Today’s issue in preview:
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One stock at the nexus of three megatrends. We’re bullish
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Hidden winners of the AI infrastructure boom
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One of the world’s strongest uptrends gets an Epic Fury boost. Higher prices ahead
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Our recommendation to stay long AI continues to pay off
Hidden winners of the AI infrastructure boom
Credit: Nikada
Yesterday, we detailed the large and varied list of AI infrastructure stocks breaking out to new all-time highs. Optical networking stocks reached new highs. Computer memory stocks reached new highs. Data center cooling stocks reached new highs. AI semiconductor stocks reached new highs. Data center operators reached new highs.
It was one of the greatest trading sessions ever for the “AI Boom” trade I’ve been bullish on for more than three years.
These companies are on the receiving end of the biggest investment boom in all recorded history. Given AI’s enormous promise, large tech firms such as Google, Amazon, Microsoft, OpenAI, Oracle, and Meta have invested over $1 trillion in semiconductors, data centers, and other components of AI infrastructure. They are on pace to invest around $700 billion this year alone and trillions after that.
The scale and velocity of investment is awesome and unprecedented.
Just after I produced that research note, many of the world’s most important semiconductor equipment stocks joined the party. They registered new all-time highs as well… sort of “rounding out” the roster of AI infrastructure market leaders.
Semiconductor equipment makers play a special role in the AI megatrend. They do not build semiconductors themselves. Instead, they provide a wide range of services and equipment that enable semiconductor production. They sell fabrication machines, chip components, and provide testing services, among other vital services that make the semiconductor industry go.
No semiconductor equipment industry, no AI boom.
The three U.S. leaders in semiconductor equipment are Applied Materials (AMAT), Lam Research (LRCX), and KLA (KLAC). Each firm holds a dominant role in the AI semiconductor equipment industry, is enjoying terrific revenue growth, and is enjoying a strong stock uptrend. They are all up more than 100% over the past year.
On March 20, I detailed how these three stocks were holding up well during the Epic Fury-induced market decline. This “relative strength” was a bullish sign. It was a “tell” from the market… that the fundamental forces driving these stocks are very strong. And this week, those fundamental forces drove the semi equipment group to new all-time highs. It’s good to be on the receiving end of the largest investment boom of all time. You give me a trillion dollars and I’ll show you a good time too.
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One stock at the nexus of three megatrends. We’re bullish
Credit: SweetBunFactory
RBC Bearings (RBC) is proving that life is better when you have not one megatrend working in your favor…but three.
When we first highlighted RBC in November, the stock was riding two powerful tailwinds – the robotics revolution and America’s manufacturing renaissance. The stock quickly advanced 32% gain before pulling back during Epic Fury.
RBC has recovered from the Epic Fury selloff, however. This week, it hit another all-time high, and the thesis has only gotten stronger.
Regular readers know the RBC story. It is one of America’s largest makers of precision ball bearings. These are mechanical components that reduce friction between moving parts and support rotational motion. They are critical components in complex machines such as aircraft engines, helicopters, industrial robots, satellites, and submarines.
You won’t find RBC’s logo printed on the side of a humanoid robot or a submarine, but without its components, those machines would not work.
These attributes put RBC at the nexus of the robotics boom and the American manufacturing renaissance. Even more bullish for RBC, a third megatrend has entered the picture.
Space.
RBC Bearings CEO Mike Hartnett laid it out clearly in the most recent earnings call. RBC is supporting the expanded needs of what he calls the “big 3 space explorers.” These are likely SpaceX, Blue Origin, and potentially Artemis.
RBC is supporting the race to the moon by building the Low Earth Orbit (LEO) satellites that require very precise assembly.
Think about the numbers for a second. Every satellite launched. Every rocket engine. Every space-based communications platform in LEO we have been writing about. All of it requires the precision bearings and engineered components that RBC has spent years perfecting.
Meanwhile, the other two megatrends are only accelerating as well. The CEO signaled that 2027 would be a higher growth year for the business than 2026, with Harnett describing demand from core markets as reaching “unprecedented levels.”
Robotics, space, and the American manufacturing capacity boom are big, multi-year trends. Giant trends such as these tend to persist and create great wealth. With this in mind, we’re still bullish on RBC.
One of the world’s strongest uptrends gets an Epic Fury boost. Higher prices ahead
Credit: isitsharp
In yesterday’s issue, I highlighted how electric power producers – as tracked by the Utilities Select Sector SPDR Fund (XLU) – held up very well during the Epic Fury-induced market decline and powered to all-time highs this week.
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.
We can say the same for the uptrend in Brazil. It also passed the Epic Fury “stress test” with flying colors. This week, the iShares Brazil ETF (EWZ) soared to a new one-year high.
Back in September, I detailed the bullish price action in Brazilian stocks and recommended owning them. At the time, I noted how Brazil was a good way to invest in the critical resources uptrend.
Critical resources are the building blocks of the economy. Think raw materials like crude oil, natural gas, iron ore, copper, corn, and cotton.
Mining, extracting, planting, harvesting, processing, refining, and transporting these critical resources is a multi-trillion-dollar business that drives the economy.
With technologies like AI changing the world, it’s easy to forget about critical resources as an asset class. But when they enter uptrends, those uptrends tend to last a long time, and they tend to go higher than most people think is possible.
For many professional investors, Brazil is a preferred way to play commodities in the stock market. Brazil is the world’s largest producer of soybeans, sugar, and coffee. It’s a major producer of cattle, cotton, corn, and orange juice. It’s a major producer of iron ore and crude oil. This makes Brazil heavily “geared” towards resource markets. It also makes it a beneficiary of Epic Fruy and its consequences.
As I’ve covered over the past few weeks, for many countries and businesses, Epic Fury is a brutal 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” resource supply chains as possible economically… like those from resource-rich Brazil.
Brazil had strong tailwinds blowing in its favor before Epic Fury. It was a market leader before Epic Fury. I expect that leadership to continue. Still bullish on Brazil.
Market Notes
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Our recommendation to own AI semiconductor leader Marvell Technology (MRVL) is paying off well. The stock climbed 5% today, reaching a new all-time high.
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Our recommendation to invest in Engineering & Construction (E&C) firms is also paying off well. Leading E&C firms Quanta Services (PWR), MasTec (MTZ), and MYR Group (MYRG) reached new one-year highs this week.
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Leading AI data center infrastructure firm Vertiv (VRT) reached a new all-time high today.
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Leading semiconductor testing and robotics firm Teradyne (TER) reached a new all-time high today.
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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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The Global X Lithium ETF (LIT) reached a new all-time high today. The fund is a play on batteries and battery metals.
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The AI boom is alive and well. The VanEck Semiconductor ETF (SMH) reached a new all-time high today.
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The AI supersonic tsunami continues to hammer the software and cybersecurity industries. The iShares Software Sector ETF (IGV) reached a new one-year low today. The Global X Cybersecurity ETF (BUG) also reached a new one-year low today. Industry giants Salesforce (CRM), Adobe Systems (ADBE), ServiceNow (NOW), Intuit (INTU), and Snowflake (SNOW) reached new one-year lows.
Regards,
Brian Hunt
Editor, Money & Megatrends
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