Chris’ note: We’re on the cusp of 1,000+% rallies in AI small-cap and micro-cap stocks. That’s been the message all week from our tech- and growth-stock investing expert, Colin Tedards.
Colin revealed all on Wednesday during his first event at Legacy Research. He detailed how to identify these under-the-radar AI plays… why their small size means outsized gains… plus the name and ticker of a stock he says has the potential to be one of the top AI investments of the decade.
So, make sure to check out the replay here. Then read on for some of the questions attendees had for Colin during the Q&A session after the event… and his responses.
Nvidia (NVDA) has been on a tear this year.
It’s the world’s No. 1 AI chipmaker.
Microsoft, Alphabet, Amazon, Tesla, and other giant tech companies use its specialized chips to build their most advanced AI models.
As a result, its stock price has tripled this year.
But as I showed the more than 4,000 people who attended my AI investing event on Wednesday, Nvidia is not my top recommendation.
It’s already a $1 trillion stock. It could deliver double-digit gains from here. But due to its size, its days of explosive growth are over. That’s why I’m recommending much smaller stocks that are key parts of the AI ecosystem…
One of them has a market value of just $2 billion. That’s just 0.2% the size of Nvidia. When inventors start to pour money in, I predict we’ll see gains of at least 10x from here.
It’s thanks to what I call the “Nvidia Effect.” As Nvidia continues to grow, dozens of small, under-the-radar companies that Nvidia relies on to make its chips will skyrocket.
I got a ton of great questions from attendees during my live Q&A session after my event.
I don’t have time to go through them all. But here are some of my favorites, plus my responses.
They’ll help you understand how I picked these Nvidia Effect stocks… why AI isn’t the jobs killer people think it is… and what kind of gains you can expect from these tiny AI plays.
How can you be sure the Nvidia Effect stocks you’re recommending are the absolute must-owns? Also, how can you be sure you’re not missing any?
I use a battle-tested system to evaluate every recommendation I make.
I start by identifying an undeniable trend.
The stock market sees plenty of fads. NFTs, internet-of-things, metaverse, and wearables come and go with the news cycle.
I’m looking for something bigger. A trend too powerful to ignore.
Examples include the original rollout of the internet, social media, and the smartphone.
And AI fits the bill perfectly. The cost savings and boost in productivity will give early adopters a huge advantage over stalwarts who are slow to adopt it.
Next, I look for a competitive edge.
I liken it to the Olympics. No one remembers who won silver. You won’t find a silver medal winner on a Kellogg’s cereal box.
It’s all about the gold.
Second place in the stock market doesn’t make investors rich.
Just look at examples like Apple vs. Samsung in the battle over smartphones.
Apple released its first iPhone in June 2007, Since then, Apple’s shares have returned 4,820%. Smartphone maker Samsung has returned only 399%. That’s more than a 10x difference over the past 16 years.
There’s a similar story in athletic wear. Under Armour was an up-and-coming name in the mid-2000s. But mismanagement saw it take second place to Nike. Since 2005, Nike has returned 930% while Under Armour is down 84% since 2016.
Intel has long been one of the largest chipmakers. But its lack of innovation allowed others to catch up. Since 2015, Intel has only returned 21% to shareholders. Meanwhile, Advanced Micro Devices (AMD) is up 3,570%.
The companies that had a real edge over the competition went on to return life-changing windfalls to early investors. Their second-place rivals traded sideways or worse… went out of business. Finally, great leaders don’t just develop a competitive edge. They also generate profits.
That’s why I look at the financials to confirm that the right leadership is in place. Every industry is different. But a company with a strong cash flow and higher operating profits than its peers is usually thanks to strong leadership.
Pets.com, again, was a perfect example. No sane leadership team would have agreed to spend multiples of their yearly revenue on advertising.
That’s a dramatic example. But – in most instances – whenever we see executives who are not focused on profitability and cash flow, it’s a good sign to run in the opposite direction.
Companies that pass these strict criteria are the highest-quality stocks to own. There may be others that benefit from the Nvidia Effect. But I don’t think they’ll be the biggest winners.
