Fat Tail’s AI Stock Special: An Advan ce Warning

Tuesday, 12 March 2024

[5 min read]

Dear Reader,

If you’ve followed my work, you’ll know I’m a glass-half-full type of investor.

I’m a bloke that gravitates to interesting ideas and gain opportunities.

I leave the moaning about macro stuff and hand-wringing on geopolitics to the other dudes.

On Thursday, you’re going to see the final findings of a project I’ve been working on since late last year.

It’s my take on AI investing from now until about 2026.

It focusses on small, speculative stocks you probably won’t have heard of.

And from an Australian perspective.

These stocks…and, at this stage, I’m looking at five…are bloody risky.

Make no mistake about that.

They’re not Nvidia. They’re tiny. You could lose a bunch of money if you take my recommendations on them, and I’m wrong.

So just go into this with that crystal clear.

BUT…

If I’m right…

Well, you’ll see the potential scope of what’s on offer on Thursday.

It’s an inherently positive take on where this AI thing might go next.

From a distinctly non-mainstream perspective.

And that’s rare, right?

AI as a topic couldn’t be more mainstream right now.

From ChatGPT to Gemini…Nvidia to whatever your mate you’re playing golf with is banging on about…AI couldn’t be more in the zeitgeist.

We’re going to try and peel the onion a few layers deeper.

I can tell you now, the project is called Collide. Lock. Build. Explode.

Now, all that said, I feel it’s important to break out of cheerleading mode, and inject a healthy dose of reality.

If you’re going to act on my findings, and add my stock selections to your portfolio, you need to do so with your eyes wide open.

You need to be aware of some pit-traps that are almost certainly going to sucker in ill-educated investors and dumb venture capital in the next two years…when it comes to Artificial Intelligence.

This is the megatrend of all megatrends.

And when they come along…once in the blue moon…they come with dangers to your money.

A bunch of front-runners come out of the gate strong...as we’ve seen with Nvidia and Microsoft and Google. And, of course, OpenAI.

The marketers and PR people ‘fire up the chatter’ to manufacture Fear of Missing Out (FOMO).

Retail investors rush in.

Then it becomes apparent that some of these guys were all talk. They fail to monopolize early advancements in the space. And the big front runner stocks correct in Years 2 and 3.

It’s a phenomenon as old as investing itself.

Will that happen to the big AI poster-stars soon?

Possibly.

I don’t know. And, in any case, I’m not focussing on that.

This Thursday, I’m going to focus on the up-and-comers.

The AI ‘Collision’ plays

Even if we see some of the big guys get ‘caught naked’ later this year…

…the five stocks I’ve landed on are playing a whole different game when it comes to AI.

They’re way riskier. In that they’re much smaller and less liquid than Nvidia and Microsoft.

Even if investors decide it’s time to take a bit of profit on Nvidia in say, June, and the stock starts correcting…

…it’s unlikely you’ll lose 50% on them anytime soon.

A 50% loss…or more…is quite possible on each of the five AI Collision plays I’m going to showcase this week.

But there’s also the chance at many hundreds of percent in gains…and fairly quickly…if one or more of these plays work out.

As I’ll show you on Thursday:

We’re nearing the end of the ‘Lock-Up’
phase of the AI megatrend

The building blocks are place.

Data and chip infrastructure is being locked in.

The huge players have made their moves.

From here…

Developers big and small will be rushing to develop apps and services that can take advantage of AI capabilities.

AI versions of everything from banking to health, to creative endeavours, to coding, to education, and way more will come onto market.

The best will thrive like what happened with the web. We’re already seeing experiments taking place in every industry.

For example...

I’ve landed on a small stock for you here with the potential to become the “future ruler” of the AI/Military collision. You’ll hear about them in Collide. Lock. Build. Explode.

Soon, we’ll reach a consolidation period.

As winning companies seek to cement their status as gatekeepers of AI solutions to consumers.

Like Google and Facebook did with the internet.

The opportunity here is to find stocks ripe for a bid from a larger player.

I don’t reckon you’ll need to worry about the right moves to make here until this time next year.

From there…the EXPLODE phase

So far, most of the rapid development has been in the specific area of generative AI. But it will have flow on effects to more general AI/Machine learning fields too.

And we could soon see breakthroughs in other aspects of AI (i.e. biotech discoveries, robotics, gaming, mining etc) at any time.

The stocks I showcase later this week take all this into account.

But…my final warning…

ONLY GO NEAR THESE WITH DOSH YOU’RE PREPARED TO LOSE!!!

These are true-blue punts.

The windfalls could be mind-blowing, once-in-a-generation stuff if we nail onto a true disruptor…while they’re still trading for cents.

But the losses if we cock it up could be equally spectacular.

I just want to make that ultra-crystal clear before you dive into Collide. Lock. Build. Explode.

It drops Thursday.

Watch your inbox.

Best,

Callum Newman,
Editor, Small-Cap Systems and Australian Small-Cap Investigator

Callum Newman is a real student of the markets. He’s been studying, writing about, and investing for more than 15 years. Between 2014 and 2016, he was mentored by the preeminent economist and author Phillip J Anderson. In 2015, he created The Newman Show Podcast, tapping into his network of contacts, including investing legend Jim Rogers, plus best-selling authors Jim Rickards, George Friedman, and Richard Maybury. He also launched Money Morning Trader, the popular service profiling the hottest stocks on the ASX each trading day.

Today, he helms the ultra-fast-paced stock trading service Small-Cap Systems and small-cap advisory Australian Small-Cap Investigator.

