RJ Hamster
Inside the Fragile Foundation of the AI Market
 Eric FryEditor, Smart MoneyDAILY ISSUEInside the Fragile Foundation of the AI MarketVIEW IN BROWSEREditor’s Note: Every market cycle has a moment that, in hindsight, feels obvious. For the dot-com era, it was the day Cisco briefly became the most valuable company in the world. For today’s AI boom, we may be approaching a similar inflection point.The parallels aren’t perfect, but the pattern is familiar: enormous concentration in a handful of stocks, soaring expectations, and a market that quietly grows more fragile even as the headlines grow more optimistic. TradeSmith CEO Keith Kaplan is joining us today to dig into the uncomfortable truth behind the AI surge – and what it means for investors who want to stay one step ahead of the next tipping point.Before we dive in, please note that InvestorPlace offices will be closed tomorrow, Friday, December 12.Take it away… On Monday, March 27, 2000, Cisco Systems became the world’s most valuable company.It was the moment everything seemed to come together for the dot-com era—and the moment the cracks began to show.And it revealed how fragile a market becomes when so much wealth rides on one theme… something that’s happening again today.If you’re under 40, you may not have heard of Cisco. It makes the switches and routers that move data across the internet—what pundits at the time liked to call the “building blocks” of our digital future.John Chambers, Cisco’s CEO, was the man of the moment.Fortune magazine called him “The New Mr. Internet” and claimed his influence was so great that a single comment from him could move the entire Nasdaq.But as Chambers and his team were popping champagne corks to celebrate their triumph, trouble was already brewing.Three days earlier, the S&P 500 marked the top of the biggest stock-market boom in a generation. Over the next two years, Cisco—along with the Nasdaq—fell about 80%.Now, a quarter-century later, we’re watching a new version of the same story unfold.Chambers was the rock-star CEO people turned to when they wanted to understand how the internet would change the world. Today, it’s Nvidia boss Jensen Huang in his signature black leather jacket sketching out the future of AI.But the most troubling parallel isn’t in the personalities or the hype—it’s the changing structure of the market itself.At the peak of the dot-com boom, the top 10 stocks in the S&P 500 represented about 25% of the index. Today, the top 10 represent closer to 35%.Things have gotten so out of whack that just two AI stocks—Nvidia and Google—have contributed about one-third of the S&P 500’s year-to-date gains. At several points, Nvidia added more to the index than the bottom 400 stocks combined.When the market becomes concentrated in just a few giant stocks, volatility goes up—and so does your risk. Eventually, the market reaches a “tipping point” nobody sees coming until it’s too late.The key is preparation, not prediction—and that’s where our work comes in. My team and I at TradeSmith have created a type of early-warning system to help you safeguard your wealth.It’s an innovation in investment tech that could save you a world of pain—and tens of thousands of dollars in potential losses—when we reach the next tipping point.And according to our MarketWise colleague and pioneering quant investor Marc Chaikin, that could come as soon as next year. As he warned at the Stansberry Conference in Las Vegas in October, 2026 is shaping up to be the Year of the Bear.I’ll show you how you can sidestep trouble using our newest innovation… and get into more detail on what Marc sees coming. First, if you don’t know us already, some background on TradeSmith and what we’re all about.Recommended LinkWall St Legend: AGI Arrives Q1 2026. The Power Grab Started Months Ago.While retail buys Nvidia at all-time highs, institutions position into something else. Why? AI needs POWER. Louis Navellier, who spent 46 yrs Wall St. and called Nvidia at $1, reveals that his grading system shows where the money is REALLY flowing. Companies you’ve never heard of. Stocks the media never covers. Before Stage 3 begins… click here for the full story.Leveling the Playing FieldWe’re a leading financial technology platform based in Baltimore, Maryland.We’re part of the Nasdaq-listed investment research company MarketWise—alongside InvestorPlace, Stansberry Research, Chaikin Analytics, Brownstone Research, Wide Moat Research, and Altimetry.And our mission is to help self-directed investors like you close the wealth gap with Wall Street elites.I never worked a day on Wall Street. I’m a computer engineer and entrepreneur. And I’ve always thought it was wrong that powerful software tools stayed locked up at hedge funds—widening the wealth gap instead of narrowing it.Today, we help more than 134,000 people around the world monitor more than $29 billion in assets. And Forbes, The Wall Street Journal, and The Economist have profiled our breakthroughs.We’ve built tools to help everyday investors track portfolios, manage risk, spot seasonality patterns in stocks, and