Wall Street veteran Ed Yardeni has dubbed the current market the “Buzz Lightyear” rally, arguing AI compute demand will scale “to infinity and beyond.”

Polymarket traders mostly agree.

Yardeni’s framework, cited by hosts on Sunday’s episode of WSJ’s “Take On The Week” podcast, says runaway AI capex will pull S&P 500 (NYSE:SPY) earnings higher with it. The thesis runs through Nvidia (NASDAQ:NVDA) and the wider chip complex, which has anchored the year’s gains.

Why Yardeni’s Math Matters

Long-term analyst expectations for S&P 500 earnings growth have climbed above 20%, according to Yardeni.

That figure may sit higher than the level reached at the 2000 dot-com peak.

Past readings at those levels have historically preceded sharp drawdowns, though bulls argue this cycle is anchored on real hyperscaler capex rather than profitless tech narratives.

The rally is not as narrow as it looks. Morgan Stanley analysts said the median S&P 500 company beat first-quarter earnings estimates by 6%, the strongest median surprise in four years, with median earnings growth of 16%.

The Rotation From AI Users To AI Builders

The trade has shifted underneath the index. Meta Platforms (NASDAQ:META) has lagged this year, and Apple (NASDAQ:AAPL) CEO Tim Cook warned on the company’s last earnings call that capital expenditures would climb on soaring memory costs.

Money has rotated from the companies putting AI to work toward the ones supplying the picks and shovels.

Micron Technology (NASDAQ:MU) has more than doubled year to date. Broadcom (NASDAQ:AVGO) is up roughly 20%. The Philadelphia Semiconductor Index has tacked on more than 50%.

WSJ columnist Dan Gallagher argued that the chip rally may not be a typical cyclical top.

Semis used to trade at compressed multiples because their earnings were treated as short-cycle and prone to crashing.

Multi-year hyperscaler supply contracts may change that math, giving the market revenue visibility it lacked before and supporting expanded multiples on top of growing earnings, in line with the wider AI infrastructure boom.

What Polymarket Traders Are Pricing In

Polymarket‘s “AI bubble burst by…” contract gives the AI industry just a 28% chance of a downturn by Dec. 31, 2026.

The market resolves “Yes” only if at least three triggers hit within 90 days of year-end, including NVDA closing 50% below its all-time high, the iShares PHLX Semiconductor ETF (NASDAQ:SOXX) dropping 40% and OpenAI or Anthropic going bankrupt. Volume sits above $2.2 million.

Traders are also fading the parabola.

Polymarket gives SPX an 86% chance of hitting 7,300 by June 30 from roughly 7,230, but just an 8% chance of touching 8,000.

A sharp break in NVDA or SOXX is what would test Yardeni’s framework first. For now, traders are pricing cautious continuation, not infinity.

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