The Hidden Mega-Theme Beneath “Boring” Industrial Stocks
Listen to the audio version of this article (generated by AI).
In This Digest:
- Our Quantum Score flagged three AI hardware stocks, one already up 30.3%
- This rough day for Cloudflare (NET) is a hidden, powerful buy signal
- Why the smartest way to play the robot boom isn’t the robot-makers
If you’re investing in AI, stay away from software…
Quantum Edge Pro analyst Lucas Downey has been pounding the table on a dead-simple reality of the AI trade.
It’s all about the hardware.
Every query you type into an AI runs through chips sitting in a data center. All those chips need to talk to each other. And every cluster of them needs immense amounts of power.
That’s the layer Lucas is watching with his Quantum Edge Pro readers.
The biggest cloud and tech companies are spending close to $700 billion on data center infrastructure this year alone. Lucas thinks that spending wave is still in its early innings.
And he’s using our Quantum Score to find the best stocks.
The Quantum Score rates every stock from 0 to 100 by combining two things: fundamental strength – earnings, revenue, and margin growth – and technical momentum, including the unusually large buying volume that shows up when institutions move into a stock.
Three of Lucas’ AI-infrastructure picks are earning top ratings on this score.
Let’s start with one Lucas has already shared with his subscribers.
On June 10, Lucas recommended MKS Inc. (MKSI) – formerly MKS Instruments – in Quantum Edge Pro. MKS makes the precision laser, vacuum, and gas-control systems used to manufacture the most advanced chips, and it sits inside one of Lucas’ foundational themes: photonics. It came in with a Quantum Score of 81.5 and a standout 96.7 Technical Score.
Since that call, the stock is up 30.3% through Thursday’s close.
And in his TradeSmith Investment Report portfolio, Lucas’ recommendation of GE Vernova (GEV) is up 45% since his February call.
GEV builds the turbines, transformers, and grid equipment that power plants and data centers run on – it scores 82.4.
And Monolithic Power Systems (MPWR), recommended in April of last year, is up 218%.
MPWR makes the chips that manage power delivery inside AI servers. At 92.3, it’s near the top of everything we track.
Photonics is just one thread. Lucas is tracking a whole set of foundational AI-infrastructure themes – memory, photonics, robotics, and the power buildout itself – and the Quantum Score is the filter he uses to find the stocks inside them where the fundamentals and the money flows already agree.
Keep this group on your radar. Quantum Edge Pro subscribers get the Quantum Score tool itself, plus Lucas’ running list of the picks behind each of these themes.
A rough day for Cloudflare just triggered a buy signal…
Cloudflare (NET) is one of the companies that keeps the internet running. It sits in front of more than one-fifth of the world’s websites, filtering out hackers, bots, and other cyberattacks before they ever reach the page you’re trying to load.
It made news recently for a different reason: It let go of a big chunk of its workforce, telling investors that AI had made its remaining team productive enough to do more with fewer people.
Last week, the stock flashed an unusual pattern that we picked up on in our Signals software:
As regular readers will know, Signals is the most advanced trading system we’ve built.
Instead of reading headlines or earnings reports, it runs thousands of stocks through almost 200 entry rules and dozens of exit rules, many of which were discovered by machine-learning algorithms.
That adds up to more than 10 million trade evaluations a day. From that ocean of data, it surfaces only the setups with the strongest historical track records.
This signal engine picked up on Friday’s price action, triggering one of our entry rules. It happens when a stock closes down, but buyers stepped in and brought the price back up before the close.
It’s the kind of subtle pattern a human trader would be lucky to spot once, let alone across thousands of stocks at the same time. Our system found it in seconds and ranked it the top signal trade to play Monday.
Going back 10 years, this exact signal has fired on Cloudflare 84 times. It’s led to a winning trade 85.7% of those times, with the average winner returning 7.8% over about seven days.
Here’s how it’s played out the last eight times it fired, going back to August 2025:
Six of those eight closed in the green, with the winners landing between 5.5% and 8.2%. Two closed red – including a 9.4% loss this past January.
No signal wins every time, which is why the system pairs each entry with an exit rule, and it’s why position sizing matters as much as the trigger.
The exit rule for this trade is to close for a 6% gain or better, or after 21 trading days.
This is a signal to keep on your radar – the signal is live, and the history, odds, and setup are lined up in its favor heading into Monday.
And it’s far from the only one. If you’re a TradeSmith Finance subscriber, pull up the Signals dashboard and sort by Quality Score – there are dozens of other live signals firing right now, each with its own track record attached.
The smartest robot trade might not be the robots…
Our CEO, Keith Kaplan, has been tracking one huge trend on his X account: the rise of humanoid robots.
Even if it still sounds like science fiction, this trend is very real.
Humanoids are one of Elon Musk’s biggest bets. Earlier this year, Tesla (TSLA) said it would phase out two of its car models to free up factory space for its Optimus robots.
And more than a dozen other companies are now racing to build the household and warehouse robots of the next decade.
But as Keith points out: picking the one winner out of a dozen robot makers is a guessing game.
If he had to bet on a single maker, he’d take Tesla – “because Elon is Elon.” But there’s a smarter way to play it.
Rather than bet on who builds the best robot, back the companies that supply the parts every robot maker needs.
Each robot needs complex joints, frames, gears, motors, batteries, and sensors that demand a rare mix of precision, durability, and light weight, produced in the volume these orders require.
It’s the same reason hardware is so dominant in the AI trade right now. The parts to build the data centers are vastly outperforming the companies that make AI chatbots.
It’s the same with robotics. Right now, there’s a gold rush into these obscure component makers that makes the coming robotics wave possible.
To play it, Keith laid out a six-stock basket of the component makers behind the machines. You can follow Keith on X to get the full list.
But Regal Rexnord (RRX) is the one Keith says stands out this week.
Its parts are the muscles and joints of industrial machinery, and its customers span defense, automotive, and robotics.
The stock is up 61% this year, and Keith thinks it looks poised to break out to a new all-time high – with one foot in the U.S. manufacturing boom and the other in the robotics wave.
I’ll add on to Keith’s analysis with our Short-Term Health signal. This is TradeSmith’s most sensitive momentum indicator, comparing recent price moves to its typical range to flag whether it’s in a health uptrend (Green), a caution zone (Yellow) or a downtrend (Red).
RRX went green on December 15, 2025 – and since then the stock is up more than 62%.
Keith shares ideas like this on X all the time, so follow him at @KeithTradeSmith to keep up with the themes he’s tracking.
To building wealth beyond measure,
Editor, TradeSmith Daily
Disclosure: At the time of this writing, Michael Salvatore held shares of NET.