Focus on the Trend, Not the Noise

There are a lot of negative headlines out there right now…

Yesterday, a rebellion led by Florida Republican Congressman Matt Gaetz led to the ouster of House Speaker Kevin McCarthy.

It was the first time that a House Speaker was removed this way.

Congress must approve new funding by November 17. Without a clear replacement for McCarthy, the threat of a government shutdown is that much more likely.

In the meantime, Fed boss Jerome Powell has become a monthly talking head of doom.

His comment last Wednesday, that the Fed would be keeping rates “higher for longer,” hasn’t exactly thrilled investors.

Higher rates choke economic growth by raising borrowing costs.

And we’ve seen some major down days in the stock market as a result.

Yesterday, for instance, the blue-chip S&P 500 and the tech-heavy Nasdaq ended the day deep in the red.

And last week, the two indexes suffered their worst weekly losses since March.

It may feel like it’s time to hit the sell button on your stocks… or at least sit on the sidelines in cash.

But as I’ll show you today, this is not the time to bail on best-in-breed tech stocks.

Despite the scary headlines, there’s a massive trend reshaping the way we live and work.

And when you look back at this moment in five or 10 years, you’ll barely see the dip in the market. What you will see is that it was the start of the biggest tech trend since the rollout of the internet.

I’m talking about the rise of artificial intelligence (AI). And not only is it one of the biggest tech trends of our lifetimes, but we also have a roadmap for how to profit.

Hardware, Software, Everywhere

That’s our roadmap for profiting from the AI boom that will unfold over the next decade or so.

It’s simple to follow.

It starts with Nvidia (NVDA) and other hardware companies.

They’re building the chips – aka semiconductors – and networking devices that power AI systems.

ChatGPT-4 analyzed more than 1 trillion data points during its training phase.

Google’s Bard AI chatbot analyzed more than 100 billion during its own development.

Hardware makes it all possible. And when you create AI software to run over that hardware, the results can be remarkable.

Take AlphaFold. In 2020, Google’s AI division, DeepMind, launched this specialized AI system.

It uses machine learning to solve the so-called protein-folding problem.

Without getting too far into the weeds, proteins are described by their amino acid sequence. But in our bodies, they scrunch up into a 3D shape.

Predicting the 3D shapes of proteins is essential for drug and vaccine development. It’s also key to curing diseases. Misfolded proteins can lead to diseases such as Alzheimer’s and Parkinson’s.

It typically takes a PhD candidate the full length of a four- to five-year PhD program to figure out the shape of a single protein.

But AlphaFold can fold an average-length protein in seconds.

This allowed it, in 2021, to fold all 200 million proteins in a single year.

It then put out a free-access database that researchers from all over the world can use.

And they’re using it in all sorts of interesting ways, including to…

• Create a novel malaria vaccine that focuses on curbing transmission of the disease.

• Combat antibiotic resistance.

• Develop medicine to treat Chagas disease, which is spread by a parasite and is common in Central and South America.

• Shed light on ways to slow the progression of neurological diseases such as Parkinson’s disease.

Or take the work happening at Tesla to create autonomous AI driving systems.

Cracking the Self-Driving Code

This year, developers used Elon Musk’s $1 billion Dojo supercomputer to totally rewrite the code that powers Tesla’s Full Self-Driving (FSD) software.

Tesla hasn’t made FSD widely available to the public yet. But it’s a major leap in autonomous driving.

It’s also a leap forward for humanity. According to estimates from the National Highway Transportation Safety Administration, autonomous driving will cut the number of road deaths by more than 90%.

Past versions of FSD were a combination of human-written code and AI.

A developer wrote lines of code that told the car what to do when it spotted a stop sign, for example.

But the latest version of FSD is different. There isn’t a single line of human-written code telling the car what a stop sign means… to avoid hitting pedestrians… or what to do around a construction zone.

Instead, Tesla trained powerful AI models from the ground up using data from more than 300 million miles driven in Teslas.

Here’s a clip of it in action during a demo drive with Elon Musk.

Source: X.com

Tesla engineers and developers have been trying to crack the code on FSD for the past eight years. Musk says Dojo made more progress in a matter of months.

Google, Tesla, and other software companies are going to be big winners as their AIs solve problems that would otherwise take humans years, if not decades, to solve.

Eventually, we’ll get to the everywhere phase.

AI Everywhere

Today, every company in the world… and roughly 65% of the global population… uses the internet in one form or another.

The same thing will happen with AI.

Already, Bank of America and JPMorgan Chase are using AI to help prevent financial fraud.

AI systems can be used to analyze large amounts of data to identify unusual patterns of activity that usually mean a fraudster is at work.

For example, an AI system can identify a customer who is suddenly making many transactions in unusual locations.

AIs can also detect forged or fraudulent documents, such as checks, credit cards, and passports.

Additionally, Visa and Mastercard are using AI to detect fraudulent payments. These AIs use decades’ worth of shopping behavior to help spot fraudsters running up bills on other people’s cards.

And Shell, the global energy producer, is using AI to predict maintenance requirements on rigs and drills before issues arise. That cuts downtime and avoids the need for expensive repairs down the line when components fail.

AI could even lead to better crop yields. Archer-Daniels-Midland is a major agricultural company. It’s using AI to better forecast weather conditions to improve crop yields.

And Deere & Company – best known for its John Deere tractors – is using AI to develop autonomous tractors and farm equipment.

Ultimately, this will lead to improved crop yields and lower overhead costs.

I’ve already recommended two AI hardware plays at my flagship tech investing advisory, The Near Future Report. I’ve also recommended four AI software plays on one AI “everywhere” play.

And despite the negative headlines in the press right now, my team and I are busy researching best-in-breed AI stocks to help paid-up subscribers maximize their profits in the AI boom ahead.

Could stocks head lower in the short term?

Absolutely. Given how much tech stocks have outperformed this year, it’s only natural for investors to take profits. But that will give us lower entry prices for AI and other tech plays on our watchlist.

This is a multi-decade profit trend. Companies are accelerating spending on AI hardware to usher in a new era of AI-powered software… everywhere in society.

Moments like these truly don’t come along all that often.

The investors that position themselves in these stocks and hold for the long term are set to experience the next wave of gains.

But to do that, you must ignore the day-to-day market noise and focus on the long-term profit trend instead.

That’s what I’ll be doing. I hope you will, too.

Regards,

Colin Tedards
Editor, The Bleeding Edge