The safe way to invest in soaring AI power demand.

Today’s issue in preview:

• The safe way to invest in soaring AI power demand.

• Think there’s a K-Shaped economy? Try the K-Shaped stock market. Make sure your portfolio is on the right side of AI.

• Could AI grow so powerful that it makes one of the world’s most successful tech ETFs a loser?

• Our extraordinary track record gets even better: Oil stocks, AI infrastructure stocks, Power Grid Upgrade, and critical resources reach all-time highs.

Think there’s a K-Shaped economy? Try the K-Shaped stock market. Make sure your portfolio is on the right side of AI.

Credit:imaginima

The forces driving the K-Shaped stock market are alive and well this week.

Yesterday, the AI Lawnmower performed another round of cutting down stocks whose business models are based on Knowledge, Information, Data, and Software work… aka the KIDS category.

Over the past six months, we have scored big wins with our oil, critical resource, silver, gold, copper, robotics, pipeline, and Latin America recommendations.

Each position above has its own favorable fundamental drivers, but they are united in that, at the end of the day, these positions produce things you can stub your toe on. They produce things that a person using AI cannot code or prompt into existence. As wonderful as AI is, it cannot create a mile of 30-inch steel pipe or a tanker load of crude oil.

On the other hand, companies in the category I’ve called KIDS have suffered historic declines in market values. Generally, these businesses sell digital products and services, such as consulting firms, credit rating agencies, financial data providers, and software firms. You can’t stub your toe on what they sell.

These companies sell products and services that AI programs could produce for a very low cost soon. If someone using AI can code a product or service into existence, then any business related to it is in danger.

AI will put some of these KIDS work 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 to throw a heavy wet blanket over their growth rates, profit margins, and P/E multiples.

These concerns are driving what I call the K-Shaped stock market. Investors are selling companies vulnerable to AI-driven disruption and buying companies that are not. As a result, some stock sectors are soaring… while some are cratering.

Yesterday, these dynamics drove software giants Salesforce (CRM), Adobe Systems (ADBE), Intuit (INTU), Workday (WDAY), Docusign (DOCU), Monday.com (MON), Box (BOX), Atlassian (TEAM), and Trade Desk (TTD) to new one-year lows. They drove consulting giants Accenture (ACN) and Booz Allen Hamilton (BAH) to new one-year lows. They drove online travel firm Booking Holding (BKNG) to a new one-year low. They drove credit rating firm Fair Isaac (FICO) to a new one-year low.

Will AI drive all these firms out of business? Highly doubtful.

Not every business in the KIDS category will be a casualty of AI. Some will adapt and thrive. There’s going to be an opportunity in this stock market wreckage. But for me, I prefer to keep most of my bets in the realm of things I can stub my toe on.

The safe way to invest in soaring AI power demand

Credit: Ron and Patty Thomas

This week, the market gave us more evidence that the “AI Power Consumption” theme is alive and well… and that utility stocks are a great way to play it.

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.

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-powered software application or the best AI-powered travel site.

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.

Our advice to own utilities is paying off. XLU – a diversified basket of utility stocks – is up 15% since our recommendation (vs. 9.76% for the S&P). Yesterday, XLU hit a new all-time high.

The gigantic 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. With all this in mind, I remain bullish on utilities.

Could AI grow so powerful that it makes one of the world’s most successful tech ETFs a loser?

Credit:lucky-photographer

Will AI become so efficient… and enable so many people to start successful tech upstarts… that it could cripple one of the world’s most popular investment vehicles?

These are very important financial questions right now, with enormous consequences for your 401(k).

This year, I’ve written many times about how AI is powering a K-Shaped stock market… full of big losers and big winners. Companies vulnerable to AI disruption are plummeting. Many companies that make things you can stub your toe on are soaring.

AI is the fastest-evolving technology in history… and Big Tech firms such as Google and Amazon are investing record amounts to accelerate it. As you read this, AI is advanced enough to perform many high-paying white-collar tasks. Nobody knows for sure how fast it will displace the tens of millions of humans that currently perform them. We only know for sure that it will bring enormous change and volatility.

This brings us to one of the most successful investment vehicles of all time, the Nasdaq 100. The “Naz 100” is like the Dow Jones Industrial Average for technology firms. It’s an index heavily weighted towards Big Tech firms and software firms. For years, the Nasdaq 100 ETF (QQQ) has provided investors an easy “one click” way to invest in bleeding-edge technology and profit from it. Over the past 10 years, QQQ is up 534% vs. the “less tech-heavy” S&P 500’s 317% return.

The QQQ has made so many people so much easy money that it’s a treasured asset in many American households. It’s right up there with the family dog and the digital photo albums.

But… there’s a real chance that AI enables so many competitors to enter enough tech-focused industries that it damages QQQ returns. Hordes of AI-centric competitors could enter tech industries and throw a heavy wet blanket on the growth rates, profit margins, and P/E multiples of current leaders.

Regular readers know we like to stay on top of both the bear case and the bull case for any investment… but it’s what the market thinks that really matters to us. In this case, we can learn what the market thinks of QQQ’s prospects by watching how it resolves its current consolidation phase in the $585-$635 range.

As you can see in the chart below, QQQ enjoyed a big rally off the April 2025 “tariff tantrum” lows. But over the past four months, concerns about Big Tech’s profitability and the software industry’s meltdown have kept the QQQ treading water in a sideways range.

The QQQ punching through the bottom of this range would be a huge red flag that signals AI is paradoxically becoming so powerful that it hurts, rather than helps, many tech companies.

Market Notes

• Our January 12^th , 2026 recommendation to invest in “AI bottleneck play” AXT (AXTI) is paying off. The optics giant advanced 18% today, reaching an all-time high. It’s up 46% in less than two months.

• Our recommendation to invest in critical resources continues to pay off. Shares of mining giant BHP Billiton (BHP) just reached all-time highs.

• Our recommendation to invest in the giant Power Grid Upgrade theme continues to pay off. Big electrical contractors MYR Group (MYRG) and Quanta Services (PWR) hit all-time highs today.

• The AI infrastructure boom continues to create big stock market winners. AI infrastructure leaders like Corning (GLW) and Analog Devices (ADI) reached new all-time highs today.

• Our September 2025 recommendation to get long oil stocks continues its winning ways. The SPDR S&P Oil & Gas Equipment & Services ETF (XES) reached a new one-year high today. It’s up 53% since our original note.

• Teradyne (TER), a semiconductor and robotics leader we’ve highlighted as a robotics megatrend play, reached an all-time high today.

Regards,

Brian Hunt
Editor, Money & Megatrends