While most investors overlook this critical piece of the AI ecosystem, Alex believes it could become one of the most important beneficiaries of the next phase of the tech boom.

He details this below…

– James Ogletree, Senior Managing Editor

Artificial intelligence has generated no shortage of commentary – breathless predictions, dire warnings, sweeping promises. Yet for all the noise, very little attention is being paid to the single most important question for investors: What must happen behind the scenes for AI to actually deliver on its potential?

Because while the conversation tends to focus on what AI can do, the more consequential issue is what AI requires to function at scale.

The newest generation of AI chips is astonishingly powerful. Nvidia’s latest architecture, for example, processes data at speeds that would have seemed impossible a few years ago. But this development has created a less glamorous – yet absolutely fundamental – challenge. These chips generate extraordinary heat, consume enormous amounts of energy, and produce more data per second than most existing systems can handle.

This is rarely discussed outside technical circles. Yet it is the limiting factor that determines how far and how fast AI can advance.

We are building larger and larger GPU clusters – some with hundreds of thousands of chips working in unison – and asking them to perform tasks that dwarf the demands of even the most powerful supercomputers of the last decade. But here’s the problem: These chips can’t operate effectively unless they can communicate with one another at incredibly high speeds… without melting the servers they occupy.

In other words, AI doesn’t rise or fall on clever algorithms alone. It depends on the physical infrastructure that underpins them.

And that’s where things get interesting.

There is a relatively small American company – one you almost certainly haven’t heard of – that has quietly solved the most important bottleneck in AI today. It doesn’t develop models or design chips. It builds the connective tissue that allows these chips to exchange data at blistering speeds while keeping heat and system instability in check.

Without this capability, the highly publicized advances in AI simply don’t work in the real world.

That’s why nearly every major player in the industry – Nvidia, AMD, Intel, Amazon, Microsoft, and others – relies on this firm’s technology. It is not an exaggeration to say that the most advanced AI clusters on the planet could not operate at scale without it.

This is the part most investors fail to appreciate.

Technological revolutions rarely reward the companies that generate the headlines. They reward the companies that quietly make the entire ecosystem function.

During the dot-com boom, investors bid up flashy internet stocks to absurd levels while ignoring the behind-the-scenes firms that enabled the internet to actually run. Cisco, which built the routers that moved data from point A to point B, became one of the most profitable investments of that era. So did companies like Akamai, which solved the problem of delivering content efficiently across the web.

Meanwhile, many of the companies that investors thought would change the world disappeared entirely. Their business models weren’t sustainable. Their valuations weren’t rational. And the innovations they hoped to commercialize were ultimately built – or bought – by others.

The same dynamic is unfolding today in AI.

Investors are clamoring for the biggest names, the megacap platforms spending billions to stay ahead of their competitors. And many of these firms will continue to do well. But the most underappreciated beneficiaries of the AI boom are not the giants creating the models. They are the companies enabling those models to run safely, reliably, and at scale.

Consider the magnitude of what’s happening right now. Global data-center construction is accelerating at a rate we’ve never seen. Companies are racing to build new GPU clusters as fast as they can pour concrete. Entire power grids are being upgraded just to support these facilities. And late last year, a consortium of some of the largest firms in the world announced a multi-hundred-billion-dollar initiative to build what may become the largest AI supercomputing system ever attempted.

All of this expansion hinges on a single, unavoidable requirement: the system must be able to handle the data produced by the chips that power it.

Most investors don’t think about this step at all. They assume it’s already solved. It isn’t.

And that is precisely why the company addressing this challenge is not just a “nice to have” in the AI supply chain – it is foundational.

This is also where history acts as a guide. When investors become overly fixated on a narrow group of winners – whether it’s the Nifty Fifty in the 1970s, the dot-com darlings of the late 1990s, or the megacap tech giants of today – the biggest opportunities often emerge elsewhere. Not in the obvious place, but in the necessary place.

AI will undoubtedly reshape industries across the economy. It will enhance productivity, lower costs, accelerate drug development, improve supply chains, and transform manufacturing. But none of this happens unless the underlying infrastructure keeps pace with the models themselves.

In the meantime, investors would do well to remember that the biggest profits are rarely made where the crowd is already looking. They’re made where essential progress is being created – quietly, consistently, and before the rest of the world notices.

The post The AI Question People Aren’t Asking appeared first on Wealthy Retirement.

Some brand-new research from Hartford Funds and Ned Davis Research shows that my friend’s son is doing the right thing. Dividend payers are critical for investing success.

According to the new data, dividend payers more than doubled the return of nonpayers. Companies that paid dividends returned 9.2% per year on average, while companies with tight fists who refused to share the wealth only generated a 4.3% annual return.

Today, you can earn 4.3% on your cash virtually guaranteed. There’s no reason to take a risk on a stock for an expected 4.3% return.

