Today’s issue in preview:
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Get paid to power AI: These stocks are rising thanks to Big Tech’s huge spending spree
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The AI “supersonic tsunami” triggers more stock market losers. Is your portfolio exposed to this danger?
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The safe way to invest in soaring AI power demand earns its nickname
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The robotics megatrend generates another big winner
Get paid to power AI: These stocks are rising thanks to Big Tech’s huge spending spree
Credit: EvgeniyShkolenko
My recommendation to ignore the AI bears and stay long the AI boom is proving to be very useful.
One of the loudest, clearest messages we can take away from yesterday’s big “ceasefire rally” is that the AI infrastructure boom is alive and well. It is one of the world’s defining megatrends… and despite what the AI bears say, it is a great place for your investment capital.
In late 2022 – before ChatGPT was released to the public – I told friends and colleagues that AI was about to explode into public awareness. Shortly after, AI did just that, marking the beginning of one of the biggest investment themes of our lives.
Now, more than three years into this super boom, big tech companies Meta, Google, Amazon, OpenAI, and Microsoft are engaged in an epic race to build the world’s best AI models and infrastructure. This year, they are on pace to spend over $600 billion on AI infrastructure, with more than a trillion dollars coming behind it. It’s the largest infrastructure spending boom in history.
Whether Big Tech’s massive investment pays off has become the most important issue in the stock market.
AI bears say much of this spending is madness. It won’t generate the revenues and profits required to justify it. Once the world realizes this is the case, GDP growth will stall, and the stock market will crash.
AI bulls say, “AI is the most transformative innovation of the century. Big Tech leaders know what they are doing. The investments will pay off.”
For the past three years, I’ve frequently cited how the market likes the “AI Boom” thesis, as evidenced by the rising market values of AI infrastructure stocks.
Yesterday, AI infrastructure stocks of many kinds soared to all-time highs. We detailed the optical networking boom and all-time highs for Ciena (CIEN) and Lumentum (LITE) yesterday.
The AI infrastructure boom also relies on large amounts of computer memory. Memory leaders Western Digital (WDC), Sandisk (SNDK), and Seagate (STX) reached new all-time highs today.
AI data center servers generate tremendous heat and must have advanced cooling systems. Related players Vertiv (VRT) and Comfort Systems (FIX) reached new all-time highs.
Speaking of data centers, data center operators Equinix (EQIX) and Digital Realty (DLR) reached new all-time highs. Companies in the AI semiconductor business – Marvell Technology (MRVL), Tower Semiconductor (TSEM), Lattice Semiconductor (LSCC), and Aehr Test Systems (AEHR) reached new all-time highs.
It’s yet more evidence that our longstanding recommendation to ignore the “AI Bust” camp… and stay in the “AI Boom” camp continues to pay off.
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The AI “supersonic tsunami” triggers more stock market losers. Is your portfolio exposed to this danger?
Credit: Bill Oxford
Yesterday, stocks of many kinds of shapes and sizes soared higher after President Donald Trump announced a two-week ceasefire between the U.S. and Iran. The benchmark Dow Industrials enjoyed its largest one-day gain since April 2025.
As we detailed in yesterday’s issue, optical networking stocks reached new all-time highs. Electric power stocks reached new all-time highs. Also, uranium miners, copper miners, semiconductor stocks, homebuilders, space stocks, and robotics stocks staged strong rallies.
One sector, however, was suspiciously weak during yesterday’s big rally: Software stocks.
Yesterday, leading software firms Salesforce (CRM), ServiceNow (NOW), Veeva Systems (VEEV), Monday.com (MNDY), Atlassian (TEAM), Workday (WDAY), and The Trade Desk (TTD) reached new one-year lows.
That these firms failed to rally during one of the strongest days of the year is a bearish signal. It’s a sign that the AI “supersonic tsunami” is causing serious impairments to their businesses, or will do so in the future.
When Elon Musk talks about the rapid, world-shaping effects of AI, he often calls the technology a “supersonic tsunami.” AI is the fastest developing technology in history… and it promises to reshape the world in massive ways.
Few industries have been hit harder by the supersonic tsunami than software.
