3 Stocks to Buy for the AI ConvergenceVIEW IN BROWSER Tom Yeung here with your Sunday Digest. In 2025, two professors wanted to see whether ChatGPT made people less creative. And so, they recruited 356 participants and asked them to perform a series of tasks, including one in which they were to make a toy from a paper bag, a brick, and a fan. The researchers forced some test subjects to use their own creativity. Others were given access to ChatGPT for help. To no one’s surprise, the cohorts without AI came up with entirely unique ideas. (One suggested adopting the brick as a pet, while another proposed disassembling the fan and turning the parts into nunchucks.) But those using ChatGPT came up with almost the same toys. Ninety-four percent of their ideas “shared overlapping concepts,” and nine participants independently named their toy the same thing: the “Build-a-Breeze Castle.” It’s as if AI is turning the entire world into the blandness of 2000s beige home interiors. Emails start sounding the same… Movie recommendations are duller… And everything has that “competent but forgettable” AI sheen. In a new presentation, legendary quant specialist Louis Navellier says this convergence is also happening on Wall Street. Millions of trading algorithms, advisors, and investors are increasingly relying on the same AI-powered tools. The danger isn’t that AI is wrong… It’s that AI causes everyone to do the same thing. As Louis puts it, this creates crowded trades, concentrated ownership, and the potential for violent reversals when sentiment changes. It helps explain the strange movements in SpaceX (SPCX) over the past several days, and why “groupthink” seems to be taking over markets. In that new free broadcast, Louis calls this the 50-Million AI Coordination Trap, a phenomenon where investors are all doing identical things without realizing it. Stocks that are popular among AI algorithms keep going up, while everything else seems to go nowhere. It’s becoming increasingly important to know what AI algorithms are recommending. Now, many investors will dislike the idea of basing their decisions on AI-powered algorithms. I’m certainly uncomfortable with it. Nevertheless, Louis has created a stock grading system that has long dealt with this issue by balancing “follow-the-money” scores against a company’s real fundamentals. Only companies that pass both earn his top “Buy” ratings. And so, to illustrate, I’d like to showcase three of his system’s top-rated companies in this update. And if you’d like to learn more (and get access to that system), then click here.
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President Trump owns up to $5 million in shares of this AI company (not Nvidia or SpaceX). He’s strongly endorsed its leadership and products. And he just awarded it with a nearly $10 billion Pentagon contract. No wonder one legendary fund manager says it could become the cornerstone of your retirement. Click here for its name and ticker. |
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Stock to Buy No. 1: Quality in a Risk-On MarketSwarm trading (whether driven by AI or humans) can mask a lot of bad behavior. The venture capital boom of the mid-2010s allowed Theranos to raise almost a billion dollars, and so did truck maker Nikola during the electric vehicle craze of 2021. FTX rode a wave of crypto enthusiasm that same year. The founders of all three companies ended up getting convicted of fraud. Now, most AI semiconductor companies are not criminal enterprises. They’re making legitimate bets on which technologies will come out ahead. But I guarantee we’ll see some spectacular blowups once AI trading tools decide to start selling the hottest chip companies. To avoid the risk of accidentally buying frauds or mediocre firms, I’ve purposely favored blue-chip semiconductor companies in this newsletter. And it turns out it’s very possible to buy well-established chipmakers for triple-digit gains. Arm Holdings plc (ARM) (+110%) and Cohu Inc. (COHU) (+120%) are some recent examples. This week, I’d like to bring you one more company that Louis’ system favors. It’s the bluest of blue-chip semiconductor stocks that should do well long after the current AI rally fades: Texas Instruments Inc. (TXN). Texas Instruments is the world’s largest analog chipmaker, specializing in the type of semiconductors that handle messy, real-world signals. These are things like pressure… temperature… cell phone signals… human heart rates… and more. Its chips convert this real-world information into the clean “0’s” and “1’s” that digital chips can then process. Growth has been solid. In the most recent quarter, the company reported a 19% increase in revenues, driven by a 30% rise from industrial customers and a 90% jump in data center demand. AI servers use huge amounts of electricity, and hundreds of analog sensors per rack are needed to track power usage, heat, and voltages. Texas Instruments should also benefit long after the AI data center boom ends, thanks to its large exposure to self-driving vehicles, humanoid robots, and other AI-powered robotics. Louis’ system seems to agree. It recently upgraded TXN to a “B,” and highlights the firm’s strong earnings power and upward analyst revisions to stay invested for the long haul, even as “smart money” jumps in for the short-term AI boost. Stock to Buy No. 2: A Second Power PlayIn March 2025, I highlighted three stocks to buy for the AI Revolution. “These are firms that learned to harness the often uncontrollable power of AI,” I wrote. “And as the tech world puts their collective foot on the R&D gas, we’re going to see these firms surge ahead.” The trio have since returned 117% on average. And the best part is that one of these