“I don’t think so. I think the economic data is going to show that real GDP is coming in at something like 4% in the third quarter,” Yardeni said. He also anticipates that the producer price index (PPI) will come in “a little bit on the hot side” due to ongoing tariff pressures on durable goods inflation. He added that Fed Chair Jerome Powell recently signalled in a press conference that a rate cut is not guaranteed and suggested it may be time to pause after the 150 basis points of cuts over the past year. Yardeni echoed this view, stressing that a rate cut is far from inevitable.
Addressing recent market volatility, Yardeni connected some of the weakness in the stock market to the “free fall” in the cryptocurrency space, particularly Bitcoin. He pointed to the ‘Genius Act’, recent US legislation that established dollar-based stablecoins backed by Treasury bills, as a significant development that erodes Bitcoin’s use case as a transactional medium. While the crypto crash has had a sentimental impact, Yardeni believes the technology-heavy Nasdaq index will increasingly diverge from Bitcoin’s trajectory. “They had been tracking each other very closely, but I don’t think that continues,” he said.
He also suggested that a sentiment correction was overdue, stating that a bull-bear ratio he follows was “extremely high” at the start of the month, indicating an excess of bullish sentiment that required a pullback.
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The conversation also turned to the artificial intelligence (AI) trade, where Yardeni said that some of the “excitement and froth” has come out of the sector. He highlighted a major uncertainty for investors, which he termed a “known unknown”: the accounting for earnings by companies purchasing Nvidia’s graphics processing unit (GPU) chips. The ambiguity lies in the depreciation period for these chips, with some suggesting a short lifespan of one to three years, while others believe they could last five to six years. This uncertainty has a significant impact on reported earnings.
Further complicating the AI landscape is the rise of new competitors. Yardeni pointed to the launch of Google’s Gemini 3, which has challenged the assumed dominance of the OpenAI ecosystem. “One is not sure anymore who the winner is,” he remarked, adding that this development throws the competitive race into a “tailspin once again.”
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Ultimately, Yardeni suggested that the primary beneficiaries of the AI boom may not be the large language model (LLM) developers themselves. Instead, he identified cloud providers as the likely winners. “They are expanding their capacity as fast as they can because the demand for that capacity continues to increase,” he explained. Looking ahead, he suggested the market could be due for a significant broadening, moving beyond the so-called ‘Magnificent Seven’ to what he calls the ‘Impressive 493’.
For the entire interview, watch the accompanying video