We begin today with a final reminder that tonight at 8 PM Eastern, Keith Kaplan, CEO of our corporate affiliate TradeSmith, is going live.
His presentation focuses on two things:
The coming stock melt-up that Keith’s algorithms have just flagged (even considering the sell-off in recent days)
A suite of tools that can help investors ride that surge higher and then get out near the top, escaping before the worst of the ensuing crash wipes out unprepared investors
Behind Keith’s melt-up prediction is a market signal that’s rooted in historical data – and data is where TradeSmith excels.
You see, beyond being our corporate partner, TradeSmith is an investment research shop that focuses on quantitative analysis. They’ve spent over $19 million and over 11,000 man-hours developing their analytical algorithms. And their latest quant breakthrough – the “MQ Algorithm” – has been signaling a coming melt-up.
But even in a melt-up, some stocks suffer sharp drawdowns – which can present fantastic buying opportunities. Given this, Keith and his team of engineers developed a complementary strategy that isolates such pullbacks in top-tier stocks then buys them to ride the rebound.
Overall, in the back tests, the strategy boasted a near 80%-win rate 21 days later, with an average return of just under 16%.
Tonight at 8 PM, Keith will dive more into more details on this. He’ll also cover:
What’s behind the recent market melt-up signal
How he’s preparing investors users to take advantage
10 stocks positioned to ride the melt-up higher…and 10 stocks to avoid
In yesterday’s Digest, we highlighted how the S&P 500 had just bounced off the critical support level of its 100-day MA. Whether that bounce continued or not could drive market direction for the next several weeks.
The most immediate influence on that budding bounce was Nvidia’s earnings report that arrived yesterday after the closing bell.
The numbers were good, but not good enough to kick Wall Street back into full-blown “party” mode.
The chip giant’s Q4 results easily beat Wall Street estimates, and management upped its forward guidance. But Nvidia’s largest source of revenue, data center revenue, slowed substantially. This raised some eyebrows, as did some margin compression.
Here’s MarketWatch:
Nvidia’s stock decline is building [in Thursday’s session], with investors seemingly focused on quibbles such as continued margin pressure and a smaller-than-usual beat on the guidance.
As I write at mid-day, Nvidia shares are down almost 3% despite the beat.
Meanwhile, the major indices have been all over the place. Wall Street is digesting Nvidia’s earnings, the news that Trump’s Mexico/Canda tariffs will go into effect on March 4, and weekly jobless claims that came in above expectations.
Unfortunately, that leaves us where we were yesterday…
With the S&P sitting directly atop its 100-day MA.
Chart showing the S&P sitting directly atop its 100-day MA.
Source: TradingView
We’re still cautiously optimistic about a bounce.
The next big catalyst is tomorrow’s Personal Consumption Expenditures Price Index report, and what is reveals about inflation.
We’ll report back.
The more interesting part of Nvidia’s earnings report
Coming into Nvidia’s earnings report, investors were concerned about the impact of the Chinese low-cost AI platform DeepSeek.
Its advanced technology suggested that the global AI buildout could occur at a lower cost with less power consumption.
Yesterday, Nvidia CEO Jensen Huang threw cold water on that idea. From CNBC:
[Huang] said next-generation AI will need 100 times more compute than older models as a result of new reasoning approaches that think “about how best to answer” questions step by step.
“The amount of computation necessary to do that reasoning process is 100 times more than what we used to do,” Huang told CNBC…
He cited models including DeepSeek’s R1, OpenAI’s GPT-4 and xAI’s Grok 3 as models that use a reasoning process.
In Tuesday’s Digest, I wrote, “I hope you didn’t sell your AI energy stocks back in January when the news of DeepSeek broke.”
That goes double today after Huang’s comment.
Bottom line: Despite Wall Street’s pouty reaction to Nvidia’s earnings, the AI trend is alive and well.
How legendary investor Louis Navellier recommends you invest in AI today
If you’re new to the Digest, Louis is a multidecade veteran investor who’s been out in front of just about every twist and turn of the AI boom. His quantitative algorithms have enabled him to get in early on each mini-phase of the AI rush.
Most notably, his quantitative stock picking system got his Growth Investor subscribers into Nvidia in 2019. They’re currently sitting on 2,924% gains.
Today, Louis is urging investors to add “AI Appliers” – companies finding ways to use AI to grow revenue and improve margins – to their portfolios. His most recent example of an AI Applier is one we flagged earlier this month…
Walmart.
(Full disclosure: I own Walmart.)
