This stock is a huge beneficiary of AI job displacement

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Today’s issue in preview:

• This stock is a huge beneficiary of AI job displacement

• Six stocks for investing in what Elon Musk calls “the biggest product of all time”

• This niche tech trade has become a stock market juggernaut

• Learn our Top Themes to buy now

This stock is a huge beneficiary of AI job displacement

Credit: Morsa Images

As demonstrated by our huge wins in Semiconductor Equipment, Engineering & Construction, Robotics, and Optical Networking, investing with a megatrend working in your favor is a wonderful thing.

But how about two megatrends working in your favor?

This brings us to Covista (CVSA), America’s largest for-profit educator of doctors, nurses, nurse practitioners, and other health care workers. The company has a bright, bullish future thanks to its unique position at the nexus of two megatrends.

One is Boomer Health Care, one of our highest conviction investment themes for the next decade.

Avid M&M readers know the bull case behind Boomer health care. More than 10,000 Americans reach retirement age every day. The U.S. population aged 80 and older is projected to roughly double, from 14.7 million in 2025 to 29.4 million by 2045.

This is the enormous Baby Boom generation entering the phase of life where health care and longevity spending skyrocket. For many boomers, a typical month involves going to see at least one doctor to have something looked at, removed, or treated.

This means many health care businesses are experiencing huge demand now – and will for at least the next decade. It also means soaring demand for health care workers. If you’re a parent and worried about your child getting a job, just point them to the booming health care industry.

The second megatrend benefiting firms like Covista is the accelerating pace of AI development and its impact on many businesses and careers.

AI is the fastest-evolving technology of all time. Its development is being driven by the largest collective investment effort in all recorded history.

Huge industries are being transformed in very short time periods. New businesses can spring up and cripple old businesses in under 24 months.

As AI advances and proliferates throughout the economy, jobs will be transformed, created, and eliminated at a rapid rate. This will lead many people to want to learn new skills and earn new certifications for new jobs… especially in careers poised to boom for a long time, like health care, construction, and machine repair.

As I covered in our June 1 issue, this trend is poised to benefit for-profit “trade school” educators such as Lincoln Educational Services (LINC) and Universal Technical Institute (UTI). It should also benefit Covista.

The company estimates that its institutions educate more than 97,000 students annually. Each year, approximately 24,000 graduates enter the healthcare workforce through one of Covista’s educational programs.

Thanks to surging demand from aging Boomers, many health care fields are experiencing serious worker shortages. This is creating a huge demand for students graduating from Covista’s programs. Add a rapidly changing job market thanks to AI, and you get a future where not one – but two – megatrends work in Covista’s favor. Bullish!

This niche tech trade has become a stock market juggernaut

Credit: jiefeng jiang

It turns out that ignoring the AI bears… and staying long AI infrastructure stocks was a very good idea.

This week, leading stocks in one of the most direct bets on the AI boom – the semiconductor equipment group – reached new all-time highs.

In late 2022 – before Chat GPT was released to the public – I began telling 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 such as Google, Amazon, and Microsoft are in a race to build the world’s best AI models and infrastructure. This year, they are on pace to spend over $700 billion on AI infrastructure, with more than $3 trillion dollars coming behind it. It’s the largest collective investment effort of all-time.

Whether Big Tech’s massive investment pays off has become one of the world’s most important economic issues.

AI bears say much of this spending is crazy. It won’t generate the revenues and earnings 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.”

Since ChatGPT came out, I’ve taken the “bullish on AI” side of this debate and made a lot of money doing so. I’ve also pounded the table on semiconductor equipment stocks to benefit from this megatrend.

Semi equipment makers are one of the most underappreciated players in the global AI semiconductor industry. They do not build semiconductors themselves. Instead, they provide a wide range of critical services and equipment that enable semiconductor production.

They sell chip fabrication machines and chip components and provide testing services, among other vital services that keep the semiconductor industry going. They sell picks and shovels to the companies making picks and shovels.

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 enjoys a dominant role in the AI semiconductor equipment industry, is experiencing terrific revenue growth, and is enjoying a strong stock uptrend.

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. They are up an average of 75% since our March 20 note (a blazing 281% annualized pace).

In other words, it’s good to be on the receiving end of the largest investment boom of all time. The AI infrastructure uptrend is alive and doing well. The AI bears? Not so much.