From 2010 to 2024, the software industry was a wonderful place to invest. It gave life to many huge stock market winners. It became a favorite of institutional investors. A great software business sported high profit margins, big returns on capital invested, and excellent growth rates… so investors were happy to afford software stocks extremely high P/E multiples, often north of 35.
But over the past 18 months, investors have dumped software stocks by the truckload, worried that advanced AI will allow hundreds of new “AI native” companies to create and sell software for very low cost.
The software bears among us say that in the future, a single person using AI will be able to create specialized software programs that currently require teams of expensive programmers. HR software, graphic design software, accounting software, you name it, producing it is going to get a lot cheaper.
AI will put some software companies out of business. But keep in mind, it doesn’t have to put them out of business to make them stock market losers. AI only needs to lower the cost of producing what they produce over the long run. This will enable hordes of AI-centric competitors, which will throw a wet blanket on their growth rates, profit margins, and P/E multiples.
AI is the fastest-evolving technology in history. The world’s largest tech companies are spending over $600 billion this year on its advancement… with trillions more to follow. This leaves investors with very little clarity about what the future holds for software firms. And when the market has very little clarity on your future, it assigns you low valuations.
The enormous amount of market value lost by the companies above shows you that AI-powered technological disruption isn’t producing just a “K-Shaped economy.” It’s also creating a “K-Shaped stock market.”
The salient feature of this market is enormous upheaval – the creation of both big winners and big losers at a breakneck pace. Review your portfolio for potential dangers in this new, fast-moving market.
Identifying powerful trends and getting on the right side of them early has never been more impactful to investment performance.
The safe way to invest in soaring AI power demand earns its nickname
Credit: Ron and Patty Thomas
If the recent ceasefire between the U.S. and Iran holds, we can look back and say the utility sector truly had a good war. It passed the Epic Fury “stress test” with flying colors.
Back in July, I highlighted the emerging uptrend in the Utilities Select Sector SPDR Fund (XLU) and said AI power demand was poised to drive it higher. This ETF owns a diversified basket of major U.S. electric power producers.
Regular readers know one of the largest and most profitable facets of the AI megatrend is power consumption. Thanks to AI’s enormous promise, giants like Google, Meta, Microsoft, and OpenAI are spending hundreds of billions of dollars a year on data centers, AI chips, and other infrastructure components.
All that AI infrastructure is poised to consume huge amounts of electricity. Goldman Sachs forecasts global power demand from data centers will climb 50% by 2027 and as much as 165% by the end of the decade. This demand is driving a big bull market in virtually every form of electric power production.
One of my recommended ways to invest in this megatrend is via electric power producers… aka “electric utilities.” When you invest in utilities, you are not risking your money by trying to pick the company that creates the best AI model or the best AI-powered fintech application.
Instead, you’re making the safe bet that every company and every individual using AI ends up buying some electricity to power it. It’s the old “selling picks and shovels to Gold Rush miners” strategy applied to AI.
Much more important than what I think of the bull case for utilities is what the market thinks of it. There’s good news here.
During the market decline in March, XLU corrected about 6.5% from its all-time high, then rallied in the last week of March. Since the ceasefire was announced, XLU built on its late March rally to register a new all-time high. This strong performance during a period of broad market weakness is a signal that the fundamentals driving the utility stock uptrend are very strong.
The enormous business, technological, demographic, and political trends that shape our world play out over years, not months. This means the financial market trends they manifest tend to persist for years, not months. I remain bullish on utilities.
Market Notes
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Semiconductor and robotics leader Teradyne (TER) reached a new all-time high today.
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Our recommendation to invest in the Power Grid Upgrade megatrend continues to pay off. Giant electrical contractor Quanta Services (PWR) reached a new all-time high today.
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Optical networking stocks Lumentum (LITE) and Coherent (COHR) reached new all-time highs today.
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Semiconductor giant Intel (INTC) reached a new one-year high today.
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Giant real estate data and analytics firm CoStar (CSGP) reached a new one-year low today. The stock is down 52% over the past 12 months.
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South Korean telecom leader SK Telecom (SKM) – which owns a stake in AI firm Anthropic – just reached new highs.
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Our recommendation to own AI semiconductor leader Marvell Technology (MRVL) is paying off. The stock reached a new all-time high today, now up 95% over the last year.
Regards,
Brian Hunt
Editor, Money & Megatrends
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