Wall Street Will Trade AI Compute Like It’s a Barrel of Oil

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

 

In This Digest: 

• You’ll soon be able to trade AI processing power like you trade oil or wheat 

• Predictive Alpha forecasts a 20% rise in this cybersecurity stock 

• After doubling his money on his last trade, Jeff Clark sees more gains for bitcoin 

AI processing power is becoming a tradable commodity… 

Airlines don’t like surprises at the pump. So for decades, they used futures contracts to lock in the price of jet fuel months in advance. If oil prices spiked later, it didn’t matter – they already locked in their price. 

Farmers do the same thing with their crops. A wheat farmer can lock in today’s price for grain he won’t harvest until the fall. That way, a bad harvest – or a price crash – doesn’t wipe him out. 

Now, a startup called Ornn wants to do the same thing for the computing power AI runs on. 

This week, Ornn – which is backed by legendary venture firm Andreessen Horowitz – raised $33 million to build a marketplace where companies can trade AI computing power the same way airlines traded oil and farmers trade wheat. 

Right now, if you’re a company that needs a lot of AI computing power, you’re at the mercy of whatever the market charges that day – and those prices swing hard. Ornn’s marketplace would let companies lock in a price today for computing power they’ll need next month, or next year. 

And one of the companies helping build this new market is one you already know – Intercontinental Exchange (ICE), the owner of the New York Stock Exchange. 

We keep coming back to ICE because it sits at the center of a theme we’ve been tracking closely here – the financialization of everything.  

Piece by piece, ICE keeps turning things nobody used to be able to trade into things you now can. 

This year alone, it’s rolled out a way to trade the odds of real-world events happening, using data from prediction markets. It’s launching contracts tied directly to Federal Reserve interest rate decisions. And now it’s building the machinery to trade AI computing power itself. 

ICE has announced plans to launch futures contracts tied to Ornn’s pricing data, giving big institutional players a regulated way to bet on – or protect themselves from – swings in AI computing costs.  

And according to our Seasonality tool, now is a great time to buy. 

ICE just entered one of its strongest seasonality zones of the year… 

Seasonality is TradeSmith’s calendar-based market timing tool. It looks over a stock’s history and maps when it has tended to rise or fall at the same points on the calendar, year after year. 

Knowing when these seasonally bullish and bearish windows have occurred in the past doesn’t guarantee they’ll recur every year. But it helps stack the odds of success in your favor. 

Over the past 15 years, ICE has risen from July 1 to July 24 all but one year for an average gain of 3.4%.  

Even better, ICE entered this bullish zone after being oversold. Its Relative Strength Index – a measure of overbought or oversold conditions – just popped out of oversold territory on the AI compute futures news.  

We call that set up a Seasonal Synergy trade. And it’s the strongest buy signal our Seasonality software produces. So keep an eye on ICE over the next couple weeks.  

A 20% gain is coming for this cybersecurity stock by Aug. 3… 

That’s according to our Predictive Alpha AI model. 

Predictive Alpha works in a similar way to ChatGPT, except instead of words, it studies stock market data. We trained it on more than 100 billion market data points. It looks for patterns that came before big price moves in the past, then uses them to project where a stock is likely to head next. 

Every day, I check the top bullish forecasts on this model. It lets me look at the market through the eyes of an AI instead of the news.  

I’m not reading headlines and guessing what they mean for stocks. I’m looking at what our AI has already found. 

And one trade stands out from the rest of the forecasts on today’s list: 

Most of these projections are for a 2% to 6% gain over the next month. But Tenable Holdings (TENB) has a projected gain of nearly 21% – more than three times the next best. 

That’s a genuine outlier. It’s also a play on another theme we’ve been covering in the Daily – AI cybersecurity. 

The conventional wisdom holds that AI will make software cheaper to build and make software companies – cybersecurity included – less valuable.  

In the first few months of the year, this led to a rout in the cybersecurity sector. From the start of the year, the Global X Cybersecurity ETF (BUG) fell as much as 22%. But since those lows, the sector has surged back to life, gaining more than 75%. 

The reason why is simple: Far from turning it obsolete, AI makes cybersecurity more important than it’s ever been. 

As companies rapidly integrate AI into their operations – and hand more decisions to AI agents that act on their own – the risk of a data breach climbs sharply. 

At the same time, hackers are using AI to find and exploit those weaknesses at a rapid clip. 

Taking it back to Tenable, the company specializes in “exposure management” – finding the weak points in a company’s systems before an attacker does. And it’s spent this year wiring AI directly into that work, including new partnerships with Anthropic and OpenAI.  

Here’s a closer look at what our forecasting engine sees. 

The model is projecting a move from about $41.29 to $49.96 by Aug. 3 – a gain of nearly 21% in roughly a month.  

Predictive Alpha has made forecasts like this one – same stock, same kind of setup – many times before. Out of all those past forecasts, the stock hit its target price 89.8% of the time. 

That’s a high bar. Most forecasts on this list are hitting their targets somewhere in the 70% to 80% range. Tenable’s is running well ahead of that. 

One important note on timing: Tenable is expected to report earnings around July 28 or 29.  

Earnings can move a stock hard in either direction, and a report landing before the model’s Aug. 3 target date adds real risk.  

If you buy TENB here, consider taking at least some profits ahead of that report rather than holding through it.  

Our master trader is bullish on Bitcoin… 

Opinions on bitcoin range from “future of money” to “trillion-dollar scam” and everything in between. 

But our master trader, Jeff Clark, has been trading professionally for more than 40 years. And his take on bitcoin is on a completely different level. 

To him, bitcoin is just a line on a chart that moves up and down a lot – everything an experienced trader needs.  

And right now, he thinks it’s set up to move higher. 

He just gave his subscribers the chance to book a 100% gain on a trade on the iShares Bitcoin Trust ETF (IBIT). But his chart analysis shows that there’s still room to run.  

Jeff walks through the setup – the chart, the levels, and where he sees bitcoin heading next – in a quick video update he recorded to get the message out on this setup: 

In it, he shows where he’d enter, where he’d exit, and why the risk-reward math works here. If you want to know how to trade bitcoin from here, it’s a must-watch.

And if you want to learn more about Jeff’s options strategy – along with direct trade recommendations – check out his entry-level options trading advisory, Jeff Clark Trader. 

This service, designed for complete beginners, offers comprehensive option education and trade ideas that teach you how to reduce risk and amplify returns at the same time. Learn more right here. 

To building wealth beyond measure, 

Michael Salvatore 

Editor, TradeSmith Daily