Six stocks for investing in what Elon Musk calls “the biggest product of all time”

Credit: EvgeniyShkolenko

Yesterday, shares of Allient Inc. (ALNT) surged 4.3% to reach a new all-time high.

This big move is yet more confirmation of our Robotics Revolution theme, one of our highest conviction long-term bets here at Money & Megatrends.

The Robotics Revolution is a giant, multifaceted megatrend poised to change our world in thousands of ways. Decades of progress in this field are yielding autonomous cars, automated factories, surgical robots, military drones, delivery drones, and humanoid robots.

The humanoid aspect of this boom is particularly interesting to me as an investor.

On February 5, we analyzed the emerging humanoid robot megatrend and presented a six-stock basket to play it. This technology is one of Elon Musk’s biggest business bets right now.

In January, Musk announced Tesla would phase out two car models to free up factory capacity to build its Optimus humanoid robots.

Humanoids are poised to become one of the most impactful, most popular innovations in history. Imagine millions of robots in our homes, factories, mines, and fields doing work most of us consider to be dirty, dreary, and dangerous.

The futurist I put the most stock in – Musk – says humanoids will be “the biggest product of all time.” Point taken.

In pursuit of humanoid market dominance, venture capitalists and large tech firms such as Tesla, Google, and Amazon are pouring billions of dollars into humanoid factories and related R&D. Over a dozen humanoid makers are competing for the title of “king of the humanoid market.”

In short, this is an enormous emerging megatrend… and a huge investment opportunity.

If I had to bet on one humanoid maker, I’d pick Tesla. Because Elon is Elon. He is the greatest high-tech manufacturer of all time.

However, rather than trying to pick a single winner of the humanoid war, I’d rather sell arms to all combatants… aka “sell highly specialized component parts to all robot makers.” This strategy is a safer, surer bet than picking a single winner.

Producing humanoid components is a difficult business. Robot joints, frames, gears, batteries, motors, and sensors must possess a very-hard-to-achieve balance of lightness, precision, durability, and functionality. This is ultra-high-tech manufacturing.

Plus, any big-league humanoid component maker must be able to fill gigantic orders from the likes of Tesla. Producing 1,000 precision components is one thing. Producing 1 million of them is a different thing. Operating on this scale requires not only technical expertise but also sourcing expertise for vast amounts of raw materials.

Back in February, we detailed that most of the world’s key robotics component makers are based in China. Many U.S. investors are justifiably reluctant to buy China-listed stocks. However, we detailed six U.S. companies with exposure to the humanoid market poised to benefit from this emerging megatrend (and the broader robotics trend). They were Regal Rexnord (RRX), RBC Bearings (RBC), Ambarella (AMBA), Allient (ALNT), Teradyne (TER), and Vishay Precision Group (VPG).

So far, this Humanoid Basket is up by a massive 57% for us in less than six months. Allient is up 65% since our original note.

Allient is a $1.7 billion small-cap company that manufactures precision electric motors, gears, and motion control systems for robot makers, vehicle makers, defense firms, and other manufacturers. A growing segment of its business is the manufacturing of highly precise coreless motors used in robotics hands (known as end effectors).

This technology is why Allient has been a supplier of surgical robots, such as Intuitive Surgical’s (ISRG) Da Vinci systems. Now it is deploying those same precise motors into humanoid fingertips, solving the “dexterity” bottleneck that prevents current humanoids from performing very delicate tasks.

As you can see in the chart below, the market is enthusiastically supporting the Allient/humanoid robot investment thesis. The stock just reached a new all-time high. We remain very bullish on selling critical components to robot makers.

Market Notes

• Our recommendation to invest in the genomics trend is a big winner. The ARK Genomic Revolution ETF (ARKG) surged 3.7% today to reach a new one-year high.

• The peptide megatrend we’ve been recommending is generating returns. Drug giant Eli Lilly (LLY) jumped 6% this morning to reach a new all-time high.

• The American consumer continues to spend money with enthusiasm. Shopping mall giant Simon Property Group (SPG) reached a new all-time high this week.

• The Boomer health care megatrend continues to drive stock returns. The Invesco Dynamic Pharmaceuticals ETF (PJP) reached a new all-time high today.

Regards,

Brian Hunt
Editor, Money & Megatrends

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