If they make too many AI robots that take people’s jobs, what are we humans going to do?
AI will replace the mundane tasks that disrupt creativity.
Early on as a web developer, I spent most of my time trying to find snippets of code.
Most developers don’t type out code like a storyteller writes a book.
The process relies on searching for code that already exists and modifying it. There’s also the time spent trying to fix code that isn’t working.
A recent survey found 92% of U.S.-based developers are using AI-powered coding tools at work.
Tools like GitHub’s AI Copilot make writing code faster and easier.
A developer just tells Copilot what they want, and it spits out the code to do just that.
That allows developers to spend more time on designing a great website or app… rather than searching for the right lines of code. AI will enable people to be more creative.
But AI isn’t limited to just coding tasks.
Consulting giant McKinsey found that generative AI has the potential to automate 60–70% of an employee’s working time. That means that AI will alleviate much of the “grunt work” for white-collar jobs.
And that will increase productivity and cut down on some jobs, like administrative work.
But it also opens up entirely new opportunities.
That’s because every boost in productivity has led to a net gain in jobs and opportunities.
We can have a look back at history and how other breakthrough technologies have created more jobs than they’ve replaced. The internet was supposed to kill brick-and-mortar stores, for instance.
And while we have seen a slowdown in the growth of physical stores, there’s been an explosion in e-commerce sites. The internet has enabled millions of people to create online stores that may not exist if they had to lease a storefront and rely on foot traffic.
The digital revolution was supposed to put millions out of work. Record stores and film development labs were once strip mall staples. Today they’re all but gone.
But the birth of digital music and photography has empowered artists to independently publish their work and make a living off it.
Cloud computing was supposed to wipe out IT jobs as companies ditched their self-run servers and databases in favor of the cloud. But the International Data Corporation (IDC) found that cloud computing added 6.3 million IT jobs to service cloud computing development.
That’s not to mention the rise of businesses like Netflix, Uber, Airbnb, and Slack. These companies were only able to scale as quickly as they have because of cloud computing.
Do you suggest trading options on any of your recommendations?
The types of small- and micro-cap stocks I recommend in Exponential Tech Investor have the potential to see explosive growth. You can realistically 5x or 10x your money without having to use options to amp up your gains.
I’m not against options trading in general. In fact, I recently interviewed options trading legend Larry Benedict over at my YouTube channel, The Investor Channel. I know that, when used correctly, they can be great wealth-building tools.
But when you’re buying high-growth stocks while they’re still small, you have so much upside that options are unnecessary.
The chip testing company, Aehr, rode the Tesla effect to something like 1,330% gains since July 2021.
Cirrus Logic supplied Apple with audio technology for the iPhone. It delivered a 1,320% return in the decade following the original release of the iPhone in 2007.
If I join your Exponential Tech Investor advisory now, do I have to buy all your Nvidia Effect recommendations now? Or can I wait and buy later?
My team and I have put together a special report called The Nvidia Effect: How to Profit from the Next Phase of the AI Boom. It contains each of my three top Nvidia Effect recommendations.
It’s not a total disaster if you wait. But as I showed during my event, waiting even one week can leave you much worse off in terms of returns.
That’s what happened when Tesla selected Aehr as its partner to test the chips going into its EVs.
This created a similar effect to the Nvidia Effect. It pulled shares of the tiny supplier higher.
Investors who acted on the news when it came out on July 16, 2021, had the chance to make a 1,330% gain.
Those who waited just one week saw their gains nearly cut in half to 697%.
If one of the Nvidia Effect recommendations shoots out of range, then be patient. No investment is a great investment at any price.
And if you miss the boat on these stocks, rest assured. I will be adding new AI recommendations to the model portfolio over the coming months.
I’ll leave it there for today. Here’s that link again to watch the replay of my Nvidia Effect event.
This is, hands down, the most exciting tech trend today. And I believe it’s going to be the most exciting tech trend in 10 years from now.
And by piggybacking off the “Nvidia Effect,” we have an exciting, time-tested way to play it.
Regards,
Colin Tedards
Editor, The Bleeding Edge