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Happy Holidays!
Hello, Reader.
Using technology is pretty much unavoidable when you’re going about your day. Look, you’re even reading this on an electronic device right now.
And now AI has come into the mix, pulling us further into the digital world.
But I want to escape for a minute, and take us back to when checking smartphone notifications wasn’t a habit… to the 14th-century Humanism movement.
(Even if you don’t fancy yourself a history buff, stay with me in this study… because it’s a trend that’s coming back, and one you’ll want in your portfolio.)
Humanists believed in reviving the culture of Ancient Greece and Rome through literature, philosophy, art, and other focuses that were exclusively “human.”
This gave us masterpieces like Raphael’s The School of Athens, a painting that depicts philosophers Plato and Aristotle and praises human intelligence. You can check it out below.
Frankly, the work of art itself – and the brilliance it celebrates – could never be replicated by artificial intelligence.
Now, it’s impossible to know how AI will affect human expression and humanity itself down the line. But I mention the Humanism movement because I believe the past can teach us a thing or two as we invest in today’s AI-heavy market.
As AI floods into every corner of our lives, what’s uniquely human will become increasingly valuable. That’s where the opportunities lie.
So, in today’s Smart Money, I’ll explain why investors should start moving away from popular tech stocks and toward underrated non-tech stocks set to thrive as “humanism” makes its inevitable comeback.
Then, I’ll share the kind of companies uniquely poised to profit from this digital reversal.
Let’s jump in…
Why AI Stocks Are Overheating
Let it be known, AI is here to stay… but that doesn’t mean it will stay dominating the market forever.
The coming decade may indeed belong to data centers, algorithms, and robots. But many of the most enduring and prosperous businesses will have nothing to do with them. They will thrive instead in the non-digital realms of gardens and gatherings, of drinks poured and songs performed, of motion, laughter, and luxury – the spaces where people still go to feel something real.
We investors don’t have to choose sides between silicon and humanity. But if you doubt that analog, non–AI stocks can deliver wealth-building gains, you would be mistaken.
During certain market cycles, stocks like these are among the few that can deliver outsized gains. This is especially important right now, as AI stocks enter the “bubble” stage.
The Big Tech companies leading the market are investing countless hours and dollars into AI, becoming highly overvalued in the process.
For example, as I discussed in Thursday’s Smart Money, Oracle Corp. (ORCL) recently fell to its lowest levels since June when it announced its plans to spend around $50 billion in the current fiscal year – a bold 40% increase from the previous fiscal year and $15 billion more than Wall Street’s forecast.
It’s worth noting that Oracle has around a $523 billion backlog of revenue-generating contracts, but most of it is linked to OpenAI, another company whose AI spending investors rightfully question.
It’s a similar story with Microsoft Corp. (MSFT) – another company with partnerships and growing ambitions with OpenAI. According to Bloomberg, Microsoft’s capex represents 25% of its revenue, more than triple what it was 10 years ago.
Additionally, we’re watching too much money going into a small handful of stocks.
That means a stumble by just one or two of those companies may have the power to drag down all stocks, with losses cascading through mutual funds, ETFs, and indices. This kind of concentration increases the risk and fragility of the entire market.
We saw something similar in Japan in the 1980s. A handful of financial and industrial firms grew so large that Japanese equities made up 42% of the entire world stock market value by 1989.
It was simply unsustainable, and the Nikkei eventually lost over 80% of its value over the next 18 years before finally starting to recover. Then it took another 16 years to recover to its 1989 level.
Simply put, it’s becoming risky to put your money into the Magnificent Seven and other popular tech and AI companies.
And as this risk grows, the money is going to start moving out of the overpriced, digital world and into companies that offer the priceless experience of being human.
Here’s how to make that move yourself…
Where Humanism Meets the Market
In a future defined by AI, the greatest and most dependable returns may come from the companies that remind us of what AI can never reproduce — the simple, sensory, irreplaceable pleasure of being human.
That’s why I looked to the past – to a purely human movement, producing creativity and excellence in a way AI could never replicate or outdo.
And translating that movement into investing means buying dependable, long-lasting stocks built to endure AI-driven change.
These companies are the “AI Survivors.”
In fact, my Fry’s Investment Report portfolio holds several explicitly non-AI stocks I believe will outperform AI stocks over the next few years. And they’re already seeing great returns…
One stock in particular – a drive-through beverage chain – checks one of my critical boxes for AI Survivors…
A business with a high level of human interaction that can’t be replicated by AI.
This AI Survivor saw a 5% increase last week while AI stocks suffered a selloff; and it’s up 80% since I recommended it to my paid subscribers in August 2024.
I discuss this stock further in my brand-new special presentation, along with a handful of others positioned for massive growth in the new year – all built on businesses that thrive because they’re irreplaceable by AI.
Also during my broadcast, I unpack the five danger signs in the market today relating to a potential AI bubble… and dive deeper into specific sectors I believe are still positioned to thrive despite the turbulence ahead.
Regards,
Eric Fry
