☕️ You do NOT want to be caught on the wrong side of what happens next

Howdy! 👋 

The markets may end down for the week even though they could finish higher on the day. 

Makes sense. 

WWTFD is now WWBD – meaning traders have turned their attention from “what will the Fed do” to “what will Bessent do.” 

Stay focused. 

Rates are for traders and profits are for investors. 

Your results are directly related to your ability to see through the noise. 

So open your eyes. 

Here’s my playbook.  

1 – Nice warning, JPMorgan — mind explaining your shopping list? 

JPM is apparently worried about an autumn downturn. (Read) 

Let’s play along for discussion's sake. 

The bank's analysts are now saying that "AI stocks show similarities to the 2000 tech peak." 

Many investors are going to see that and go into panic mode. 

Don't. 

One of the most significant and profitable lessons you can learn as an investor is one that I learned decades ago… always do what Wall Street does, not what it says. 

The first giveaway is that we're talking about analysts here – yep, the folks who don't actually run money… just pontificate. 

The second is that the bank itself continues to invest heavily in AI. Examples include boosting its 2026 tech budget to nearly $20 billion, with $1.2 billion of that increase earmarked specifically for AI projects, pushing AI use cases in production from roughly 450 toward a stated goal of 1,000, and inking direct partnerships with both OpenAI and Anthropic rather than just building in-house… and they wouldn't do that if the bank really thought AI were a sh-----w. 

And the third is that the same firm putting out this warning just published its own list of 15 AI-exposed stocks it's calling "bargains" for anyone willing to buy the dip. 

Keith's Investing Tip: The trade a bank makes matters more than the note it publishes. 

2 – Where all that AI money is really going 

I hear frequently from investors who simply can’t process what’s happening when it comes to AI. 

Where’s all the money going many wonder with an exasperated expression on their face. 

I’ve said for a long time that this is a multi-trillion-dollar proposition only to be greeted with skepticism, derision and doubt. Not to mention a few choice nastygrams. 

Now, I’ve got company. 

Goldman Sachs has come out saying that it now sees AI buildout spending more than doubling to roughly $1.6 trillion a year by 2031 — about $7.6 trillion cumulative over that stretch. 

The other part of their research says Goldman models power spend jumping 87% to $73 billion, even as it shrinks as a share of total AI spend — from 5.1% down to 4.5%. 

Click to enlarge.

Bottom line on this one? 

Yeah, the doomsayers will continue to mount their attack, but the spending will continue and the profit potential will continue to build. 

So yeah as I noted back in May 2023, AI is still very likely the largest single investment opportunity in recorded history. (Watch) 

Btw, somebody’s got to power all this and the play isn’t nukes or nonsense but plain ol’ natural gas, solar and fuel oil right now.  

If you’re an OBAer, you know what to do. If not and you’d like to learn about what this could mean for your portfolio, I’ll be here and would love to welcome you to the Family. Or heck, even meet in person next week at the MoneyShow in San Francisco. 

https://sanfranciscomms.moneyshow.com/speakers/keith-fitz-gerald/ 

Please note that I do not accept compensation from the MoneyShow for promoting it; I’ve spoken there for 20+ years and am happy to do so because I believe that every investor can be wildly successful in the markets with the right tools, perspective and education. 

3 – Broadcom takes a page from Nvidia’s playbook 

Broadcom is in talks for a financing package that could reach $100 billion — split roughly $60-70 billion in senior secured debt and $30 billion in junior debt — to help its own customers afford the AI chips it's already selling them. (Read) 

Sound familiar? 

Nvidia wrote the playbook.  

Last September, Nvidia said it would invest up to $100 billion in OpenAI to fund a data-center buildout stacked with Nvidia's own chips. Since then it's only gotten bigger — talk of a $250 billion guarantee and $350 billion in financing tied to OpenAI alone, plus another $500 billion deal with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR to bankroll AI infrastructure across the board.  

We spoke about this recently. (See #3) 

The CapEx Crusaders are grousing about circular financing yet again but betray their ignorance about what that really is. 

This time around it's Broadcom's own balance sheet backstopping the senior debt, which is exactly what makes lenders comfortable enough to write investment-grade paper on a $100 billion pile. 

Same trick Nvidia's using.  

Vendor becomes lender becomes landlord… chips keep moving either way. 

Every dollar of this financing turns into a purchase order for Broadcom's custom silicon. Contrary to what the chatroom folks seem to think and the clickbait artists keen to sell you a subscription want you to believe, that's real revenue… booked today, not a promise for 2030.  

Hock Tan's already told investors he expects AI chip revenue north of $100 billion next year – this is how he gets there. 

Broadcom (AVGO) remains one of the best-positioned picks-and-shovels plays in AI infrastructure but my personal choice is a few other names because I think they’ve got better, more durable profit potential. It may not be perfect, but it works for me. 

I hope you’re thinking along similar lines. I wouldn't chase it or any other stock in this space after a run, but pullbacks are plenty buyable for anyone who wants to build a long-term position. 

Keith's Investing Tip: When the chipmaker starts acting like a bank, don't panic – figure out who's really taking the risk. Hint… it's usually not the chipmaker. 

4 – China just did it and the right companies are making money hand over fist 

CNBC is reporting that “American brands are losing China” and they’re citing examples that include Nike's China business shrinking 30% since 2021, Starbucks handing over its China operations to a private equity partner just to stop the bleeding and GM falling off a cliff after going from making $2 billion a year in China to two straight years of losses.  

Not. 

As usual, you are not getting the whole story. 

There’s a big difference between well-run companies doing business there and companies that couldn’t manage their way out of a wet paper bag if they tried. 

It’s a story we’ve talked about many times when it comes to investing.  

Brands that localize right, price right and – gasp – build products their customers “must have” tend to win in the very same environment the "losers" are struggling with. 

Keith's Investing Tip: Don't ask "does this company have China exposure." Instead, ask "did this company actually earn its position, or is it coasting on a logo and slick advertising." One of those is investable. The other one's a countdown clown clock and very likely dead money in your portfolio. 

5 – You do NOT want to get caught on the wrong side of this one 

If you’ve read the 5 with Fitz for any length of time whatsoever, you know that I don’t say things I don’t mean. 

So here goes. 

I think there is an increasingly high probability that the court rules against Meta and – if I am correct – that causes the stock to get obliterated. 

Millions of investors have no idea what’s coming despite the fact that a) this is happening in plain sight and b) that Meta itself seems to be telegraphing the outcome noting that it could be a $1.4 trillion hit. (Read) 

The news will undoubtedly caterwaul that “nobody saw it coming” or that it's unprecedented.  

That’s simply not true. You and I have repeatedly talked about this for several years noting that El Zucko and his squad face increasingly angry consumers and increasingly aggressive AGs who are determined to punch through Section 230 – and rightly so, imho. 

Btw, and if you’re a member of the One Bar Ahead® Family, please keep an eye on your email for a few ideas on what to do and how to profit from the situation if I’m correct. Or, even halfway so. 

Millions of investors are going to get caught between a rock and a hard place because they don’t think I’m right or what I am describing is possible because they can’t believe it.  

I say flip that around. 

Keith’s Investing Tip: Focus on being profitable, even if you’re wrong. 

Bottom Line 

Investing is like gardening.   

You cannot enjoy the flowers if you don't plant 'em in the first place. 

You got this — I promise. 

As always, let’s MAKE it a great day. 

Keith 😀