In preview:
- A high-probability bet on the AI infrastructure boom
- There’s a revolution on the battlefield and a bull market in drone stocks
- More signs the global economy is doing a lot better than you might think
- The battery megatrend sends lithium miner Albermarle to new all-time highs.
A high-probability bet on the AI infrastructure boom
“Many critical resource projects take 5 – 10 years to go from an idea on paper to producing raw materials. So, when a resource market trends in one direction, the trend tends to last for years.”
As you look at the uptrend in copper mining stocks, remember the above guidance I’ve been sharing for months. Today, the copper mining fund we track – the Global X Copper Miner ETF (COPX) – reached a new all-time high.
Over the past four months, I’ve repeatedly made the case that we are entering a bull market in many critical resource sectors.
Critical resources are the building blocks of the economy. Think raw materials like crude oil, natural gas, iron ore, copper, corn, and cotton.
Even today’s high-tech world of AI, apps, email, and Zoom calls is built on a “low-tech” foundation of steel, oil, concrete, copper, lumber, and aluminum. Mining, extracting, planting, harvesting, processing, refining, and transporting these vital resources is a multi-trillion-dollar business that affects every area of your life.
Last year, we highlighted the bull case for copper and copper stocks:
Copper is widely used as a conductor to build power grids, data centers, power lines, and communication networks. When demand for power grids, renewable energy, and AI power usage booms, copper demand goes up. Plus, copper supply is constrained due to a lack of new discoveries.
In other words, the AI infrastructure boom is creating a “domino effect” that’s benefiting copper. Here is how the dominoes fall: Consumers want AI applications. Big tech wants to sell those applications and must build AI data centers to do so. AI data centers require lots of copper… and the power grids that supply AI data centers consume lots of copper. As AI demand increases, so does copper demand.
Importantly, the market agrees with this bullish thesis. The COPX fund recently broke out of a consolidation area and reached a new all-time high today. The odds are very high that this trend persists and runs higher.
Copper miners reach new all-time highs
There’s a revolution on the battlefield and a bull market in drone stocks
When most people hear the word “robot,” they think of walking, talking, humanoid-like robots from Star Wars, Star Trek, or The Terminator.
People with an interest in investing might even think about factory robots that build cars, appliances, and airplanes. However, drones are robots too, and they are one of the most compelling facets of the giant robotics megatrend, which is one of the great investment opportunities of our time.
In late 2024, I urged colleagues to invest in drone stocks for one simple reason: After years of progress and innovation, military and surveillance drone makers can now produce large amounts of effective drones at low cost. Many drone applications now have very high “cost-to-damage inflicted” ratios. This is why drones have played a significant role in the Russia/Ukraine war.
The now pervasive use of drones in warfare means we are in what military experts call a “Revolution in Military Affairs.”
A Revolution in Military Affairs is a fundamental change in how wars are fought, typically driven by technological innovation. For example, the introduction of mechanized warfare in the form of tanks, battleships, and airplanes drastically changed the battlefield. Airplanes in particular introduced a whole new dimension to battles.
I’m deeply anti-war and anti-surveillance, so a big part of me wants to see drones manufactured only for peaceful activities like delivering pizza and Amazon packages. However, I don’t make the rules. Governments around the world are buying drones like crazy. Drone maker revenue is soaring. We have an investment megatrend on our hands.
But don’t take my word for it. Take the market’s word. Today, it sent Elbit Systems (ESLT) to a new all-time high.
With a market value of $25 billion, Elbit is one of the world’s largest makers of attack and surveillance drones. Elbit has exceptional revenue growth and tremendous stock price momentum. We see the chart below and think “the drone megatrend is alive and well.”
More signs the global economy is doing a lot better than you might think…
It seems like every day, there’s another new sign that the global economy is doing a lot better than the pessimists would have you believe.
Today, the new sign is coming from the hospitality industry.
The world’s biggest hotel chain operators are soaring to new all-time highs.
Over the past four months, I’ve written over a dozen pieces that cited soaring stock prices in heavy equipment makers, major banks, steelmakers, transportation firms, cement makers, and automakers as evidence that the global economy can’t be doing all that badly.
Many investors obsess over government data such as unemployment figures, job hirings, and the consumer price index. I like to know that data as everyone else does. However, when I want a read on what’s really happening in the economy, I look at what’s happening in the real world. I look at stock prices. I listen to the judge, jury, and executioner of any thesis, any trend, and any claim: The market.
The stock market is one of the world’s greatest forecasting mechanisms. It tends to look ahead 6 -12 months. When an industry is in a recession, its stock prices will rise before the news media says it is recovering. When an industry seems to be doing well, its stock prices will decline before the news covers its downturn. This is often called, “discounting the future.”
Today, the market sent three of the world’s biggest hotel chain operators – Marriott (MAR), Hilton (HLT), and InterContinental Hotels Group (IHG) to new all-time highs. These hotel operators thrive when people are making enough money to travel and when businesses are spending freely on conferences and events.
Sure, the global economy has problems. It always does. But it also has some positives. And these positives are so strong that the world’s hotel chains are booming. Invest accordingly.
Let’s get away: Marriott soars to all-time highs
Market Notes
- Global banking giants HSBC (HSBC), UBS Group (UBS), and Barclays (BCS) reached all-time highs today. Can the global economy be doing all that badly?
- Lithium mining giant Albermarle (ALB) reached an all-time high today. Demand from the battery industry remains strong.
- AI-powered insurance firm Lemonade (LMND) reached an all-time high today. It’s up 125% YTD. This demonstrates how companies can leverage new AI technology in old industries.
- Mining giant Rio Tinto (RIO) reached another all-time high today. The bull market in critical resources is on.