find undervalued options trades. We’ve even created, tested, and released a popular AI-trading model.And we created our newest innovation with market tipping points in mind. It’s designed to get you out of stocks before sudden drops. And it’s sensitive to even the slightest bearish tremor.An Early-Warning System for StocksTraditional sell alerts look back years or even decades of volatility to determine what’s normal and what’s not. They smooth everything into one long-term average—and anything outside that range triggers a red flag.Our new system does something similar, but with a crucial difference. Instead of relying on decades of data, it focuses on the past six months to map a stock’s true, short-term “healthy” volatility range. That makes it far more sensitive to the micro-shifts that appear before a real breakdown.Our system doesn’t wait for a 20% or 25% slide to confirm trouble. It flashes an early warning the moment a stock shows abnormal weakness — often weeks or even months before a major drop.If one of the stocks you own starts to trade with short-term volatility outside its range, it will automatically alert you. In our backtests, it flashed the following warnings:Freshpet (FRPT) before a 74% crashLifetime Brands (LCUT) before a 77% crashBloomin’ Brands (BLMN) before a 72% crashFunko (FNKO) before an 86% crashRocky Brands (RCKY) before a 75% crashAmerican Eagle Outfitters (AEO) before a 69% crashThe Buckle (BKE) before a 21% crashLevi Strauss & Co. (LEVI) before a 49% crashShoe Carnival (SCVL) before a 42% crashThe Gap (GAP) before a 72% crashQVC Group (QVCGA) before a 99% crashIf you want the full walkthrough, I’m hosting one next week. I’ll be going into more details on how our early-warning system works during my Tipping Point 2026 event on Tuesday, December 16, at 10 a.m. Eastern Time.I hope you’ll join me. I’ll be there alongside a legend in our industry, Marc Chaikin.He’s worked on Wall Street for 60 years, survived 10 bear markets, built three new indexes for the Nasdaq, and created his own quantitative indicator that’s still used on Wall Street. I don’t know any other investor who matches his record.But he’s maybe best known for sharing a series of timely market forecasts with his more than 800,000 followers around the world.In early 2022, Marc sounded the alarm on the post-COVID bull run, just 90 days before stocks plunged into a bear market.In early 2023, he said stocks were about to kick off an extraordinary recovery and shoot up 20% or more. That year alone, the S&P 500 gained 26%.And earlier this year, he warned of a violent market shift just before the S&P 500 plunged 19% following the Liberation Day tariffs.Nobody has called the twists and turns of this market quite like Marc has. Which is why his warning about 2026 deserves serious attention.Based on decades of market data, he now says there’s a 65% chance of a bear market in 2026, with an average market loss of 20%. And he says that many popular AI stocks could fall a lot further.Marc isn’t basing his forecast on valuations… what the Fed is doing… projected earnings—or any of the other talking points on CNBC and Bloomberg. It’s based on a cycle Marc tracks with more than 100 years of data.And for the first time since I’ve been TradeSmith’s CEO, I’m not recommending MarketWise subscribers use our long-term trailing stops to protect themselves.They’re a powerful tool—but they weren’t engineered for the kind of fast, reactive environment Marc expects in 2026. So, we created a new kind of sell alert built especially for the kind of volatility shocks, fast trend breaks, and tipping-point conditions Marc sees ahead.If his 2026 prediction proves as accurate as his past market calls, stocks will likely bottom in the fall of 2026 after a steep drop. That’s when one of the most lucrative recoveries in market history will begin.Most investors will miss out. But by following our early-warning signals, you can pinpoint when to get back into any stock in the market.I’ll show you how it all works during our event next Tuesday. And Marc will get into more detail on why he’s calling 2026 the Year of the Bear—including the four-year cycle that’s played out over more than a century of data.We’ll also show you how to use our newest investment tech to protect your downside and spot opportunities after the selling is over.Use this link to sign up for free.I hope to see you there. Our aim is for everyone to have a clear plan for navigating a year that’s shaping up to be full of surprises—and the tools to protect yourself.  Keith KaplanCEO, TradeSmithP.S. Could your favorite stocks be headed for a sudden drop? When you sign up for our Tipping Point 2026 event, you’ll get access to our Flash Crash Screener. You can use it to check on up to 10 of the tickers in your portfolio and instantly see if they’re susceptible to a plunge.But to get the name and ticker of the worst offender—a widely loved stock that looks doomed according to our new system—you’ll need to tune in on December 16. Here’s that link again to register. |
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