[4 min read]

Dear Reader,

This headline caught my eye last week:

The cloud computing division of Amazon – Amazon Web Services (AWS) – has just paid US$650 million to secure a nuclear-powered data centre in Pennsylvania.

This move intrigued me greatly.

As you might be aware, nuclear is a bit of a hot political topic right now, with Labor arguing against it and the Liberals pushing for a discussion on small nuclear reactors.

I suspect the politics will go with Labor on this one.

Fear campaigns usually do in Australia.

But of more interest to me is what’s happening out in the real world.

And on that front, things look a lot more positive on the nuclear front.

I mean, the uranium price has been on a tear this year bringing a bunch of uranium mining stocks with it.

But that’s not want I want to talk about today…well, not directly.

I’m more interested in the intersection of AI and energy because I think it could be a very intriguing angle for you as an investor.

Although this was a comparatively smallish deal, the fact one of the biggest tech companies in the world is doing it at all, is a very interesting turn of events.

So why are they?

Well, here’s the thing…

AI’s big energy problem

As you know, Amazon is one of several big tech companies pushing hard into the AI space.

Their cloud division grew revenues by 13% over the course of 2023, drive mostly by an increasing interest in AI services.

They expect things to ramp up considerably in 2024 with CEO Andy Jassy saying recently:

“Gen AI is and will continue to be an area of pervasive focus and investment across Amazon, primarily because there are few initiatives if any that give us the chance to reinvent so many of our customers experiences and processes, and we believe it will ultimately drive tens of billions of dollars of revenue for Amazon over the next several years.”

Most of the big tech CEOs are saying much the same thing.

They’re all uber bullish on the potential of AI to become some sort of all-pervading part of digital life. Much like the internet did.

But here’s the problem.

AI is very energy intensive. Shockingly so.

A report in Scientific American concluded that every data centre in the world is going to:

‘…experience effectively a 10-fold increase in energy consumption. That would be a massive explosion in global electricity consumption.’

The author went on to say this was a worst-case scenario.

But worst case in his eyes was the exact types of scenarios the big CEOs like Andy Jassy at Amazon are predicting!

Which brings us to Amazon’s recent nuclear deal.

Big tech doesn’t want to be accused of driving an increase in carbon emissions and yet at the same time they need to secure clean, reliable, low-cost energy to power the AI world of the future.

And nuclear power is perfect for that. I expect to see more of this kind of thing over 2024, and that could spell an opportunity in uranium mining.

Though I should note that my tech analyst Charlie Ormond has done some work on this and thinks maybe this idea isn’t as promising as it was a year back when uranium prices were more subdued.

Still, it’s an idea we’ll continue to investigate for subscriber of our Alpha Tech Trader service.

And there’s a nice twist to this story too.

You see, it appears some scientists are using the tools of AI to accelerate technological development in the field of nuclear itself!

As the IAEE reported:

“In order to be competitive, as well as integrated into the mix of modern energy systems, nuclear power plants – in addition to being safe, secure and reliable – also need to be economical and efficient,” said Mikhail Chudakov, IAEA Deputy Director General and Head of Department of Nuclear Energy, in his welcome remarks. “AI-based approaches can contribute to these areas.”

The article here goes on to talk about AI solution for predictive maintenance, optimisations, anomaly detection and even new types of fusion technology.

There’s a nice bit of circularity here, where nuclear helps AI expand and AI helps nuclear tech improve.

But the broader point is this…

Beyond the numbers

What I find really exciting about investing in game-changing technology ideas is the sheer breadth of the opportunities they present.

But unlike a lot of investing, you don’t find such ideas by scanning financial statements.

You have to read widely, you have to understand business models, who has a competitive advantage and who doesn’t.

You also have to understand supply chains and how a new technology potentially changes them.

Think about how the internet destroyed the old model of retail shopping. Or how Netflix destroyed the video store.

There’s also the uncertainty of entropy as thing progress in ways no one yet understands or thinks possible.

All this flux, progress, and excitement throws up opportunities and risks in equal measure.

And sometimes in the most unlikely of places…I mean, who’s connecting nuclear to AI right now?

Not many people I know of…

Such asymmetric opportunities are what I live for as an investor.

That is, the chance to make many multiples of gains compared to your downside risk.

I’ve done it personally before, riding such trends as blockchain tech (I first got into Bitcoin in 2014) and the advance of electric cars (mostly by investing in lithium and battery metal miners in 2016).

I know from experience that getting in early is key to making the big money in such fast-growing areas.

But AI could be a lot, lot bigger than either of those two massive opportunities.

And my gut says, whoever can work out how this plays out over 2024, could be set up for the rest of the next decade.

Not that that’s easy to do of course.

But my colleague Callum Newman has formulated strategy.

It’s called Lock. Build. Explode. And it comes out this Thursday.

Watch this space…

Good investing,

Ryan Dinse,
Editor, Crypto Capital and Alpha Tech Trader

Ryan is a former financial advisor who over seven years helped more than 600 clients and had more than $150 million under management. This experience taught him that the mainstream investment industry has no interest in helping clients strive for greatness. He was told to make ‘safe’ investment plays and settle for average returns. It wasn’t good enough for Ryan.

In 2016, he embarked on a renewed mission: to help ordinary people lock onto extraordinary trends before they go mainstream. He’s an experienced small-cap trader and an expert in cryptocurrencies. He first bought Bitcoin [BTC] in 2013, when it was around US$600. Today, it’s around US$30,000.

His crypto advisory is a must for anyone looking to make digital assets a part of their long-term portfolio. Check it out here.

His tech advisory Alpha Tech Trader aims to identify and latch onto strong emerging opportunities in the tech sector, wherever they are in the world. Get more info here.