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An AI Chokepoint Most Investors Have Never Heard Of
An AI Chokepoint Most Investors Have Never Heard Of
BY MICHAEL SALVATORE, EDITOR, TRADESMITH DAILY
In This Digest:
- The biggest infrastructure spend in U.S. history
- Three “AI data highway” stocks lighting our screen
- The longevity theme is just picking up steam, and it’s not all about GLP-1s
If you want to profit from AI, own the chokepoints…
That was the message in Friday’s Daily from our CEO, Keith Kaplan.
By the end of this year, four U.S. tech giants – Microsoft, Google, Amazon, and Meta – will have spent more than $700 billion on AI infrastructure.
And that figure is set to hit $1 trillion by 2027.
That’s the largest sustained surge in spending in the U.S. since the end of World War II. And it’s a huge tailwind for stocks that can resolve “chokepoints” in the AI supply chain.
Most people know that AI needs powerful chips… and tons of energy to power them.
What’s less well known is that to run at AI speeds, those chips need two other technologies most folks have never heard of: high-bandwidth memory (HBM) and silicon photonics.
Ordinary memory chips can’t keep up with the demands of modern AI. HBM solves that problem by stacking memory next to the main processor, so the data the chip needs is always within arm’s reach.
Silicon photonics solves the next problem: getting data from one chip to another across the data center. For decades, those connections have been copper wires. But at AI speeds, copper wastes too much electricity as heat. And the signal gets weaker the farther it travels.
The fix is to send pulses of light through tiny glass fibers instead of electrons through copper wire. Light is faster. It doesn’t burn off energy as heat. And a single thin cable can carry far more data than copper can.
Think of HBM and photonics as creating a “data highway” for AI. It’s an essential infrastructure that lets it run faster.
Three AI data highway stocks just lit up on our new emerging trends screen…
Each day, I run a screen for high-quality stocks hitting one-month highs. Then I look for clusters of stocks around emerging investing themes.
And silicon photonics is lighting up on the radar right now with these three stocks.
- Credo Technology (CRDO) – Optical and high-speed interconnect chips used to link AI servers inside data centers
- MACOM Technology (MTSI) – High-performance analog and photonic semiconductors, with a named line of business in optical components
- Astera Labs (ALAB) – Connectivity for AI infrastructure, including new products purpose-built for AI clusters
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According to our Predictive Alpha AI trading model, MTSI is the one to watch.
As regular readers know, Predictive Alpha’s AI works in a similar way to large-language AI models like ChatGPT and Claude. But instead of predicting the next word in a sentence, it predicts where a stock is likely to go next.
We trained it on more than 100 billion data points from decades of market history. For any given stock, it produces a target price, the expected percentage move, and the date it expects that move to play out by. It also shows how accurate its past forecasts have been.
Here’s what it sees for MTSI right now.
From the current price of $384.09, our model projects a move to $424.50 by June 23. That’s a 10% gain in roughly a month.
And Predictive Alpha’s accuracy rate on these forecasts is 82.8%. In more than four out of five past forecasts on this stock, it hit the projected price by the projected date.
Add MTSI to your watchlist. And if you’re a paid-up subscriber, CRDO and ALAB are both worth a closer look on the TradeSmith Finance platform.
Keep cybersecurity stocks on your watchlist…
A week ago today, we called Palo Alto Networks (PANW) an “easy buy.”
PANW had just broken out to an all-time high, and two of our most important indicators – Short-Term Health and Long-Term Health – flashed Green in the same week.
As I wrote at the time, that combination is “a rare-but-powerful buy signal that always catches my attention in our system.”
Since then, PANW is up 5.6% over the past five trading days.
And PANW isn’t the only cybersecurity stock that’s bouncing.
On Friday morning’s breakout screen, eight cybersecurity stocks made the list – Fortinet (FTNT) leading the group with a 61.8% one-month move, alongside PANW, Zscaler (ZS), Okta (OKTA), and four others.
F5 (FFIV) is worth a closer look.
It makes software that manages traffic flowing in and out of corporate web apps. Every enterprise running AI-powered customer-facing apps needs more of what F5 sells.
Here’s what Predictive Alpha sees for FFIV right now.
From the current price of $393.85, our model projects a move to $427.84 by June 24. That’s an 8.7% gain in about a month, with a historical accuracy rate of 72.7% on this ticker.
Keep the cybersecurity sector on your watchlist – we’ll have more on the strongest stocks in coming issues.
A different lens on a $314 billion megatrend…
Andy and Landon Swan, the brothers behind LikeFolio, have been closely watching a theme outside the bounds of AI chokepoints.
And they found it with their own unique approach to investing – consumer insights.
Their proprietary Social Heat Score combines millions of daily data points – social media posts, search trends, AI queries, web traffic – into a single 0-to-100 number.
A score above 60 is bullish, meaning real consumers are putting their attention and their money behind a brand.
As the Swans put it in their latest MegaTrends report: “By the time the numbers hit an analyst’s spreadsheet, we’ve already seen the demand building for months.”
Right now, those Social Heat Scores are lighting up across what the Swans call the Longevity Stack.
According to Andy and Landon, longevity is an accelerating health trend that’s not to be ignored. Just think of all the major tailwinds that have emerged in only the last few years:
- GLP-1 drugs like Ozempic
- The broader peptide therapy market
- Biological-age testing and metabolic health tracking
- The MAHA policy tailwind out of Washington
- And the cultural shift Bryan Johnson made famous in his Netflix documentary Don’t Die.
These are all converging into a single consumer-behavior trend.
The wellness economy hit $6.8 trillion last year. The broader longevity market is projected to grow from $65 billion in 2023 to $314 billion by 2030.
In the Swans’ words: “The longevity economy isn’t a theme. It’s a transition – one that’s already reshaping how millions of consumers spend money on their health, their food, and their bodies.”
The Swans are looking past GLP-1s…
The Swans just released a new MegaTrends issue on the Longevity Stack theme – four fresh stock ideas built around the Social Heat Score signal, ranging from a luxury gym chain quietly building a longevity health platform inside its clubs to the company that makes the components inside nearly every GLP-1 injection on the market.
And while their report names four mid-cap longevity plays our morning quant screen hasn’t flagged yet, there is one mega-cap longevity name that did hit Friday’s screen: Eli Lilly (LLY).
LLY is the largest pure-play GLP-1 manufacturer in the world. Its tirzepatide formulation – sold under the Mounjaro and Zepbound brand names – produces stronger weight-loss results in clinical studies than the semaglutide drugs from Novo Nordisk.
But the Swans’ consumer-behavior tracking sees the longevity theme accelerating past this well-known play and into four smaller stocks that are laying down the rails of the Longevity Stack economy.
If you want the four mid-cap ideas the Swans are tracking right now – the names most investors haven’t connected to longevity yet – the new MegaTrends issue is where to find them. Paid-up subscribers – including our Platinum members, who receive everything we publish – can access it here.
If you’re not already subscribed, click here to join the Swans as they uncover the Main Street trends driving stock prices before Wall Street ever catches on.
To building wealth beyond measure,
Michael Salvatore
Editor, TradeSmith Daily
Disclosure: Michael Salvatore held shares of GOOGL at the time of this writing.
