In preview:
- Why you should you own AI stocks to start 2026
- The critical resources megatrend starts 2026 with fresh all-time highs
- The Venezuela situation highlights a profitable investment megatrend
Why you should you own AI stocks to start 2026
AI bulls can start 2026 with a spring in their step. After all, the VanEck Semiconductor ETF (SMH) is trading at an all-time high, and they are winning the great “AI Boom or AI Bust” debate.
Last year, I named “AI Boom or AI Bust” the world’s most important financial question.
In pursuit of building the world’s most useful AI applications and infrastructure, big tech firms such as Google, Microsoft, and Meta are investing hundreds of billions of dollars. Wall Street estimates this spending could exceed $500 billion in 2026. This spending represents the largest business “bet” in history.
Whether Big Tech’s enormous AI investments pay off has become the most important issue in the stock market.
AI bears say much of the spending is crazy. It won’t generate the revenues and profits required to justify it. Once the world realizes this is the case, GDP growth will stall, and the stock market will plummet.
AI bulls say, “AI is the most transformative innovation of the century. Big Tech leaders know what they are doing. The coming innovations will justify the enormous investments.”
Regular readers know we like to know both sides of any debate about the “fundamentals” of a megatrend. But what the market thinks of those fundamentals is far more important than either side’s beliefs.
You can track and trade what the market thinks of the great “AI Boom or Bust” debate with the SMH ETF. This fund owns the world’s top semiconductor chip makers, including AI giants Nvidia (NVDA), Taiwan Semiconductor (TSM), and Broadcom (AVGO).
If the AI bulls are right, this fund goes higher. If the AI bears are right, this fund goes lower. As you can see in the chart below, the bulls are the clear winners. This morning, the fund broke out to a new all-time high. This move is attributable to persistently strong AI-related spending on semiconductors.
The trend is still up for AI stocks. The tailwinds are still blowing at their backs. Invest accordingly!
The critical resources megatrend starts 2026 with fresh all-time highs
Critical resource investors can celebrate the new year as well. After all, the iShares MSCI Global Metals & Mining Producers ETF (PICK)– recently reached an all-time high.
Last year, I repeatedly made the case that we are in a favorable environment for critical resources… one in which many individual resource sectors will generate strong returns.
Critical resources are the building blocks of the economy. Think raw materials like crude oil, natural gas, iron ore, copper, corn, and cotton.
Even today’s high-tech world of AI, apps, email, and Zoom calls is built on a “low-tech” foundation of steel, concrete, copper, lumber, and aluminum. Every day, our cars, trucks, and airplanes consume millions of barrels of fuel. Our lights turn on because we burn coal and natural gas.
Mining, extracting, planting, harvesting, processing, refining, and transporting critical vital resources is a multi-trillion-dollar business that affects every area of your life.
Many critical resource industries have become “ripple effect” technology investments. Copper, for example, is a major ingredient in power lines and electrical systems. It’s in very high demand from the electric power industry, which is enjoying tremendous demand from big tech’s AI data centers.
One way to track and trade the critical resource bull market is with the PICK ETF. This fund owns a basket of the world’s largest mining firms. Mega miners BHP Billiton (BHP), Rio Tinto (RIO), and Freeport McMoRan (FCX) are major holdings. These firms mine a large portion of the world’s iron ore, copper, and coal.
As you can see in the chart below, PICK shares broke out of a sideways consolidation in November. Since then, shares have climbed steadily to reach a new all-time high. This uptrend is likely to continue in 2026. Because trends tend to persist. You can leverage this fact of life to make a lot of money.
The Venezuela situation highlights a profitable investment megatrend
It’s a bull market in AI. It’s a bull market in mining.
It’s also a bull market in geopolitical angst and belligerence.
A few days ago, the U.S. government forcefully removed Venezuelan “strong man” Nicolas Maduro. It was a reminder that we live in a world full of geopolitical volatility that can turn into a heavily armed conflict. There’s the U.S. vs. Venezuela. The U.S. vs. China. China vs. Taiwan. Russia vs. Ukraine. The list goes on and on.
Given all the geopolitical angst out there, countries around the world are increasing spending on the latest missiles, satellites, drones, tanks, attack ships, and surveillance equipment.
Global military spending climbed by 9% to a record $2.7 trillion in 2024. It was the biggest annual increase since 1992, according to data from the Stockholm International Peace Research Institute.
Also, keep in mind that, as war becomes increasingly high-tech, older weapon systems are becoming obsolete and ineffective at the fastest rates in history. Drones are rapidly changing warfare. Replacement cycles are speeding up. For better or worse, this trend is good for defense industry revenues. You either spend big to go high-tech or you lose.
Don’t take my word for it, however. Take the market’s word for it.
The market, in this case, is the share price trend of the iShares U.S. Aerospace & Defense ETF (ITA). This fund owns a basket of big defense contractors such as Lockheed Martin (LMT), General Dynamics (GD), and Northrop Grumman (NOC). It’s the largest defense/military fund on the market.
As you can see in the chart below, the trend is up for conflict, geopolitical angst, and military spending. Shares of ITA are up 55% over the past year and just hit a new all-time high.
It’s a bull market in defense spending
Market Notes
- Mega banks JP Morgan Chase (JPM), Wells Fargo (WFC), and Back of America (BAC) reached all-time highs today. This is not bearish.
- Big Pharma firm Merck (MRK) reached a new all-time high today.
- High-horsepower engine maker Cummins (CMI) reached a new all-time high today. This is a bullish economic signal.
- Robotics firm Teradyne (TER) reached a new all-time high today. The bull market in robotics is alive and well.
- Drone giant Elbit Systems (ESLT) reached a new all-time high today.
- The oil-and-gas-focused iShares Energy Sector ETF (XLE) reached a 1-year high today.
