Stocks for investing in “the next big AI trade”

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Today’s issue in preview:

• Stocks for investing in “the next big AI trade”

• The FSR bull market sends us an important message: The American consumer is alive and well.

• Four stocks to invest in an extraordinary new AI trend

• Our incredible track record continues to improve: Our thematic trades in Biotechnology, Canada, Cybersecurity, and Genomics reach new highs.

• Learn our Top Themes to buy now

Stocks for investing in “the next big AI trade”

Credit: piyaset

It turns out, being bullish on genomics was a great idea.

Last Friday, shares of medical diagnostics giant Natera (NTRA) leaped 21% to a new all-time high after the company reported outstanding second-quarter business results.

Natera is a genetic testing and diagnostics company that specializes in prenatal and cancer testing. Its Signatera blood test looks for microscopic pieces of tumor DNA in a patient’s blood. Doctors use it to detect whether cancer has returned following treatment.

Business is booming for Natera. Total revenue for the company grew 38% in the second quarter, driven by surging demand for its specialized diagnostics services.

Constant Money & Megatrends readers are not surprised to see the genomics theme surge to new highs. Over the past year, we’ve written over half a dozen research notes about the extraordinary upside potential of biotech and genomics.

Genomics is the science of analyzing human DNA – often referred to as the “software code of life” – to create tests, medicines, and treatments.

Years of innovation in this field have us on the brink of creating many customized treatments based on an individual’s DNA… and even “editing” genes to cure disease. Bulls on the industry believe it will get a giant “AI boost,” because super-intelligent computer programs can analyze genes and treatment effects so well… and have the potential to create drugs on their own.

The fusion of AI and genomics should generate dozens of compelling stock narratives over the coming years. Researchers running superintelligent AI programs will be able to create useful new diagnostics and run millions of digital simulations of drugs and treatments. This will put medical innovation into overdrive… and create many big stock market winners.

The personalized approach to medicine that genomics offers has us on the cusp of a historic revolution in healthcare. Ten years from now, medicine will be transformed… and a lot of money will be made along the way.

As I mentioned on May 28, the ARK Genomic Revolution Multi-Sector ETF (ARKG) is one way to track and trade the genomics theme. It owns a basket of bleeding-edge genomic companies.

Its largest holding, Tempus AI (TEM), is often cited as a premier way to play “AI in health care.” ARKG also holds significant positions in genetic diagnostic service firms such as Natera and Illumina (ILMN)… plus positions in promising “gene editing” companies CRISPR Therapeutics (CRSP) and Intellia Therapeutics (NTLA).

Natera’s excellent business results indicate soaring use of bleeding-edge genomic analysis to detect and treat illnesses.

Natera’s excellent stock performance suggests investors are beginning to appreciate the trend. We remain bullish on the genomics megatrend.

The FSR bull market sends us an important message: The American consumer is alive and well.

Credit: RiverNorthPhotography

Over the past five trading sessions, shares of Brinker International (EAT), The Cheesecake Factory (CAKE), and Texas Roadhouse (TXRH) reached new all-time highs.

These new highs are more evidence that the bull market in Full Service Restaurants (FSR) is alive and well.

They’re also the byproduct of a strong U.S. economy. And that’s important for your portfolio…

On July 21, I highlighted the emerging uptrend in FSR stocks, including Darden Restaurants (DRI, Olive Garden, LongHorn, Yard House), along with EAT, CAKE and TXRH.

These uptrends are important because they give us an informed, real-time analysis of American consumer health.

A full-service restaurant is one where you’re seated by a host, talk to a server, have your food brought to you, and hopefully leave a nice tip. This experience is different from a fast-food restaurant such as McDonald’s or Chick-fil-A.

It is also more expensive. The typical family of four going to a full-service restaurant knows it will be spending considerably more there than at a fast-food joint.

Because FSR bills are on the higher end of the dining cost spectrum, the earnings and stock prices of leading these chains are excellent “real world” indicators that signal a lot about the financial health of the American consumer.

After all, dropping $150 on dinner is not something most people do when they are broke. It is something people are more likely to do when they are gainfully employed, making money, and optimistic about tomorrow.

Driven by strong business performance, FSR stocks are in a clear uptrend, with some breaking out to new all-time highs.

Over the past eight months, I’ve written over a dozen research notes analyzing the soaring share prices of highly economically sensitive industry groups, including trucking stocks, railroad stocks, regional banks, manufacturing stocks, steelmakers, shopping mall operators, and hotel chains.

At the end of each note, I pointed to their soaring stock prices and told readers that the U.S. economy is doing much better than most people think.

