{"id":266901,"date":"2026-02-04T08:55:16","date_gmt":"2026-02-04T08:55:16","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/266901\/"},"modified":"2026-02-04T08:55:16","modified_gmt":"2026-02-04T08:55:16","slug":"ai-has-turned-technology-into-an-even-more-competitive-sport","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/266901\/","title":{"rendered":"AI Has Turned Technology Into An Even More Competitive Sport"},"content":{"rendered":"

On December 7, 2025, we recommended market weighting rather than overweighting the Information Technology and Communication\u00a0Services sectors of the S&P 500. Their combined share of the S&P 500 market capitalization has declined from a record 46.7% on November 5, 2025 to 43.9% on Monday (chart). That’s even though their combined earnings share of the S&P 500 continued to rise to a record 39.8% yesterday.<\/p>\n

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Despite the rapid growth of the two sectors’ combined forward earnings, the forward P\/E of the two combined has dropped from 28.9 on November 5, 2025 to 24.3 currently\u00a0(chart).<\/p>\n

On December 7 of last year, we concluded that AI was causing the Magnificent-7 to compete more with one another, forcing them to significantly increase their spending on AI infrastructure. That’s why we recommended underweighting them. The main beneficiaries of this competition should be the S&P 500’s Impressive-493, which are using the AI tools to increase productivity.<\/p>\n

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Technology, broadly speaking, has always been competitive and is becoming even more so as a result of AI. In my 2018 book\u00a0Predicting the Markets<\/a>, I wrote that the technology industry provides the perfect example of \u201ccreative destruction.” It is incessantly destroying old technologies by creating new ones. Most recently, software stock prices have been falling because AI tools are getting very good at writing software code (charts). Their forward earnings have been rising to record highs, but investors have reduced their valuation multiples amid increasing competition from AI.<\/p>\n

Today, the software stocks were especially hard hit because Anthropic rolled out new tools for its Cowork product. It’s too soon to tell how useful the new tools will be, but investors decided to cut the valuation multiples of software stocks. <\/p>\n

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Meanwhile, semiconductor stocks have held up quite well, though the industry’s forward P\/E\u00a0has been\u00a0falling as forward earnings have been soaring (chart). Competition\u00a0has been\u00a0heating up, especially among chips competing with Nvidia’s GPUs. A shortage of memory chips is causing their prices to soar;\u00a0but when capacity expands to meet demand, those prices will likely drop, as they have in the past.<\/p>\n

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The stocks of semiconductor equipment\u00a0companies\u00a0have continued to soar, along with both\u00a0their\u00a0earnings and valuation multiples (chart). That’s because companies in this industry are relatively immune to competition. They do well as long as there is\u00a0strong demand for equipment that can increase the semiconductor companies’ capacity.<\/p>\n

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\ud83d\udca1<\/p>\n

Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members’ contributions may be featured in our segment, “Ed Answers Your Questions”.<\/p>\n","protected":false},"excerpt":{"rendered":"On December 7, 2025, we recommended market weighting rather than overweighting the Information Technology and Communication\u00a0Services sectors of…\n","protected":false},"author":2,"featured_media":266902,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[365,363,364,111,139,69,145],"class_list":{"0":"post-266901","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-artificialintelligence","11":"tag-new-zealand","12":"tag-newzealand","13":"tag-nz","14":"tag-technology"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/266901","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=266901"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/266901\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/266902"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=266901"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=266901"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=266901"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}