We’re revealing our top AI trade of the month…

Today’s issue in preview:

• We’re revealing our top AI trade of the month…

• This stock sector is starting to boom. We bet it has years to run. Are you on board

• One of our top thematic recommendations generates another huge winner

• Learn our Top Themes to buy now

We’re revealing our top AI trade of the month…

Credit: Ron and Patty Thomas

Short-term traders take note: The utilities sector is oversold and due for a rebound.

Back in April 2024, I sent a note to colleagues highlighting the emerging uptrend in utility stocks and the AI data center boom’s potential to increase electricity demand.

Utility stocks are shares of companies that generate, transmit, and distribute electricity. Most operate as regulated monopolies in specific regions, earning government-approved returns on their investments. They’re generally known for stable revenues and reliable dividends.

The bull case for these stocks going forward is simple: Given AI’s enormous promise, big tech firms 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 $4 trillion expected to follow.

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.

From early 2024 to mid 2026, utility stocks – as represented by the State Street Utilities Select Sector SPDR ETF (XLU) – enjoyed a strong bull market. However, the sector has been hammered over the past two months by rising interest rates. XLU has dropped 13% over the past two months, a huge move for the utility sector.

Traditionally, utility stocks decline when interest rates rise because income-seeking investors may view rising bond yields as making bonds more attractive relative to dividend-paying utilities.

This big decline has made XLU deeply oversold and due for a rebound. To gauge the “oversold-ness,” of XLU, we can consult its Relative Strength Index (RSI).

RSI is an indicator that measures a stock’s short-term price momentum. It is represented on a 0 – 100 scale. Typically, an RSI reading below 30 indicates that a stock or ETF has suffered a deep sell-off and may be due for a rebound.

I like to think of the RSI as showing how a market swings like a pendulum. The market swings back and forth, back and forth, back and forth… with some swings anomalously large and extreme.

RSI is no infallible indicator. However, it can be a useful tool to spot good trade setups.

In the case of XLU’s trade setup, the sector’s fundamental drivers are strong. And the price is badly stretched to the downside. RSI has reached an extreme level that in the past has flashed near local bottoms. A rebound starting soon is likely.

This stock sector is starting to boom. We bet it has years to run. Are you on board?

Credit: gorodenkoff

This morning, the benchmark S&P 500 declined 0.40% to trade back to its level in early August.

And one look at our Global Trend Tracker database shows most major U.S. sectors and themes are down on the day. Many are trading in sideways, directionless trends… much like “becalmed” sailboats on a windless sea.

This pervasive lack of bullish momentum makes today’s continued strength and new highs in Healthcare Equipment & Services stocks such as Repligen (RGEN), Agilent (A), Thermo Fisher Scientific (TMO), Mettler Toledo (MTD), and Waters (WAT) more impressive.

We covered this industry yesterday because that’s where the money was flowing. It’s where the meaningful trend was. And we’re covering it again today because both of those conditions are in full force again.

This group of winners has many of the “who’s who” of the healthcare industry niche that sells laboratory equipment, drug manufacturing and testing equipment, and related services. They comprise a critical infrastructure layer that enables large drug firms such as Pfizer (PFE), Amgen (AMGN), Merck (MRK), and Eli Lilly (LLY) to test, develop, and manufacture drugs.

Avid Money & Megatrends readers know that “Boomer health care” is one of our highest-conviction long-term investment megatrends. We don’t know of another investment research publication that has written more bullishly, more often about this booming industry than we have.

Over the past year, we have published more than two dozen pieces on opportunities in drug development, biotechnology, senior living facilities, genomics, cardiology, diagnostics, and more.

Our bullish stance has produced a parade of home runs, with the healthcare industry dominating the stock market’s new highs list over the past year.

Healthcare stocks are generating extraordinary returns because they are benefiting from several megatrends simultaneously…

One is demographics. 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.

Two is exponential technological progress. Thanks to major advances in genomic sequencing, AI-powered analytics, imaging technology, and preventive treatments, healthcare is becoming much better and more personalized. This is driving strong demand for all kinds of new tests, tools, and treatments.

After all, when a useful and important service you buy gets much better, you typically buy more of it.

The fortunes of the equipment and services firms above are closely tied to the R&D and capital spending cycles of big drug firms like those listed above.

When drugmakers expand laboratory research, genomic analysis, testing programs, and manufacturing capacity, they require more analytical instruments, consumables and bioprocessing equipment – the “picks and shovels” supplied by companies like Agilent, Waters, and Thermo Fisher.

We believe the new highs reached by these firms are harbingers of a healthcare megatrend that will generate large returns over the coming years: That thanks to advanced genomic sequencing, AI-powered data analytics, and other bleeding edge innovations, the healthcare industry will move away from blunt “one size fits all” treatments and move to more “personalized” treatments that are tailored to an individual’s genetic makeup.