companies is still a “Buy”: Monolithic Power Systems Inc. (MPWR). Monolithic is a leader in power management chips for AI devices. These are the tiny semiconductors that use data (often from Texas Instruments) to convert messy electricity flows into the precise voltages that semiconductors need to function. This is an incredibly important job. In AI data centers, servers often start up all at once, creating voltage dips and spikes. (It’s why turning on a microwave can briefly dim a home’s lights.) And without proper regulation, these power surges can fry any electronic chip connected to the system. Monolithic’s products help data centers manage this challenge. The Seattle area-based firm pioneered putting multiple power management components onto a single integrated chip (that's the "monolithic" in the name), and its advanced devices have become the gold standard for high-end AI chips. Monolithic chips are smaller, run cooler, waste less energy, and are more reliable than the patchwork approach that rivals use. The result is that Monolithic has been growing fast. Revenues increased 26% last year and are on track to notch a 32% gain this year. The company also has been able to take market share of the voltage regulator chip market, thanks to its higher-end designs. Louis’ system agrees. The company scores a top “A” grade in its quantitative “follow-the-money” score, and valuations remain reasonable, thanks to its rapid earnings growth. Stock to Buy No. 3: America’s Healthcare PivotFinally, I’d like to highlight one decidedly non-AI stock with a lot of “smart money” buyers: Oncology Institute Inc. (TOI). This cancer care company has become a potential breakout firm, with strong institutional buying (read: AI-powered investors) and the fundamentals to match. In short, Oncology Institute runs a network of 146 clinics across five states. Health plans pay TOI a fixed per-member-per-month fee to take on cancer patients, and TOI profits if it provides care below that fee. It was a historically unexciting business that relied on acquisitions and partnerships for growth. However, TOI now has three potential catalysts. The first is political. In late April, Health and Human Services Secretary Robert F. Kennedy Jr. gave testimony to Congress that would have seemed totally out of character a year ago. “China is now eating our lunch,” a visibly shaken Kennedy said in front of a congressional committee. “They went from running 3% of clinical trials to running 30%... We are losing scientists, we’re losing our IPs… and we’re going to lose our biosecurity.” The federal government has since pivoted toward a far more accommodating stance to the U.S. healthcare system. Following Kennedy’s testimony, a key Food and Drug Administration committee unanimously recommended its first vaccine since the start of the current Trump administration. (An mRNA vaccine, no less!) Several days later, the Department of Health and Human Services announced Operation TrialBlazer, an ambitious project designed to fast-track clinical research. This is important because TOI generates most of its profits not from direct cancer care, but rather from the expensive oncology drugs that its patients use. And because reimbursement rates are largely set by the Centers for Medicare & Medicaid Services (CMS), favorable posturing from the federal government is a clearly positive sign for TOI. As awful as it sounds, one of the easiest ways for regulators to spur cancer drug development is to raise what the government is willing to pay for them. The second is TOI’s shift from negative profits to positive. In May, the company reiterated it expects to flip to positive adjusted EBITDA this year, and upgraded its free cash flow to positive $10 million at its midpoint, up from a previous prediction of a $5 million outflow. That matters because conservative investors often wait for companies to become profitable before buying. The third is TOI’s high popularity among institutional and “smart money” investors. As mentioned earlier, these traders are beginning to show convergence in their actions. And as shares continue gaining momentum, these AI algorithms usually become more willing to buy a stock, not less. Louis’ system awards TOI a solid “B” for strong institutional buying, rising earnings momentum, and very strong sales growth. The Human Nature of Artificial IntelligenceIt turns out that AI investing carries many of the same investing biases that we humans do. In one 2025 meta-study, a team of European researchers found that large language models:
Favor U.S. stocks. 93% of portfolios were invested in American stocks. Pursue risky allocations. 51% of investments were beyond normal allocations. Chase hot stocks. 28% of portfolios were invested in the top three equities that were traded most frequently in the past three months Ask an AI where to invest today, and it might give some combination of SpaceX, Nvidia Corp. (NVDA), and the latest meme stock. Professionally designed AI algorithms are often not much better. They’re trained on the same data… use the same machine-learning techniques… and are even created by the same people. It’s no surprise that momentum has emerged as the single most important factor for predicting stock market returns. That’s why I think it’s essential for you to watch Louis Navellier’s latest presentation, where he outlines the opportunities and risks of this new convergent market. The highs are going to be far higher than in the past. Momentum-seeking algorithms will see to that. And that means the lows will also be far more devastating. If you invest with the crowd, be sure to do so safely. Click here to learn how. Until next week, Thomas Yeung, CFA
Market Analyst, InvestorPlace |
