How the AI boom can pay you large income streams

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Today’s issue in preview:

• How the AI boom can pay you large income streams

• Two big developments for “the world’s most important trend.” An update in our ongoing special series

• ON SALE: 10.4 million acres of high-quality inflation defense

• Learn our Top Themes to buy now

How the AI boom can pay you large income streams

Credit: stanley45

This morning, the Alerian MLP ETF (AMLP) advanced 0.52% to reach a new all-time high.

The fund, which is the largest ETF focused on oil and gas pipeline companies, has returned 26.8% so far this year.

In other words, the business of transporting oil and gas across America is booming.

If you’re a dedicated Money & Megatrends reader, this comes as no surprise. You might even be sick to death of reading about this bull market. It is one of our highest conviction themes… and we’ve written over a dozen research notes on it. I hope you’ve made good money on it.

In early 2024, I began to see the oil and gas pipeline industry as the best way to generate substantial passive income from the AI boom.

Given AI’s enormous promise, big tech firms like Meta (META), Alphabet (GOOG), and Microsoft (MSFT) are racing to build the world’s best AI models and infrastructure. They’ve already spent more than a trillion dollars. This year, they are on pace to spend over $700 billion on AI infrastructure, with more than $3 trillion expected to follow.

All that AI infrastructure is poised to consume vast amounts of electricity. S&P Global estimates that global electricity demand will increase by nearly 50% by 2040.

I’ve frequently mentioned that AI’s growing power demands are a bullish driver for natural gas, as it is the preferred clean-burning fuel for power plants that support AI data centers. This is why I believe natural gas producers such as EQT (EQT), Antero Resources (AR), Expand Energy Corp. (EXE), and Range Resources (RRC) are compelling long-term stock ideas.

However, all the natural gas in the world isn’t worth much if you can’t transport it to customers.

This is where America’s vast natural gas transportation, processing, and storage industry comes in. An extensive network of pipes crisscrosses America to allow energy companies to transport natural gas from the wellhead to power plants. If we get an AI-driven boom in natural gas consumption, we get a boom in natural gas transportation by default.

This year, the market has enthusiastically supported our thesis. Blue chip pipeline operator Enterprise Products (EPD) has returned 28.2% this year. Fellow blue chip operators Energy Transfer (ET) and Kinder Morgan (KMI) have returned 37.6% and 20.3%, respectively.

These individual stock gains have driven AMLP to a 26.8% year-to-date gain. Despite AMLP’s big run and shares being near all-time highs, it still yields around 7.27%.

The typical pipeline operator is not your conventional “high-risk, high-reward” AI play. Instead, it’s a boring, predictable business that generates steady cash flows and shareholder distributions.

But the AI megatrend is giving natural gas a boost that will last for years. Plus, the Iran War and its constriction of Middle Eastern energy flows have made U.S. natural gas exports increasingly more valuable to customers in Europe and Asia. The Russia/Ukraine war is doing the same with its constriction of Russian natural gas exports.

Generating stable cash flows by transporting oil and gas isn’t as exciting as some high-tech industries, but business is booming… and will most likely do so for years.

Two big developments for “the world’s most important trend.” An update in our ongoing special series

Credit: KanawatTH

Score two points for the AI bulls.

Today, we received a pair of important – and bullish – price signals with big implications for “the world’s most important trend.”

These bullish signals come in the form of multi-month highs for optical networking giant Lumentum (LITE) and computer memory giant Micron (MU). Both firms are huge players in their respective industries… industries that play key roles in the AI infrastructure megatrend.

Over the past month, we’ve published a special series of research notes analyzing the AI infrastructure trend… which we call “the world’s most important 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 will have large effects on your portfolio.

As mentioned in our above note on oil and gas pipeline stocks, large companies 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.

The collective voices of the AI bears amounted to a background “hum” in 2025. This year, they have grown into a loud chorus.

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), just might know more about 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.

Dedicated 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 a hell of a lot in my book.

Over the past month, we’ve analyzed the trends in optical networking stocks such as Lumentum and computer memory stocks such as Micron to guide our trading. Both optical networking and computer memory are key systems operating inside AI data centers. This means leading stocks in those industries are important real time indicators with something to say about the health of AI infrastructure.

Today, Lumentum jumped 2% to reach its highest point in over two months. Micron jumped 3% to reach its highest point in over two months.

By themselves, these new short-term highs do not mean the larger AI infrastructure trend is back in “juggernaut” phase. A thorough analysis of any trend as large and diverse as AI infrastructure is a mosaic of facts, figures, and stock price action.

