuing jobless claims dropped to 1,766,000 in the week ended May 2, their lowest level since January 2024. The four-week moving average of this series has now declined for nine consecutive weeks, the longest such streak since June 2022. Taken together, the consistent downward momentum in both series is a strong signal that hiring activity is improving, while layoffs remain very low low. (6) Layoff announcements. The May 7 Challenger, Gray & Christmas report showed that US employers announced 83,387 job cuts in April (chart). For the second consecutive month, AI was cited as the primary reason for layoffs, accounting for 26% of all cuts (roughly 21,490 jobs). Despite the monthly jump, year-to-date layoffs remain down 50% compared to the same period in 2025. This confirms that while specific sectors are being disrupted by AI, the overall labor market remains resilient. It is also entirely consistent with our belief that AI will create jobs on net. (7) Job growth. Yesterday, ADP reported that private-sector payrolls rose by 109,000 in April, the fastest pace of job creation since January 2025. The result is corroborated by Revelio Labs, which reported that total nonfarm payrolls rose by 66,400 in April, the most since March 2025, with gains led by health care and social services and the finance sector. We expect that tomorrow's April employment will show a big upside surprise.
The War’s Supply Shocks
Our friends at Capital Alpha released a great summary of the impact of the war in the Middle East on the availability of key commodities that are produced in the region and transported through the Strait of Hormuz. Even if the war ends soon, the ripple effects will continue to be felt around the world through the end of this year and perhaps next year too. … William focuses on the war’s impact on global food supplies.
Archive
Our Research Library
19 years of daily research, charts, and analysis
Topics
QuickTakes Topics
Timely commentary covering the most important market themes
Charts
Find Any Chart in Seconds
Search across 7,338+ real-time charts with instant visual previews
BNY MELLON: FORWARD LTEG, STRG & STEG
CATERPILLAR: STOCK PRICE INDEX, EARNINGS & P/E
WELLS FARGO: FORWARD PROFIT MARGIN
NIKE: FORWARD LTEG, STRG & STEG
Sample charts from our collection of 7,338+ visualizations
Tools
Research Tools
Interactive dashboards for tracking economic conditions and market trends
Beige Book Monitor
Fed economic conditions across 12 districts with traffic-light signals.
FOMC Policy Meter
Dovish-to-hawkish policy stance tracker across FOMC meetings.
FOMC Minutes Monitor
Hawk/dove signal extraction across 10 economic themes.
FOMC SEP Monitor
Fed projections and dot plot distributions across meetings.
Private Credit Monitor
Auto-updating chronology of the private credit liquidity crisis.
Release Calendar
Major publications from the Fed, ECB, IMF, and 12 global institutions.
Try Yardeni Research free for four weeks.
Full access to everything we publish. No credit card, no obligation.