The Boomers are willing to spend trillions of dollars per year on such things.

This megatrend will drive strong drugmaker R&D spending and strong revenue growth for well-positioned “picks and shovels” firms above.

Also, consider that U.S. healthcare leaders and the U.S. government are very keen on increasing domestic drug manufacturing to reduce our reliance on foreign manufacturing.

The FDA says more than half of pharmaceuticals distributed in the U.S. are manufactured overseas, and only about 11% of active pharmaceutical ingredient manufacturers are U.S.-based.

Since 2025, pharmaceutical companies have announced hundreds of billions of dollars of U.S. manufacturing and R&D investment. CBRE tracked approximately $350 billion in announcements, although it estimates that roughly half of these were projects that had already been planned or begun – an important caveat when interpreting the headline.

Add these two trends – the personalized treatment revolution and the domestic drug manufacturing boom – and you get serious fundamental tailwinds that will continue driving the bull market in many areas of healthcare, especially the “picks and shovels” providers of drug development and manufacturing. We remain bullish on drug development and manufacturing infrastructure.

One of our top thematic recommendations generates another huge winner

Credit: gorodenkoff

It turns out, being bullish on the Healthcare Diagnostics theme was a heck of an idea.

The latest data point that makes this case?

GRAIL (GRAL) – one of the world’s leading cancer diagnostics firms – just received a critical endorsement from an FDA advisory committee for its bleeding-edge Galleri cancer screening technology. The news has sent GRAL stock up 57% in the past eight trading sessions. Shares are up a massive 97% since our original bullish note on Healthcare Diagnostics, which featured GRAIL.

In the Healthcare Equipment & Services note above, we detailed why Boomer health care is one of our highest conviction long-term investment themes. Our bullishness has yielded many large winners over the past year.

In July, we narrowed our focus to the Healthcare Diagnostics theme.

Over the past 20 years, preventive healthcare diagnostics have improved dramatically due to advances in genomics, imaging technology, and data analytics. Genetic testing has become faster and less expensive, allowing earlier identification of disease risks. High-resolution imaging and improved laboratory testing can detect conditions such as cancer, heart disease, and diabetes at much earlier stages.

Wearable devices and remote monitoring tools continuously track vital signs and health trends, enabling early intervention. Electronic health records and artificial intelligence help clinicians identify risk patterns and personalize screening recommendations.

Together, these innovations are shifting healthcare from reactive illness care to predictive, preventive, and proactive disease management before serious symptoms develop. The shift from reactive treatment to early detection is still early, but the numbers already reflect its momentum.

The U.S. health care diagnostics market was valued at $35.7 billion in 2024 and is projected to reach nearly $60 billion by 2030, growing at an annual rate of over 9%. Globally, clinical diagnostics is on track to hit $170 billion by the end of the decade. North America commands nearly half of that market.

But those figures don’t fully account for how AI is about to revolutionize health care diagnostics, such as:

• AI-powered imaging that detects inflammation in the coronary arteries before a heart attack.

• Liquid biopsies that identify cancer DNA in a blood draw years before a tumor becomes visible.

• Genetic testing that recommends food and supplement changes to treat illness before it even takes root.

The diagnostics market isn’t just growing. It’s being rebuilt from the ground up around a new clinical philosophy powered by blazing technological progress: detect early, intervene early, prevent the crisis entirely. This industry’s potential to drive growth, deliver societal benefits, and produce big stock market winners is massive.

In our June note, we detailed how GRAL’s flagship product, Galleri, is a multi-cancer early detection test that analyzes DNA fragments in a blood sample to identify cancer signals and predict where the cancer originated, potentially detecting more than 50 types of cancer, many of which lack routine screening methods. And as of today, this test’s potential has driven GRAL up 95% since our note.

We look at this major shift and confidently restate our original summary of Healthcare Diagnostics: Healthcare is undergoing a historic revolution. For generations, the system was built to treat the sick. It is now being rebuilt to detect and treat disease before it makes people sick.

The companies above are building the tools and equipment at the center of what may be the most durable growth theme in healthcare investing over the next decade. We recommend staying bullish on it and the stocks we have covered.

Market Notes

• Our recommendation to invest in the genomics megatrend continues to pay off. Sector leaders Natera (NTRA) and Illumina (ILMN) reached new all-time highs today.

• Our July 31 call to buy Meta (META) remains a huge winner. The stock is up 42% since our note, thanks to the company’s successful new AI assistant Muse.

• Nuclear power industry manufacturer BWXT Technologies (BWXT) just hit a new one-year low.

• Cruise line giant Carnival Corp (CCL) reached a new one-year low today.

• Casino giants Wynn Resorts (WYNN), Boyd Gaming (BYD), and Las Vegas Sands (LVS) reached new one-year lows today.

Regards,

Brian Hunt
Editor, Money & Megatrends

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