You may think that 9.2% versus 4.3% doesn’t make that much of a difference. After all, it’s less than 5% per year – just $0.05 on every dollar invested.

But it adds up in a big way.

Starting with $10,000, a 4.3% annual return over 10 years results in $15,235. An investor earning 9.2% ends up with $24,111.

Expand that to 20 years, and we’re talking the difference between $23,210 and $58,137. The dividend investor earned 150% more than the non-dividend investor.

Three decades of investing results in $35,361 versus $140,177.

Forty years means $53,873 for the nonpayers (still less than the dividend payers grew to in just 20 years) and $337,991 for the dividend payers.

The gap widens each year. After 50 years, the dividend payers provide 10X the amount of money as the non-dividend payers.

Dividend payers were 24% less volatile as well, allowing you to sleep better at night and perhaps helping you not bail out of your stocks when things get rocky. That will help your performance over the long term.

All anyone can talk about right now is tech, tech, tech. But investing in a “boring” energy company like Chevron (NYSE: CVX), whose 4.6% dividend yield alone is already above the average annual return of the non-dividend payers, or a regional bank like Bank OZK (Nasdaq: OZK), with a 3.2% yield, gives you a much better chance of boosting your wealth than trying to pick the right tech stock.

My friend’s son is a finance major. He wants to work in private equity, financing exciting startups. But he’s investing his own money where it has historically performed best.

If you’re not investing in dividend stocks, you are leaving a lot of money on the table.

The post Dividend Stocks Are Still the Stars of the Stock Market appeared first on Wealthy Retirement.

The stock has been on quite a journey. After climbing from around $115 in mid-2023 to over $250 by mid-2024, the shares have tumbled roughly 45% to about $138 today. This steep decline has many investors wondering whether the stock has become a bargain, especially given the company’s critical role in the semiconductor supply chain.

Despite the stock’s recent poor performance, Applied Materials just delivered record quarterly revenue of $7.2 billion in the first quarter of fiscal 2025, up 7% year over year. The company’s gross margin improved to 48.9%, its highest level in 25 years, while operating margin increased to 30.6%. These strong results helped drive a 12% boost in earnings per share to $2.38.

Looking ahead, management remains optimistic about the company’s growth prospects, pointing to AI as a major catalyst for semiconductor demand. In the company’s latest earnings call, CEO Gary Dickerson highlighted that the market remains on track to exceed $1 trillion in annual revenues by 2030. He went on to add that AI is “only at the beginning of what’s possible.”

The company is also showing impressive momentum in advanced chip manufacturing, especially as customers start using the latest technologies with next-generation transistors.

When we put Applied Materials through The Value Meter’s analysis, we find a stock that’s right on the border between fairly valued and slightly undervalued.

The company’s enterprise value-to-net asset value ratio sits at 5.65, just below the average of 5.72 for similar companies. This suggests that the stock trades at a slight discount to its peers.

On the cash flow front, Applied Materials has delivered positive free cash flow in each of the past four quarters, with its quarterly free cash flow averaging 8% of its net assets. This is very close to the peer average of 8.24%.

For long-term investors looking to gain exposure to the AI revolution and the semiconductor industry, Applied Materials represents a quality business that’s now available at a reasonable price. With its strong market position in critical areas like manufacturing processes, high-performance memory, and advanced packaging, the company appears well positioned to benefit from the technology transitions that will drive semiconductor growth in the years ahead.

The Value Meter rates Applied Materials as “Appropriately Valued,” though it’s right on the edge of being “Slightly Undervalued.”

What stock would you like me to run through The Value Meter next? Let me know here.

The post Applied Materials: Is It Time to Buy This Semiconductor Giant? appeared first on Wealthy Retirement.

I expect it to revolutionize medicine.

Instead of scientists searching for years for a molecule that may treat a disease and then spending many more years and hundreds of millions of dollars to figure out whether it works, AI can take every piece of knowledge about that disease and come up with likely drug candidates, drastically reducing the drug development time frame.

And AI can answer more questions than Google because it allows you to ask follow-up questions or modify your requests.

When I describe to my kids what life was like before the internet, I’m pretty sure they picture it in black and white and everything moving at a snail’s pace. I suspect 20 years from now it will be the same when we talk about the pre-AI era.

I believe AI will be like the internet revolution but bigger. So that leaves investors dying to know the answers to two questions…

1. Which AI stocks should I buy?

Many investors are looking for that tiny company that is going to become the next Microsoft (Nasdaq: MSFT).

They may be out there, but it is still very early in the game. Remember how many internet companies there were that died? Netcentives, theGlobe.com, eToys and – of course – the infamous Pets.com…

Here’s my advice. Instead of searching for the next Microsoft, choose Microsoft. The tech giant is already devoting lots of resources to AI, including a 49% stake in ChatGPT, and not many companies have more resources than Microsoft.

