Dr. Ed Yardeni vs. Dan Ives: Is 2026 the Year to Rotate Out of Big Tech or Double Down on AI?

Dr. Ed Yardeni of Yardeni Research and Dan Ives of Wedbush are two well-known market strategists and tech analysts on Wall Street right now.

Yardeni holds a Ph.D. in economics from Yale University and has a storied career as a chief investment strategist on Wall Street. Yardeni currently runs investment firm Yardeni Research and has nailed bullish calls on tech, artificial intelligence (AI), and the stock market for the past several years now.

Ives has built a career by being ultra-bullish on tech and now artificial intelligence for much of his 25-year career on Wall Street, a thesis that has paid off handsomely. Ives and his colorful outfits can be frequently spotted on all the major business networks or being quoted in the country's most prominent business publications.

Currently, one of these analysts is quite bullish on tech and AI heading into 2026, while the other is starting to pull back. Who will be right?

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Yardeni: Time to pump the brakes

Yardeni and his firm recently did something for the first time in 15 years: They shifted their stance on the broader benchmark S&P 500's (SNPINDEX: ^GSPC) tech and communications stocks, changing their recommendation from overweight to market weight, which is essentially a neutral rating. This group of stocks specifically refers to the "Magnificent Seven," tech giants expected to benefit immensely from the rise of artificial intelligence. Yardeni suggested being overweight in the financials, industrials, and healthcare sectors.

Yardeni says the tech and AI landscape has changed. Members of the Magnificent Seven have begun to "aggressively" compete with one another, which is actually a big change from recent years. "They used to just operate in their own moats and kind of leave each other alone, but I think we're now having a competitive situation," Yardeni told CNBC recently. "Not only that, but I think we're going to find out start-ups are coming [to] challenge some of their technologies."

For instance, Alphabet has built its own chips that the company has reportedly begun pitching to AI companies, and that could cut into some of Nvidia's market share. Furthermore, Yardeni also cited examples like the Chinese start-up DeepSeek, which sent U.S. AI stocks reeling after the company supposedly developed a ChatGPT rival at a fraction of the cost, although there is much debate over the resources that went into DeepSeek.

Ives: Another gangbuster year incoming

Ives has never been one to shy away from market skepticism, and while many investors are starting to question AI companies more prominently, including their massive capital expenditure plans and big valuations, Ives says tech stocks are set to post at least a 20% gain in 2026.

Ives and his team wrote in a recent research note:

Heading into 2026, the tech world and investors are both excited and nervous about the AI Revolution. On one hand this is a 4th Industrial Revolution taking shape, with the U.S. leading China on tech for the first in 30 years ... while on the other hand the trillions of dollars needed to reach the heights of enterprise/consumer AI Revolution have caused nervousness and doubters among investors.

Ives also views 2026 as an "inflection point" for the AI revolution. His top 10 predictions for 2026 indicate clear bullish sentiment for the Magnificent Seven. In one prediction, Ives believes Tesla will successfully launch robotaxis in over 30 cities in the U.S. and also increase production of robotaxis. His base case for Tesla stock is $600 per share, with a bull case of $800 per share. That implies significant upside from the stock's current price of $494 per share (as of Dec. 22).

Ives also sees Apple and Google announcing a formal partnership around Gemini that will help provide Apple with a real AI strategy, Microsoft finding "its sweet spot" and being "the top outperforming cloud software name in 2026," and Palantir continuing to deploy its AI data solutions to businesses and corporations. Ives and his team believe Palantir's valuation will more than double and hit a $1 trillion market cap over the next two or three years.

Stick to AI or rotate out?

Timing the market is extremely challenging, so I wouldn't recommend that retail investors attempt it. Both Yardeni and Ives could end up being right, in that tech has another great year and then fades after that.

That's why I think it's important for investors to carefully select their stocks and focus more on valuation. While AI and tech can continue to perform well, I don't believe money managers will continue to invest in these stocks as freely as they have been. I think investors can stick with tech conglomerates such as Apple, Microsoft, and Alphabet in the long term because these companies have many other strong businesses and tamer valuations than some of the pure-play AI names.

I would, however, avoid names like Tesla and Palantir, which trade at monster valuations and have a less favorable risk-reward proposition. In my opinion, investors are better off allocating this money to sectors that have struggled over the years, such as financials and healthcare.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.