Louis reviewed Walmart’s earnings report in his latest issue of Market 360. After addressing how the report reflected consumer concerns about tariffs, Louis dove into the details that many investors overlooked, and they suggest one thing…
Walmart is becoming an AI Applier Juggernaut.
Here’s a quick summation of Louis’ points:
Walmart has created a new AI agent for its merchants to help “get to the root cause of issues related to things like out of stocks or overstocks with more accuracy and speed.”
The company is using tools for coding assistance that will “help streamline deployments and deliver code faster with fewer bugs.”
Walmart has already been using AI to help reduce costs and boost margins.
The Walmart+ subscription service is helping management understand its shoppers. This AI tool tracks spending habits and creates better recommendations for future buys.
Walmart is using AI in its supply-chain automation. The company was an early user of warehouse robots.
From Louis:
I bring all this up because you might not think of Walmart when you think about AI.
But mark my words… In the not-too-distant future, every company will be involved with AI to one degree or another.
And those that don’t will go the way of the Dodo bird.
Walmart gets this, and so do a handful of AI Appliers, the companies that apply AI to better optimize their businesses.
The fact is, the early adopters of AI are already becoming more efficient and profitable. And we’re only at the beginning stages of this process.
If this message sounds familiar, it’s because you’ve heard similar versions from Eric Fry and Luke Lango. All our experts are banging the drum on this next evolution of AI.
We’re seeing an investment line in the sand between the companies that are applying AI to increase revenue, make smarter capital allocation decisions, and reduce costs… and those that are falling behind as technology races past them.
It’s worth doing a deep dive into the companies in your portfolio to make sure they’re implementing AI effectively.
For more on the AI Appliers Louis likes today – specifically, in the wake of the emergence of DeepSeek – you can check out his free research video right here.
Why the potential agreement between Ukraine and the U.S. on access to critical rare minerals is about AI
According to President Trump, Ukrainian President Volodymyr Zelensky will travel to Washington tomorrow to sign an agreement on sharing Ukraine’s rare earth minerals with the U.S. in exchange for greater U.S. security guarantees against Russia.
This would boost U.S.’s efforts to solidify its tech/AI supply chain away from China.
You see, “rare earth” minerals and metals are needed to make high-tech products – notably AI. But they’re also key for the green energy transition, a bevy of consumer electronics, infrastructure, and weaponry.
Ukraine has about 5% of the world’s rare earth deposits, according to a 2022 report by Ukraine’s association of geologists.
China has the largest volume of deposits and is behind most of the global processing.
Here’s the Center for Strategic & International Studies:
At present China produces 60 percent of the world’s rare earths but processes nearly 90 percent, which means that it is importing rare earths from other countries and processing them.
This has given China a near monopoly…
China announced a ban of rare earth extraction and separation technologies on December 21, 2023.
This has significant implications for U.S. national, economic, and rare earth security.
Rare earth elements—a group of 17 metals—are used in defense technologies, including missiles, lasers, vehicle-mounted systems such as tanks, and military communications…
Bottom line: This potential deal would be a big step toward the U.S. insulating itself from China in the AI race.
Finally, here’s something for bruised crypto investors to hold onto as prices slump
On Wednesday, Bitcoin entered an official bear market, as defined by a 20% pullback from the most recent high. Many altcoins are down far more.
In times like these, Bitcoin investors might find solace by focusing more on adoption and less on price.
After all, as a loose parallel, in the same way that a stock’s price eventually mirrors the quality of the underlying company’s earnings, Bitcoin’s price has, historically, mirrored the degree of its global adoption. And on that note, yesterday brought encouraging news.
Block (formerly “Square”) is officially rolling out its “Bitcoin inheritance” product.
Here’s CNBC:
What happens to your bitcoin when you die?
While traditional financial institutions allow for the seamless transfer of stocks, mutual funds and retirement plans, bitcoin’s self-custodial nature makes inheritance and estate planning inherently thorny.
Coinbase requires probate court documents and specific will designations before releasing funds, while physical wallets offer little to no support, potentially leaving all that digital value stuck on a private key.
Jack Dorsey’s Block says it’s created a fix, and the company is now bringing it to market…
Block’s Bitkey self-custody bitcoin wallet [has] an inheritance feature that lets users set a beneficiary for their bitcoin holdings, creating a simple system for transferring the digital currency in the case of death.
This is just another piece of evidence demonstrating Bitcoin’s mainstream adoption. And that suggests higher prices out on the horizon.
To be clear, perhaps Bitcoin’s new bear market will turn into a real bruiser, and we have far lower to go. But even if that’s the case, history shows that this asset is fantastic at rising from the dead and proving the naysayers wrong.
We’ll keep you updated on all these stories here in the Digest.