Other tech giants, like Amazon (Nasdaq: AMZN), Meta Platforms (Nasdaq: META) and Cisco Systems (Nasdaq: CSCO), will likely keep their commanding leads. Nvidia (Nasdaq: NVDA) is already one of the big winners, and while it will face competition, it has a lead over other chipmakers in the AI space.

Go with what you already know and who is already a dominant player.

But there’s a second question I’ve been seeing from readers…

2. How can I generate income from AI?

As you likely know, the majority of growth stocks (including most tech firms) don’t pay dividends – and those that do pay dividends often have unimpressive yields.

That’s because they invest their excess cash into growing their businesses rather than paying it out to shareholders.

Of the five stocks I mentioned above, Cisco Systems is the only one with a yield above 1%.

With many of the leaders in the tech sector – and the AI space, specifically – opting not to pay dividends, some income investors are feeling left out in the cold, unable to participate in the market’s latest big trend.

The solution is to find the rare AI plays that give you the best of both worlds: explosive capital gain potential AND stable, reliable income.

Luckily, I’ve recently uncovered three opportunities that meet my strict criteria for AI income plays:

• The first is an unusual trust that gives you income from America’s AI boom each and every quarter. As a trust, it is legally required to distribute 90% of its available cash to its partners via special tax-sheltered dividends – that’s money that goes directly to YOU!
• The second is a breakthrough AI biotech that’s partnering with two of the household names I listed earlier: Nvidia and Amazon. Even better, this company has raised its dividend for 13 years in a row.
• The third is a very special play… a unique fund that boasts a whopping 10% yield and invests in high-tech AI companies.

I’ve compiled all the details on all three of these opportunities in what I’m calling my Free AI Income Playbook, and I’d love to share this playbook with you today.

Simply click here to claim your copy. (There’s no catch – it won’t cost you a cent!)

The post The Top 2 Questions People Are Asking About AI appeared first on Wealthy Retirement.

The panic hit on September 15, 2008, when Lehman Brothers failed. The global financial system froze.

This lasted for months. By the first week of March 2009, the mainstream consensus was that another Great Depression was at hand.

Nobody was buying stocks.

With the benefit of hindsight, we now know that the first week in March 2009 was the greatest stock-buying opportunity in a generation.

But what should we have been buying?

Should we have been focusing on stocks with the cheapest valuations?

Or should we have loaded our portfolios with quality and bought great companies trading at good – but not absurdly cheap – valuations?

Value or Growth?

In March 2009, you could find energy companies down 90% from where they were 12 months prior.

With oil trading for not much more than $30 per barrel, producers were at absurdly low valuations relative to their production and reserves.

It was a value investment opportunity if there ever was one.

The tech sector, meanwhile, loaded with some of the most dominant growth companies on the planet, was certainly down – but not nearly as much as the energy sector.

Instead, the tech sector in March 2009 offered growth at a very reasonable price.

So which should we have been buying? Energy sector deep value or tech sector growth at a very reasonable price?

Consider the chart below…

Since March 2009, the Vanguard Information Technology ETF (NYSE: VGT) is up 950%.

If an investor had put $100,000 into these growth stocks at a reasonable price in March 2009, they would have $950,000 today. That is a life-changing return.

Meanwhile, the Energy Select Sector SPDR ETF (NYSE: XLE) is not even up. The sector is actually down 11.21%.

A $100,000 investment there at the bottom of the financial crisis would now be worth only $89,000.

At no point since the March 2009 bottom did the energy sector outperform the tech sector. That is despite the price of oil more than tripling from $30 per barrel in March 2009 to more than $100 per barrel for several years heading into 2014.

Quality growth at a reasonable price smashed deep value.

What REALLY Drives Stock Market Results?

One common misconception is that there is a difference between growth and value investing.

There isn’t.

Just because a stock is trading cheaply relative to its earnings, cash flow or assets doesn’t mean it actually offers value.

And just because a rapidly growing stock trades at an expensive value relative to its earnings, cash flow or assets doesn’t mean that isn’t a great value.

The truth is that the best investments are companies that are able to grow their value over long periods of time.

A great tech company that trades at 20 times earnings but will grow those earnings at a rate of 20% per year is a much better bargain than an energy company trading at eight times earnings that will never grow.

As investors, we need to be able to identify what makes a company great – and that greatness always boils down to how much free cash flow a business can generate.

The tech and energy sectors provide the perfect context for this.

The value in tech companies comes from their intellectual property. They don’t need to invest huge amounts of money in machines, buildings, etc.

Their businesses spit out cash flow every year that can then be reinvested to grow the business or be distributed to shareholders through dividends and share repurchases.

