These Four Stocks Will Answer the Market’s Biggest Question

By Michael Salvatore

Listen to the audio version of this article (generated by AI).

In This Digest:

  • The market’s biggest question about AI is about to get four answers
  • Only three sectors are a buy based on our Quantum Score
  • Pipeline stocks show that electricity is the purest play on AI

Sam Altman says the AI “singularity” is here…

It’s the once purely fictional idea of an AI getting so smart it breaks away from humanity and starts improving itself, over and over, faster and faster.

Think of it as the point at which AI decides it doesn’t need us anymore to improve and evolve.

And OpenAI’s CEO says we’ve arrived.

Speaking on the Relentless podcast last week, after an experimental version of ChatGPT broke out of its testing sandbox and hacked into another AI company’s systems on its own, Altman put it bluntly: “We are now inside the singularity.”

Big questions follow.

Will AI spiral out of control and wreak havoc on human civilization? Will governments step in to slow it down? Could they even manage it if they tried?

Nobody has the answers yet. But employees at OpenAI and its rival Anthropic – along with more than 1,000 others across the top AI labs – are now backing a petition to the U.S. government that reads:

The US government should support an international effort to develop the technical and governance tools needed to deliberately pace the frontier of automated AI development.

These are interesting philosophical and policy questions. But for us as investors, there are far more immediate questions to ask about AI. And that will be answered in the next 48 hours.

Four Big Tech giants report earnings over the next two days…

After today’s close, Microsoft (MSFT) and Meta Platforms (META) report. Amazon (AMZN) and Apple (AAPL) follow tomorrow.

The question on everyone’s mind: Will these companies finally see a payoff from their staggering spending on AI? Or will much of it go to waste – the way it did in the early days of the internet, when companies built far more capacity than anyone could use for years?

The AI spending numbers are staggering. This year alone:

  • Microsoft will spend $190 billion on AI infrastructure.
  • Meta will spend as much as $145 billion.
  • Amazon will spend $200 billion.
  • And Google parent Alphabet, which reported last week, guided toward 2026 spending as high as $205 billion.

By contrast, Apple – which will report earnings tomorrow – plans to spend a mere $14 billion on AI.

And as you can see from the green line on the chart below, of the seven giant tech stocks in the Magnificent Seven, it’s seen the biggest gains this year.

According to our Predictive Alpha AI trading model, Apple is the top bullish forecast among the Big Tech stocks reporting this week. It’s expected to rise 2% by Aug. 10.

Meanwhile, Predictive Alpha is bearish on AMZN:

It sees Amazon’s stock price falling 0.6% from now through Aug. 25.

That’s no huge surprise. So far in 2026, the market has rewarded the companies spending less on AI and punished those spending more.

If you’re looking for a short-term trade on today’s round of Big Tech earnings, Apple is the clear winner.

Only three sectors are a buy today based on our Quantum Score…

It ranks stocks on a scale of 0 to 100 by combining fundamental strength – earnings, revenue, profit margin growth – with technical momentum and unusually heavy institutional buying volume. Anything above 70 is a buy.

Using exchange-traded funds (ETFs), you can also use the Quantum Score to rank entire sectors.

Right now, by this measure, only three sectors are a buy: Industrials (XLI), Financials (XLF), and Energy (XLE).

Let’s take a closer look at Industrials for the top stocks.

The top-rated industrial stock in our system – with a Quantum Score of 93.8 – is trucking company Old Dominion Freight Lines (ODFL).

This has regularly showed up at the top of our Quantum Score and Predictive Alpha rankings. And so far this year, it’s up 43%.

Aerospace manufacturer Howmet Aerospace (HWM) comes in second, with a Quantum Score of 92. It’s up 40% so far this year.

Third is defense contractor General Dynamics (GD) with a score of 89.9. It’s up 16% this year.

These are all strong stocks, with strong momentum, in a rising sector. And they’re worth adding to your buy list.

If you’re a Quantum Edge Pro subscriber, be sure to look at smaller-cap industrials stocks in our database as well – I see six in the Russell 2000 with scores above 90.

Finally, a way to earn passive income from the AI boom…

While Wall Street is glued to tech earnings, our CEO, Keith Kaplan, is watching a different corner of the market: oil and natural gas pipeline stocks.

On X, Keith made the case that pipeline companies Kinder Morgan (KMI), Enterprise Products (EPD), and Energy Transfer (ET) may be a safer way to ride the AI boom than the big cloud computing companies soaking up the headlines.

In his words, pipelines are the “best way to generate substantial passive income from the AI boom.”

This brings us back to the AI Power Pipeline theme we introduced on May 18.

The AI buildout runs on electricity, and natural gas is becoming the go-to fuel for the power plants feeding new data centers. But that gas is worthless if it can’t get to where it’s needed – and nearly all of it has to move through America’s pipeline network first.

Natural gas and crude oil pipeline network operator Energy Transfer LP (ET) is a standout example. Look at its price chart over the past four years charted against its Short-Term Health status.

Short-Term Health is TradeSmith’s most sensitive trend indicator. It compares a stock’s recent price moves to its typical trading range, then flags whether it’s in a healthy uptrend (Green Zone), a caution zone (Yellow Zone), or a downtrend (Red Zone).

ET entered a Green Zone in 2022 at $6.61 and has held that status with only brief interruptions. Over that stretch, the stock roughly tripled in price.

And after a recent dip into a Yellow Zone, it entered a new Green Zone on July 16 – a fresh buy signal.

ET also pays an annual income of 6.7% – which is about two percentage points more than you’ll earn on a 10-year Treasury note.

It slashed that payout in half back in 2020, during the depths of COVID – but it has rebuilt it steadily since, and today’s payout is higher than it was before the cut.

ET is a rock-solid AI Power Pipeline play for your watchlist.

Keith posts ideas like this on X regularly, often before they make it into our official coverage. Follow him at @KeithTradeSmith to see what he’s watching next.

To building wealth beyond measure,   

Michael Salvatore   

Editor, TradeSmith Daily