The Biggest Thing To Remember About Making Money In Stocks

We can use Trackstar – and the battle at the top between Tesla (TSLA) and Nvidia (NVDA) – to help make today’s point in The Juice. A point that really should be investing 101. 

Don’t get caught up in the noise. Always look ahead, because the stock market is forward-looking. A forward-looking money-making machine… for long-term investors. 

AI Is Driving This Stock Market

Updating what we told you last week about TSLA versus NVDA in Trackstar. 

After several weeks at number two among financial professionals, Tesla regained its crown as the most searched stock among the pros (money managers and such on Wall Street) and retail investors (you and I). So now, NVDA is the second most searched stock among pros and third most searched – behind TSLA and AAPL – among retail. 

But why did NVDA go on this massive run in the first place? 

Largely because of artificial intelligence. Because, Nvidia is ahead of the curve – forward looking – in the space. 

When our sister newsletter, The Spill, wanted to find the best AI ETF, it went with the VanEck Semiconductor ETF (SMH). And what’s the top holding in SMH? Nvidia, making up roughly 17% of the portfolio. Nvidia dominates the AI computing chip market, with estimates of its market share ranging from 80% to 95%. 

The semiconductor industry is chock full of stocks driving and facilitating AI adoption. 

Another top ten holding in SMH is Broadcom (AVGO). By 2024, the company expects AI to account for more than 25% of semiconductor revenue, up from the current 15%. 

Outside of chip stocks, there are companies that directly deploy AI solutions. Names such as Amazon.com (AMZN), which not only uses AI to drive sales in its retail business, but offers AI services and infrastructure via Amazon Web Services. Or Microsoft (MSFT), an investor in OpenAI (the developer of ChatGPT), the company also integrates AI technology into its search product and Azure cloud computing platform.

YTD, NVDA is up roughly 197%. AVGO is up about 53%. AMZN approximately 51%. And MSFT has risen around 41% since the beginning of 2023. 

How can this be in an economic environment where, depending on the data you’re looking at, anywhere from 50% to 75% of Americans think we’re in a recession? 

It’s because the stock market values the future – progress, innovation, the next big thing – more than that it gets caught up in day-to-day economic uncertainty that, to many people on Main Street, feels like calamity. 

Sure, the market sometimes dives on the news of the day or relatively short-term concerns. However, over time, it values companies and prices stocks on the basis of what they’re expected to deliver. Not just any companies and stocks, but the ones at the center of shaping our futures. 

The 15% YTD gain in the most searched name among all investors in Trackstar – SPDR S&P 500 ETF (SPY). You can attribute it almost solely to tech stocks, many of which are big, direct AI players or at least names at the forefront of AI adoption. Same goes for the 8th most searched ticker in Trackstar, the Invesco QQQ ETF (QQQ). Tech, with a focus on AI, drives its nearly 40% YTD rise. 

You can buy and even make money with the companies buying AI chips and solutions from NVDA, AVGO, MSFT, AMZN and others. No doubt. However, you’re doing an end around. And you could be doing it with companies in spaces more vulnerable to the economic hysteria of the day. Remember that when, for example, a grocery store says it’s using AI, this does not put it at the forefront of AI. This isn’t an example of the stock market as a forward-looking mechanism. 

The market doesn’t place a premium value on these second and third tier AI players. It does so with the companies on the AI frontline. The companies who were thinking about and working on AI long before it became a household name driving this stock market into the future. 

The Bottom Line: All of this said, your best bet as an investor with a long-term time horizon is to ignore the noise and buy the names responsible for the upside we’re seeing in today’s stock market amid so much bad, even scary economic news. Spread your money around by owning well-established AI and tech stocks directly or via an ETF such as SMH. Because these names don’t only represent today’s upside, but they’re rallying, in part, because of what investors expect from them in the future.

And, of course, as a long-term investor, regularly put money into SPY and QQQ. Over the last five years, SPY and QQQ are up roughly 60% and 109%, respectively. Since inception of these ETFs (1993 and 1999), we’re talking about an approximately 900% gain for SPY and about 594% worth of upside in QQQ. 

As the market looks ahead, it tends to take two or more steps forward and one or fewer steps back. It’s on those steps back when people get scared. They sell when they should be buying. When they should be thinking about tomorrow rather than freaking out over today.

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