Energy producers, on the other hand, generate very little (if any) free cash flow. They must always spend their cash on drilling new wells, finding new discoveries and paying for their rigs just to replace declining production.

The reality is that tech companies are far better businesses than energy producers.

Over the long term, it is always worth paying up a little bit for the long-term free cash flow growth that quality companies generate.

Good investing,

Jody

The post Should Investors Focus on Growth or Value? appeared first on Wealthy Retirement.

Stocks tend to do particularly well later in the month as the holidays get closer, a cycle known as the “Santa Claus rally.”

But President Trump has a habit of upsetting historic norms, and he might be doing it with this one too…

Last December, the markets plunged after President Trump declared himself “Tariff Man.”

The risks are rising for a repeat performance this month.

After rolling through the year and starting December at all-time high levels, the stock market hit some turbulence, falling 1.5%.

The selling really started on the eve of Thanksgiving, when President Trump signed legislation backing protesters in Hong Kong. Predictably, Chinese officials accused the president of meddling in affairs that shouldn’t concern him.

That Monday, China announced U.S. military ships and aircraft would no longer be allowed to visit Hong Kong.

Beijing also announced sanctions against several U.S. nongovernment organizations for encouraging protesters to “engage in extremist, violent and criminal acts.”

The next day, President Trump upped the ante. “I have no deadline,” he said at the NATO summit in London. “If it’s not going to be a good deal, I’m not signing a deal… In some ways, I like the idea of waiting until after the election for the China deal.”

The market sold off in reaction. While stocks rebounded nicely the next day, there’s currently growing fear that the trade war will escalate further before December 15.

That’s when the United States is scheduled to impose 15% tariffs on $160 billion of additional Chinese products, including electronics, shoes and other retail goods.

Let’s assume President Trump is following the playbook laid out in Trump:The Art of the Deal. If so, that means he’ll keep adding to the pressure on China until the last possible minute.

That means another 10 days of potentially market-moving headlines before the December 15 deadline.

But wait, there’s more…

In addition to battling China, Trump reopened fronts in the global tariff wars this week.

First, he restored tariffs on steel and aluminum from Brazil and Argentina.

Next, he threatened tariffs of up to 100% on $2.4 billion of French imports, including champagne, handbags and cheese.

This is in response to a new French digital services tax the White House called “unusually burdensome” for U.S. tech giants such as Apple (Nasdaq: AAPL), Amazon (Nasdaq: AMZN), Facebook (Nasdaq: FB) and Alphabet’s (Nasdaq: GOOGL) Google.

Finally, he threatened tariffs against other NATO countries – Canada, most notably – if their governments don’t increase military spending to 2% of GDP.

Maybe it’s the weather, or maybe it’s just a coincidence. But it appears there’s something about December that brings out Trump’s inner Tariff Man.

To be clear, I’m not abandoning the bullish views I’ve expressed before. The declines we’ve seen so far in December are minimal in relation to the market’s overall strength in 2019.

But as I’ve written before…

Historically, bull markets end because of some combination of…

• Overaggressive tightening or other policy errors, which can tip the economy into recession
• War or another geopolitical shock
• Runaway inflation, which can erode the value of corporations’ future cash flow
• Rampant speculation, such as occurred in the Roaring ’20s and late 1990s.

“Other policy errors” top the list right now in terms of the potential to scuttle the bull market. That’s because of President Trump’s unpredictable nature.

This is not about politics or whether you believe the president is doing the right thing – or in the right way. No matter their political views, investors must keep a close eye on Trump’s latest statements and understand their ability to rattle Wall Street.

Speaking of which… In the middle of all the circumstances listed above, the president took another swing at the Federal Reserve.

While announcing the new tariffs on Twitter, he called out the governments of Brazil and Argentina for “presiding over a massive devaluation of their currencies.”

He tweeted, “The Federal Reserve should likewise act so that countries… no longer take advantage of our strong dollar by further devaluing their currencies. This makes it very hard for our manufacturers & farmers to fairly export their goods. Lower Rates & Loosen…”

The Federal Reserve meets next on December 10 and 11. It’s highly unlikely it will cut rates given the overall strength of the economy and relatively low inflation.

But Trump’s pressure adds another layer of uncertainty to a meeting that otherwise was shaping up to be a nonevent – for a Fed meeting, at least.

The same can be said about Friday’s jobs report for November. Trump also said this week, “I don’t watch the stock market, I watch jobs.”

A weaker-than-expected jobs report will give Trump more ammunition to target the Fed. Most presidents have been careful about dealing with the Fed, whose credibility rests, in part, on its independence from politics.

But, again, this president makes a habit of upsetting historic norms.

Another week like this, and rather than embracing the holidays, investors will be saying beware the ides of December.

(With apologies to Julius Caesar and Shakespeare.)

Good investing,

Aaron

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