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Get ready for the “death of smartphones”… Energy continues to outperform… What the A.I. future will need more than anything else… Biden’s tight spot on gas prices… Trading the market of today to outlast whatever’s coming tomorrow… A can’t-miss earnings report drops in 9 days… 

By Michael Salvatore, Editor, TradeSmith Daily


Ask 10 Americans what A.I. looks like right now, and nine of them will probably describe something like ChatGPT. 

Less often they’ll mention image creation models like DALL-E… and there’s even a smaller chance of them mentioning the kind of audio wizardry that applies the dulcet harmonies of The Beach Boys to Jay-Z’s “99 Problems.” (If you can tolerate musical sacrilege, look it up. It’s equal parts hilarious and terrifying.) 

That’s what happens when large language model-powered chatbots are not just the killer app, but virtually the only app people have to ground A.I. with. As we’ve pointed out in these pages, A.I. has been around in some form for decades. Trading algorithms used in the top elite hedge funds, early language-processing models that helped IBM’s Watson computer win Jeopardy, and plenty more innovations have all used A.I. over the years. 

The difference now is A.I. is a hit consumer product. That puts big money behind it. And that’s why it so quickly became a massive investment theme after ChatGPT launched a year ago. 

But ask those same Americans what A.I. looks like in, say, five years… and they might tell you it looks like this: 

That’s Humane’s Ai Pin — a small hardware device with an onboard A.I. assistant that you pin to your clothing, projecting a screen onto your hand. 

How do you use it? You talk to it… with your voice… whether you’re in public or private. 

Sounds crazy, right? Well, so did the internet back in the early ’90s. And so would have the idea of people constantly staring at their phones everywhere they went in the early aughts. But here we are, facing the prospect of pinning an A.I. assistant to our lapel. 

Here’s another interesting possibility. A.I. might instead look like objects we’re already familiar with: 

Snazzy, right? But an ordinary pair of shades these are not. 

These are Meta’s Smart Glasses. With them, alongside an imminent update to their software, wearers can use A.I. to immediately translate text in different languages, or identify landmarks, and even tell you the names of animals or exotic plants you don’t recognize. That’s in addition to the kinds of things large language models like ChatGPT are capable of now. 

This is all to say, the trend of A.I. hardware devices is not just approaching, it’s here. And if — big if — these devices take off… they could become a key investment target. Everyone loves a “death of [ubiquitous tech device]” narrative, for good reason. 

There are higher pies in this sky — like the home robots Tesla and now supposedly Apple are working on — but this one reads as more immediately investable. 

So how do you do that? 

Thus far, META is the only publicly traded company with a dedicated A.I. hardware consumer product that can scale. Is it a buy? 

Well, TradeSmith’s tools certainly think so. The “instrument cluster” of signals on my TradeSmith Financedashboard mostly read positive: 

1. It’s been in the Green Zone for 10 months, indicating a strong uptrend.
2. It holds an excellent Business Quality Score of 95.
3. And its Ratings Gauge reads a Strong Bullish: 93.

The stock is at the low end of our “High Risk” Volatility Quotient threshold, which helps determine its stop-out price. 

But one knock is it’s currently in a Peak zone — which our Trade Cycles algorithm suggests is a historical headwind for the share price. 

So if you’re looking to buy META based on this idea and its strong fundamentals, consider waiting for better prices from now through the end of its Peak period at the end of April. 

❖ Energy is top of mind for us this week…

For its recent price action… for what we just talked about… and for something entirely different we’ll cover shortly… let’s quickly run through each… 

First up, let’s check out how energy stocks are doing compared to the S&P 500 right now: 

The energy trade has continued to work the past few weeks, with XLE outperforming SPY to the tune of about 12.4%. This, along with drops in bond prices and gold prices setting all-time highs, looks to be a group of warning signals we shouldn’t take lightly. 

But less broadly, I want to return to the idea of how we’re going to power the A.I. future. Because some major tech firms have interesting ideas about that… which you might’ve heard before. 

Less than a month ago, news broke that Amazon would buy a 960-megawatt nuclear-powered data center from Talen Energy. You can see the data center in the foreground, here, and the nuclear plant in the back: 

Here’s Nuclear Newswire with the details:

Talen Energy announced its sale of a 960-megawatt data center campus to cloud service provider Amazon Web Services (AWS), a subsidiary of Amazon, for $650 million. 