However, given the high profile of these two stocks and their respective industries, we must give these new short-term breakouts several pounds of importance on our “weight of the evidence” analysis of AI infrastructure. These are two very large steps in the bullish direction. I’ll continue tracking such steps and tell you what they mean for “the world’s most important trend.”

ON SALE: 10.4 million acres of high-quality inflation defense

Credit: Douglas Rissing

Over the past six months, we have published a special series of research notes on publicly traded assets such as copper mines, energy pipelines, and gravel pits that can add a robust “inflation defense” component to your financial life.

You know why being vigilant against inflation is important: The U.S government has promised far too many things to far too many people. It is spending far more on social programs, pensions, and wars than it collects in tax revenues.

The related debts and obligations governments have taken on cannot possibly be paid back with sound money. They can only be paid back with debased, devalued money… much of which is created out of thin air. This is driving inflation and significant currency debasement. Prices are going up because the value of our money is going down.

Measured against a basket of widely used raw materials like crude oil, corn, copper, natural gas, sugar, and soybeans, the U.S. dollar has lost 53% of its value over the past eight years.

When I provide guidance on inflation defense, I urge people to keep my number one rule in mind: own in-demand, useful assets that cannot be easily replaced or replicated.

That is inflation defense in a nutshell. You want to own businesses and properties that produce in-demand, scarce resources, products, experiences, and services.

This group of assets includes quality farmland, beachfront real estate, timberland, mountain-view properties, great businesses, and oil and gas pipelines.

When a very difficult or impossible-to-replicate business or property produces in-demand, scarce resources, products, experiences, or services, it tends to hold its value no matter what the dollar is doing.

Its price will constantly “recalibrate” to accommodate an increase in currency units. It’s like the difference between slicing a pizza into 6 or 8 pieces. The number of slices changed, but the amount of pizza is the same.

For centuries, quality timberland has been a preferred hedge against currency debasement and an asset class of the wealthy. This is the case for multiple good reasons…

• Quality timberland is a “living asset.” Your “crop” grows regularly with minimal capital expenditure.

• Timberland yields in-demand products, such as lumber and paper, which generate income for the owner.

• These income streams can be augmented by leasing timberland to hunters, campers, and farmers.

• You can delay timber harvests when prices are low and keep the “crop” growing.

• Occasionally, a real estate developer will show up at your door and offer you ridiculously high prices for some of your acres.

These qualities make timberland an asset that steadily grows in value and keeps pace with the rate at which voters and their elected representatives debase the currency via profligate spending. Timberland has returned around 10% per year for decades… with low correlation to the stock market.

And here in the AI age, timberland has the treasured quality that, like premier sports teams, beachfront homes, and copper mines, it cannot be coded into existence by AI.

If you like the idea of owning timberland, you can buy it in private transactions and enjoy a walk in the woods.

Or, you can buy timberland in the stock market via big timberland REITs Weyerhaeuser (WY) and Rayonier (RYN). These firms own huge tracts of timberland across the U.S. They manage them for investors who understand the benefits of timberland ownership. Weyerhaeuser owns 10.4 million acres of land, which makes it the largest public landowner in the U.S.

Since they are structured as REITs, they pay decent dividends. WY’s current yield is 3.7%. RYN’s current yield is 5.09%.

Over the past four years, owning WY and RYN has not been a pleasant walk in the woods. Since these businesses generate significant revenue from lumber sales, they are exposed to the ups and downs of the U.S. housing market, which is struggling with high mortgage rates and low affordability problems. Both stocks are down more than 20% over the past four years.

Many investors will look at the weak housing market and poor recent returns of housing-related stocks and say to avoid WY and RYN. However, it’s only when sentiment is terrible towards a cyclical sector like housing that you can get good value for your investment dollars. If you’re looking for relative bargains in the “inflation defense” section of the stock market, you’ll find them in timberland.

Market Notes

• Our recommendation to get long oil and gas stocks continues to pay off. Oil giants Chevron (CVX), ConocoPhillips (COP), Cenovus Energy (CVE), and Equinor (EQNR) reached new all-time highs today.

• Fast food giant McDonald’s (MCD) reached a new one-year low today.

• Clothing and footwear giant Nike (NKE) reached a new one-year low today.

• The VanEck Oil Refiners ETF (CRAK) hit a new high today. Individual refining giants Valero Energy (VLO), Phillips 66 (PSX), and Marathon Petroleum (MPC) reached highs, too.

• Technology giant Dell (DELL) just hit a new high one week post earnings. It’s now up 343% YTD, making it one of the best stocks in the market this year.

Regards,

Brian Hunt
Editor, Money & Megatrends

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