These economically sensitive firms are important “real world” indicators. They almost always do a better job of telling us what is happening in the economy than any media outlet or economist. And their uptrends are moving in a bullish upward direction for the U.S.A.

Soaring FSR stocks are key members of this growing list of positives.

Four stocks to invest in an extraordinary new AI trend

Credit: imaginima

Cloudflare (NET) CFO Thomas Seifert recently ran the numbers. And he says that in the near future, web traffic from AI programs will far exceed traffic from real, actual humans.

Cloudflare is a key provider of equipment and services that keep Internet sites up and running smoothly, so it has unique insight into web traffic trends.

On the company’s recent earnings call, Seifert said that in five years, non-human web traffic will be as much as 1,000 times as much as human traffic.

“In other words, humans will be a rounding error on the internet, not because human traffic goes down, but that’s just how fast we’re seeing non-human traffic grow,” Seifert said.

Avid Money & Megatrends readers won’t be surprised to hear that AI agent traffic is on the up… and will be for years.

On March 16, we urged readers to prepare for the “Agent Supernova” our nickname for the coming explosion in AI agent usage.

Years of development have made AI advanced enough to perform many everyday tasks people do now… and the list of tasks is only getting bigger.

In the next 12–24 months, AI agents will assist with managing factories… performing financial analysis… managing business inventories… writing software… designing websites… creating legal documents… and thousands of other things.

Within the next two years, the number of AI agents operating in the American economy isn’t poised to increase by 10X… or 50X… or even by 1,000X. Try at least 10,000X.

This is the coming Agent Supernova. Agents working with people. Agents working with other agents. Agents running businesses. Agents negotiating and haggling with other agents.

The Agent Supernova is about to introduce billions of “AI workers” into our economy to perform all kinds of roles… with very little day-to-day human oversight.

The business and investment implications are huge. The Agent Supernova will transform many businesses and industries, and end many as we know them… while creating new ones. The economic deck is about to get reshuffled.

The bigger the impact a megatrend can have on our world, the bigger the capital gains it can generate in your portfolio. This is why the Agent Supernova is such a big opportunity. It’s why we will be writing about and investing in this trend for years.

One compelling theme inside the Agent Supernova megatrend is internet traffic. Just one AI agent working for a business can create enormous amounts of web traffic.

Remember, agents work much faster than humans. They don’t take breaks or vacations. They can search for information and transact at the speed of light. An explosion of agent usage will generate an explosion of internet traffic.

In our initial profile of this trend, we highlighted these companies poised to benefit from it:

Cisco (CSCO): CSCO benefits significantly in the agentic world because it sells the equipment that enables data to move. CSCO provides switches (which move data between machines within a data center) and routers (which move data across networks). As AI becomes more agentic, CSCO’s infrastructure keeps these systems connected.

Ciena (CIEN): CIEN provides optical networking equipment that enables data to move at very high speeds over long distances. CIEN is one of the leaders in the optical space along with Lumentum (LITE) and Applied Optoelectronics (AAOI).

Arista Networks (ANET): ANET builds the high-speed switches that sit inside data centers, similar to CSCO. ANET has carved out a much narrower niche in AI chip-to-chip communication, which should mean it benefits more from the agentic world over the next few years. Expected revenue growth is 27% in 2026, up to $11.5 billion.

Akamai Technologies (AKAM): AKAM is a global cloud computing and cybersecurity company best known for its massive distributed network. It helps businesses deliver websites, applications, video, and digital services quickly and reliably while protecting them from cyber threats.

Since our original note, the basket above is up an average of 21%. Given that we are in the first inning of the Agent Supernova… and trends recently highlighted by Cloudflare’s CFO, we believe this trend has much further to run.

Market Notes

• Our recommendation to invest in cybersecurity via Palo Alto Networks (PANW) continues to pay off. The stock is up 143% since our March recommendation and reached a new all-time high today.

• Our recommendation to invest in the Boomer healthcare trend continues to pay off. Healthcare diagnostics giant Labcorp (LH) reached a new all-time high today.

• Our recommendation to invest in the genomic megatrend continues to pay off. Synthetic DNA giant Twist Bioscience (TWST) jumped 6.5% today to reach an all-time high. The stock is up 287% this year.

• Our recommendation to invest in the defense trend continues to pay off. Defense giant RTX (RTX, formerly Raytheon) reached a new all-time high today.

• Our recommendation to get long the biotechnology megatrend continues its winning ways. The iShares Biotechnology ETF (IBB) reached a new all-time high today.

• Our recommendation to invest in critical resource-rich Canada is a winner. The iShares Canada ETF (EWC) reached a new all-time high today.

Regards,

Brian Hunt
Editor, Money & Megatrends

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