The data center, Cumulus Data Assets, sits on a 1,200-acre campus in Pennsylvania and is directly powered by the adjacent Susquehanna Steam Electric Station, which generates 2.5 gigawatts of power. 

“We believe this is a transformative transaction with long term benefits,” said Mark “Mac” McFarland, Talen president and chief executive officer of Talen, on a Monday call with investors and media. As power demand continues to rise worldwide, “data centers are at the heart of that growth,” he added.

The Susquehanna power plant is the sixth-largest nuclear power plant in the U.S., producing 63 million kilowatt hours of energy per day and in operation since 1983. 

Long story short: Amazon is directly investing in a nuclear-powered data center at the same time it’s investing $4 billion into A.I. startup Anthropic. 

It doesn’t take much to connects the dots. The simultaneous push for A.I. and clean energy at scale is drawing the biggest tech firms toward the best logical conclusion: nuclear power. 

As we mentioned back when we first covered this idea, the Global X Uranium ETF is a solid turnkey way to play the trend. But diversifying your energy portfolio into high-quality nuclear power companies is an even better play. 

For that, I recommend checking out Ratings by TradeSmith to learn of a quick method to find the best ones.

❖ Last note on energy: Biden’s in a tight spot…

My dad’s always said that 90% of doing well in life is just showing up. I’d argue the next 5%, maybe more, is doing what you say you’re going to do. 

Unfortunately, nobody shared my dad’s advice with the Biden administration. 

Amid surging oil prices, taking a barrel of light crude from $68 per barrel in December to over $85 today, the White House has reneged on last month’s plan to purchase 3 million barrels of oil to refill the Strategic Petroleum Reserve. 

For context, Biden & co. began emptying the SPR near the beginning of his presidency, as a way to combat rising gas costs hitting American pocketbooks. 

It worked… for a while. But now the SPR is drawn down at its lowest level since the reserve was being built up in 1983, down about 43% from the start of Biden’s term, and sitting at 363.6 million barrels. And gas prices are roughly $0.50 higher from when the drawdown began. 

If you’re sitting there thinking, “Wow, they were only trying to restore the SPR by a measly sub-1%!” Or, “Wow, the SPR is close to halfway empty and gas prices are higher than they were before!” Or, “Wow, it seems like there’s not much more Biden can do to suppress gas prices!” 

I can do nothing but say “ding ding ding!” 

The administration is in a pickle. They missed the chance to buy oil more cheaply. The summer travel season is coming up. And it’s an election year — when you want folks to be happy about the price they pay at the pump. 

There’s no real way to suppress the price of oil and gasoline, lest the administration draw down the reserve even further. And with the SPR designed to be an emergency stockpile, the lower we go, the less prepared we are for an actual emergency. 

Expect gas prices to remain relatively high in this environment. But how should you deal with it? 

Similar to how Lucas Downey pointed out you can tap into dividends from health insurers to help pay medical costs, why not look at some high-quality energy stocks to help pay your gas bill? 

Exxon Mobil (XOM) currently pays a quarterly dividend of $0.95 per share. That means one share of Exxon Mobil pays for a gallon of gas a year… and you’re holding an energy company that just entered the TradeSmith Green Zone, holds a Business Quality Score of 94, and rates a Strong Bullish 95 on the Ratings gauge: 

(Disclosure, I own shares of XOM.) 

Dividends are a great way to subsidize costs from the companies sourcing those costs in the first place. And that idea doesn’t stop at health care and gas… Many strong dividend payers offer similar clever ways to get paid for your business. 

❖ I’ll leave you today with another free tip…

Markets have never been what you’d call predictable. But the surprise factor has certainly ramped up the last few years. 

Who knows what’s going to happen a year from now? Or five years from now? Who can even guess? 

It seems impossible. But what seems quite a bit less impossible is having a good idea of what’ll happen in, say, a month from now. A week from now. Even tomorrow. 

That’s where my good friend Jonathan Rose comes in, founder of our corporate partner Masters in Trading. 

Every trading day at 11 a.m. Eastern, Jonathan hosts a 15-minutes trading livestream that’s equal parts education and alpha. He shares one of his best trade ideas, and walks you through every reason why it’s on his radar, in clear and concise fashion. 

Joining Jonathan is 100% free, and I wanted to make sure you have the opportunity to join the 12,000 other people who have thus far. 

Click here to check out the details and sign up, then tune in to Jonathan’s Friday stream today at 11 a.m. Eastern. 

Have a great weekend, 

Michael Salvatore
Editor, TradeSmith Daily