How to trade AI stocks from here

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Today’s issue in preview:

• How to get paid again and again by owning the world’s best businesses

• How to trade AI stocks from here

• This bull market in energy is generating huge winners. Here are four good ways to invest.

• Learn our Top Themes to buy now

How to trade AI stocks from here

Credit: KanawatTH

The giant AI infrastructure boom has its believers and its doubters. And they can disagree on many things.

But they can all agree that no matter if this trend is going to move higher or lower from here, it’s going to do so quickly… and with plenty of volatility.

Case in point: After ripping higher in September, most of this megatrend’s key stocks and ETFs have suffered steep declines over the past week. This rapid series of up-and-down moves has left the larger trend back to trading in a directionless, sideways market… or “becalmed,” like a sailboat on a windless sea.

In other words, the “world’s most important trend” is back in a holding pattern. Here’s what it means for your portfolio…

Over the past three months, we’ve published a special series of research notes analyzing the AI infrastructure trend.

The status of this critical trend has become one of the great sagas of the business and investment world… a source of intense disagreement among industry bulls and bears. It’s a trend whose outcome could have large effects on your portfolio.

Given AI’s enormous promise, large tech firms such as Alphabet (GOOG), Amazon (AMZN), and Microsoft (MSFT) have invested over $1 trillion in AI infrastructure. They are on pace to invest over $700 billion this year alone and more than $3 trillion after that.

Both the scale and the velocity of this investment boom are unprecedented. It is the largest collective investment effort in history.

Big Tech’s historic investment boom has made the entire “AI infrastructure” trend responsible for a large share of America’s GDP growth and stock market returns over the past two years. It has also drawn the skeptical scrutiny of many widely followed investment analysts who claim the trend is a bubble… one that will soon explode and cause tremendous damage to stock prices and the global economy.

If this hugely consequential trend isn’t the most important trend in the stock market, then it is certainly in the top three.

I believe the AI infrastructure trend has years to run. I believe the world’s smartest, most connected tech insiders who know the true state of bleeding-edge AI development and have real-time stats on AI investment ROI, such as Elon Musk, Jensen Huang (Nvidia), Satya Nadella (Microsoft) and Andy Jassy (Amazon), perhaps maybe… just might… know far more about AI and their businesses than outsiders know about it.

As much press as AI gets, let’s remember that less than 1% of the global population pays for top-tier AI programs. And I estimate less than 10% of large companies believe AI has made a meaningful impact on their businesses.

This revolutionary technology hasn’t yet proliferated, achieved mass adoption, or had mass impact. However, the Agent Supernova is coming.

Regular readers know I care a lot more about what the market thinks of any stock, trend or theme than what any one person thinks of it, including me. You can be bullish or bearish on a trend all you like, but if that trend is moving strongly against you, then your idea isn’t worth much in my book.

One of the best ways to gauge what the market thinks of AI infrastructure is analyzing the VanEck Semiconductor ETF (SMH).

This fund is full of key semiconductor firms whose fortunes rise and fall with AI infrastructure spending trends. Major holdings include Nvidia (NVDA), Taiwan Semiconductor (TSM), AMD (AMD), Texas Instruments (TXN), ASML Holdings (ASML) and Micron (MU).

As you can see in the two-year chart below, SMH enjoyed a gigantic run from June 2025 to June 2026. The fund gained 176%. Since June 2026, however, the fund has corrected and moved in a volatile, sideways pattern. The fund attempted a breakout in late Sept/early Oct, but huge selling pressure over the past week has sent it back into its sideways base. Back to a trendless state.

I’ll keep you updated on the world’s most important trend. It won’t be long before we get meaningful price action that provides more direction for trading the semis and AI as a megatrend.

How to get paid again and again by owning the world’s best businesses

Credit: Liudmila Chernetska

This week, the stock market sent us a subtle but important message…

It says that if you don’t want to deal with the complexity and volatility of investing in rapidly evolving technologies like AI, consider focusing on the simplicity of just getting paid.

Focus on the strategy employed by investment funds like the Invesco Dividend Achievers ETF (PFM).

PFM is a unique fund that invests exclusively in high-quality dividend-paying stocks. A dividend is a payment a company makes to its shareholders, typically distributed from its profits. Dividends are typically paid by companies on the larger, more stable side of the stock market spectrum.

In the world of dividend payers, there is an elite class of firms that have raised their dividends for 10 consecutive years. These elite, high-quality firms are called Dividend Achievers. Only the strongest, most durable companies can qualify for membership in this club.

Some legendarily great businesses that are members of the exclusive Dividend Achievers club include Johnson & Johnson (JNJ), PepsiCo (PEP), 3M (MMM), Wal-Mart (WMT), Visa (V), Procter & Gamble (PG), Coca-Cola (KO), Chevron (CVX), and ExxonMobil (XOM).

Some of these firms have increased their dividends not for “just” 10 years in a row, but 30, 40, and even 50+ years in a row (and are called “Dividend Aristocrats”).

