Hey friends,
I'm writing you from Abu Dhabi, about 200 miles from the Iranian coast.
The war feels very real to me. I get emergency “shelter in place” alerts on my phone. I see missiles being shot out of the sky and flights being rerouted overhead.
Thank you for the kind messages checking in on us—it genuinely means a lot.
I understand why many of you are scared right now. Investors have been asking whether they should sell everything and wait this conflict out.
I want to give you three words to tape above your desk right now: Ignore the news.
That sounds backward. But the more news you consume, the less informed you are.
The investors who get rich during moments like this aren't the ones glued to cable news. They're the ones who tune out the noise and ask…
What unstoppable trend is the world too distracted to see right now?
History answered that question at least three times in the last 50 years. Each time, the investors who asked it made a fortune.
OPEC has just cut off oil supplies to the United States. Gas lines stretch around the block. The stock market falls nearly 50%.
But while investors are panic-selling, something extraordinary is happening in a lab in Santa Clara, California. A team of engineers at a little-known company called Intel Corp. (INTC) has just etched an entire computer onto a sliver of silicon the size of a fingernail.
They call it a microprocessor.
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Within two decades, that fingernail-sized chip will power the PC on every office desk and rewire the global economy.
Intel’s stock surged by 50X from 1973 to 1993. While most investors were staring at oil prices, a handful were getting rich watching chips.
In 1990, Iraqi tanks rolled into Kuwait and America initiated the first Gulf War.
Once again, markets panicked over the Middle East.
And once again, almost nobody noticed what was being built in the background.
In university labs across America, researchers were sending messages to each other through a web of connected computers they called… the internet.
For the internet to work at scale, someone needed to build the pipes.
That someone was Cisco Systems (CSCO).
Cisco makes the routers and switches that physically connect computers to each other. For much of the 1990s, every byte of data that moved anywhere in the world passed through Cisco's equipment.
Cisco went public in 1990, the same year the Gulf War kicked off.
By the peak of the dot-com boom, CSCO surged 102,400%.
While investors were watching oil prices and Pentagon briefings, a handful of people got extraordinarily rich watching data move through boxes.
Lehman Brothers collapses and the entire global banking system is on life support. The housing market is in meltdown mode.
I remember this panic feeling like the end of capitalism.
Spoiler alert: It was not.
A year earlier, Apple (AAPL) founder Steve Jobs had walked onto a stage in San Francisco and held up a small glass rectangle he called the iPhone.
Within five years, 2 billion people were carrying one. It became the most successful product in the history of the world, turning Apple into a trillion-dollar giant.
Since the depths of the financial crisis, Apple’s stock is up 8,080%—11X the return of the S&P 500.
The lesson?
The big money is rarely made predicting oil prices or the outcome of wars.
It’s far easier to own great businesses at the frontier of unstoppable megatrends.
Artificial intelligence (AI).
Over the past two years, the world’s largest and most profitable companies have spent close to a trillion dollars building AI data centers.
We’ve run the numbers, and it’s the largest infrastructure buildout in history
Back in 2020, I introduced my readers to the new AI “law.” It states: “With every 10X increase in the amount of data you feed into an AI model, its quality doubles.”
To boost performance, AI companies must use ever-greater amounts of computing power. Better chips. Bigger clusters. Faster networks.
Over the past decade, the “compute” needed to train the latest AI models has surged over 1 billion percent!
“Scaling laws” are the cheat code for making AI smarter. It's why GPT-5 runs circles around GPT-4. It’s also why you can hardly recognize AI videos from reality anymore.
Just like with microprocessors, the internet, and smartphones before it, the AI megatrend won’t stop because of a war. That’s what investors should be paying attention to.
The most obvious company at the center of AI is Nvidia (NVDA).
It’s been a staple in our Disruption Investor portfolio since 2020. We’re up 550% on it, and we’ve already collected profits twice.
Thanks to the Iran crisis, Nvidia looks cheap today. It’s trading near its lowest valuation in the last five years!
I think Nvidia will be the world’s first $10 trillion company. It’ll hit that milestone before the decade is out.
But there are plenty of lesser-known AI infrastructure stocks with higher upside.
In the new issue of Disruption Investor, we recommend four of them. Members can read the issue here.
If you want to join us, click here to learn more.
Stephen McBride
Chief Analyst, RiskHedge