What’s your honest reaction to the phrase “artificial intelligence?”
There’s a short, but powerful list of responses to choose from.
You may be intrigued by the power it unleashes and the breakthroughs it will enable.
You may be afraid of the power it unleashes and whether your job will be replaced by technology.
You may be puzzled about what the heck it really is. (You’re not alone.)
And, as an investor, you may be excited by the massive money-making potential it unlocks.
Chances are it’s all of those.
I’ve been around long enough to have lived, worked, and traveled through a number of technology-breakthrough eras. The shift from mainframes to PCs in the 1980s. The explosion of the Internet in the early 2000s. The cloud-computing boom a decade or so after that.
And plenty of others.
Some panned out. Some flamed out.
And some did both.
Take the internet. Led by tech, stocks soared in the 1990s as the promise of the internet spanned the globe. Companies only needed to make “dot-com” a part of their name to draw investors in like moths to a flame.
But the dot-com boom became the dot-bomb bust starting in 2000. The Nasdaq 100 ultimately lost nearly 80% of its value.
But the technology itself improved and spread, and now almost 65% of folks around the world have some access to the web. The best companies that continued to innovate have thrived and made their shareholders nice piles of money.
I’ve also seen the hype over the sequencing of the human genome, the potential for solar energy, and even cryptocurrencies and blockchain just a few years ago. Progress continues, and profits have been harder to come by – meaning the jury’s still out on those.
But the AI hype machine accelerated faster and louder than any of those that preceded it.
Just this past Sunday, for instance, 60 Minutes devoted half of its show to AI. And expert Dennis Hassabis told the show’s millions of viewers that “I’ve been working on AI for decades now, and I’ve always believed that it’s going to be the most important invention that humanity will ever make.”
That’s a big statement, and it would be easy to dismiss it as hype. But this is someone who has degrees in computer science and neuroscience, and a Ph.D. in human imagination. (I didn’t even know you could get those.)
Hassabis also happens to be the founder and CEO of DeepMind Technologies, an AI lab in London acquired by Google in 2014. Just watching the show, it was easy to see the mind-blowing work going on at this subsidiary of Alphabet (GOOGL), as companies race to reap the power and profit potential of artificial intelligence.
In fact, in the quarterly earnings report scheduled for Tuesday (April 25), after the market close, Alphabet will unveil a brand-new way of reporting its AI investments. Rather than including DeepMind in what it calls “Other Bets,” the subsidiary will be part of corporate costs, which includes important divisions like Google Services and Google Cloud.
The upshot: We’ll get a better glimpse of just how much the company is spending on AI, something shareholders have been obsessing over.
In that same “60 Minutes” episode, Alphabet CEO Sundar Pichai made the equally bold AI prediction: “This is going to impact every product across every company.”
If what Pichai says is true, AI is also going to impact every investor across every company.
Finding ‘Needle in a Haystack’ Stocks That Make You Money
Research done by Professor Hendrik Bessembinder arrived at this mind-blowing conclusion:
For the last 100 years, 100% of the stock market’s net gain above Treasury bonds came from only 4% of stocks.
Or to put it another way: 96% of all stocks over the last century failed to beat Treasuries.
Like scientists developing potential therapeutics, we as investors must find those needles in the haystack to make money. That requires screening literally millions of data points – and fast.
It requires analyzing the right factors the right way. That’s where quantitative analysis and artificial intelligence come in.
AI involves massive computing power that analyzes, sorts, and ranks more data points, combinations, scenarios, and patterns than any human being could in his or her lifetime.
And it does it all in practically seconds.
My Quantum Edge system performs a deep mathematical analysis of roughly 30 fundamental and technical variables – variables that have proven to be the best predictors of higher share prices. And it does it on roughly 6,000 stocks every single day.
Many of these predictive variables, by the way, would only be discoverable by the handful of people who manage the largest order flow information in the world. I was privileged to occupy that chair earlier in my career, and it led directly to my whole quant stock-picking system and its proven success.
When I log on early in the morning, my computers have already done more data retrieval and analysis than an entire brokerage firm. My system assigns a Quantum Score to roughly 6,000 stocks every single day, a single number that lets me know if each of those stocks is an opportunity, a danger, or just a bump on a log.
With a few additional clicks of the mouse or taps of the keypad, I am left with those handful of stocks with the critical ingredients to generate profits. From there, I can get back to the human brain (“real” intelligence?) to pick the best of the best – from what is already a list of the best of the best.
Scoring Five Massive Players in AI
As the AI hype missile soars to new heights, it’s awfully tempting to search for that “one company” that’ll emerge as THE dominant AI player – making you about a gazillion dollars over the years.
Even an AI “bot” (a bot with today’s capabilities) – would tell you that’s probably a losing strategy. Startups don’t have enough data to reliably predict a happily-ever-after outcome.
Sure you and I can make educated guesses about which company will turn out to be the “next” Amazon or Google or Apple, but that’s all they’d be – guesses.
And longshot guesses at that.
AI relies on data, patterns, and algorithms to predict results.
My proprietary stock-rating system is based on probability – the ability to predict with high degrees of certainty which stocks will be winners… and which ones you should avoid.
After decades of research and back testing massive data sets that go back more than 30 years, I can identify the stocks most likely to make you money. We’re talking about the shares of healthy and growing companies (strong fundamentals) in an uptrend (strong technicals) that are also being bought by Big Money players (institutions and hedge funds).
So let’s peek into our data and check the Quantum Scores on five of the biggest companies in the world that are heavy into AI:
- Meta Platforms (META) Quantum Score: 77.6.
- Microsoft (MSFT) Quantum Score: 77.6
- Nvidia (NVDA) Quantum Score: 77.6
- Alphabet (GOOG) Quantum Score: 69
- Amazon (AMZN) Quantum Score: 55.2
As you probably noticed, the top three stocks have identical – and excellent – Quantum Scores. Scores between 70 and 85 are the best predictors of higher prices in the coming weeks or months. (These scores are not designed to predict long-term potential years down the road.)
If I want to “break the tie,” I drill down further into the data. In this case, I find that Microsoft – with a fundamental score of 75 – has more muscle than Meta and Nvidia, which have respective scores of 70.8 and 62.5 in that same category.
Big Money has been flowing into all three this year, which is highly bullish. It’s also not surprising, as Technology is the strongest sector currently. MSFT is up 20% in 2023 (the blue line is price). And its most recent Big Money buy signal (green bars) was back on March 31 – so just three weeks ago.
Qualitatively, Microsoft is a well-run and massively successful company. Quantitatively, it rates well in just about every category in my system.
If I were looking to make money off of AI right now, I would put MSFT at the top of my list.
It will be fascinating and exciting to see how AI changes our lives. And new AI leaders may (and probably will) emerge. But I’d rather discern that through the predictive power of data and quantitative analysis than guessing right now.
Talk soon,
Jason Bodner
Editor, Jason Bodner’s Power Trends
P.S. Technology is now allowing people to accomplish phenomenal results with a fraction of the effort, in a fraction of the time.
Investors today have an incredible chance to use technology to change their life for the better… to make more money than they ever thought possible.
If you’d like to learn more about my system and our brand-new investing service – including our initial stock picks – you can click here.