These businesses have paid and increased their dividends through recessions, bear markets, and a global pandemic. In terms of consistency, these firms rank just behind the rising sun. PFM is a fund designed specifically to own such firms.

Over the past week, many high-profile technology stocks, such as Lumentum (LITE), Dell Technologies (DELL), and Applied Materials (AMAT), have suffered large short-term sell-offs. Each firm is down more than 15% over the past five trading sessions.

Meanwhile, PFM has climbed by 2% over the same period. It’s something of a “port in the storm.” As you can see in the one-year chart below, the fund is enjoying a strong uptrend and is near its all-time high.

We are wildly bullish on the power of technology to create greater prosperity, longer lifespans, and large investment returns. However, we understand that “going big” into technology investments isn’t for everyone. And of course, it’s smart to have a diversified portfolio.

If you’re of the same mind, it’s good to know that investing in stable compounders and insisting on “getting paid” is still working well.

This bull market in energy is generating huge winners. Here are four good ways to invest.

Credit: Stock87

This morning, the stock prices of Canadian oil giants Suncor Energy (SU) and Canadian Natural Resources (CNQ) reached new all-time highs. Shares of Norwegian oil and gas giant Equinor (EQNR) did the same.

This price action tells us that it’s still a bull market in “non-Middle Eastern” oil supplies… and that our September 2025 recommendation to get long oil stocks was very well timed.

Last September, I made the case for going long the emerging uptrend in oil and gas stocks: As the global economy grows, oil demand will remain solid. However, importantly, U.S. shale oil production growth appears to be peaking.

Flatlining supply from this region would remove a critical and reliable source of production growth that has been in place for more than a decade. Plus, oil was very cheap relative to gold and other assets, indicating good value.

With all that in mind, we’ve written frequently and bullishly about owning Suncor, ExxonMobil (XOM), the diversified State Street Energy Select Sector SPDR Fund (XLE), and oilfield service stocks like those in the SPDR S&P Oil & Gas Equipment & Services ETF (XES). The oil sector has been one of the true market leaders over the past year. Both XOM and XLE recently reached new all-time highs.

When I recommended oil and started trading it from the long side, I did not factor in the potential bullish driver of the Iran War. That’s been a “bonus” driver of gains in oil stocks. Sometimes, the dice rolls in your favor.

Although positive news related to the Iran War could emerge at any time and trigger a short-term correction in oil and oil stocks, the long-term picture remains bullish. I see three reasons why this is the case.

One: Critical oil infrastructure in the Middle East has been damaged. Oil flows will not return to pre-war levels for possibly over a year. This supports oil prices north of $80 per barrel, which in turn supports strong cash flows for oil and gas firms.

Two: Most countries maintain substantial above-ground “buffer” supplies of oil and refined petroleum products in the event of market disruptions such as the Iran War. Over the past six months, much of these buffer supplies have been depleted to compensate for the loss of Middle Eastern flows. They must be replenished.

The coming restocking of buffer supplies will support oil prices north of $80 per barrel… which, again, supports large cash flows for oil and gas firms.

Three: Although oil stocks have enjoyed a large run since our September call, they aren’t up much over the past ten years. Adjusted for dollar debasement over the past decade, key oil and gas ETFs are down significantly. This is not an aging bull market that has attracted too many fans and too much capital. It is the opposite of that.

I’ve been especially bullish on companies with all or most of their assets in safe, reliable “not Middle Eastern” asset bases such as Canada, Brazil, and Norway (where Equinor is a major player).

As I’ve covered over the past five months, for many countries and businesses, the Iran War is a powerful reminder: If your survival or smooth operation depends on uninterrupted resource flows from the Middle East, you are in a dangerous, vulnerable position.

No politician, CEO, or major shareholder wants their business to be in that position. No citizen wants their country to be in that position. Many powerful and influential people are realizing this is a big risk that must be mitigated if humanly possible. Executives and politicians will get fired for not addressing it effectively.

This means building and buying as many forms of “not Middle Eastern” and “non-Russian” resource supply chains as possible economically… like those from safe, resource-rich Canada, Norway, and Brazil. With today’s new highs for Suncor, Canadian Natural Resources, and Equinor in mind, I repeat my big picture takeaway: It’s a bull market in safe, reliable oil supplies… so stay long Canada and Norway.

Market Notes

• Our recommendation to own healthcare stocks continues to pay off. The Health Care Select Sector Fund (XLV) reached a new one-year high today.

• Software leaders Atlassian (TEAM), Veeva Systems (VEEV), DocuSign (DOCU), Freshworks (FRSH) and Paylocity (PCTY) hit new one-year highs today.

• Our January 28th recommendation to own the AI application layer is paying off. Zeta Global Holdings (ZETA) just hit a new yearly high. It is up 88% since our initial recommendation.

• Payment giants Visa (V) and Mastercard (MA) hit new one-year highs today. These are positive economic signals.

• E-commerce giant eBay (EBAY) hit a new one-year high today.

Regards,

Brian Hunt
Editor, Money & Megatrends

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