Are Your Favorite AI Stocks Studs or Duds? VIEW IN BROWSER By Michael Salvatore, Editor, TradeSmith Daily In This Digest: - If TradeSmith users are watching these tickers, then we all probably are
- TradeSmith’s mission to bring hedge-fund level tools to you
- Following the best stocks is essential
- How our newest ranking system rates your favorites
- The top brass to own on any dips
- How you can get involved
It’s important to know what stocks investors are most curious about… Investor curiosity is not the world’s most complex indicator. Good thing it doesn’t need to be. What tickers folks are searching for speaks volumes about what’s going on in the market. And when you log in and search for a ticker on our analysis platform, TradeSmith Finance, you see the top stocks other users are searching for that day. Here were the top three stocks our roughly 150,000 users were searching for as of Monday… 
What do you know… all these companies are part of the AI trend. Palantir (PLTR) is the premier AI software company… notorious for commanding a massive premium on its earnings. And AI hardware companies Nvidia (NVDA) and Advanced Micro Devices (AMD) are instrumental in the ongoing AI infrastructure buildout. With these three tickers at the top of the list, it’s safe to say the AI trade is alive and well. The past two years of surging price performance prove that the trend has long legs. It’s easy to see why. The promise is massive. AI introduces a level of efficiency and productivity unlike any technology to date. Key companies that make the best use of AI have already reaped the rewards from investors, pushing their stock prices through the stratosphere.. Not only that, these same firms are starting to see accelerating revenues, earnings, and profit margins – which should help them catch up to their lofty valuations. The terminal question is how do you know which AI stocks are duds or studs? There’s value in curiosity. But it should be just the first step in a quantitative approach to analysis. And if you aren’t with TradeSmith, the next steps might be unclear. Maybe you’d follow the headlines and look for which stocks are being spared from Trump’s tariff regime, like Apple (AAPL) recently was. Or maybe you’d scour message boards and social media for anonymous opinions. | Recommended Link | | | | This company is the lifeblood of AI data centers, yet almost no one has caught up with the story. Their hardware is so essential that the data center industry uses enough of it to stretch around the world 8 times – in a single building! So, if you own Nvidia stock now, you might be well-served to sell those shares and check out this under-the-radar play instead. Or if you missed the boat on Nvidia, this is a rare second chance to target tremendous profit potential as AI data centers spring up in every corner of the world. Get my full take on this exciting play right here… |  | | But here at TradeSmith, we do things differently… For the past 20 years, our mission has been to put hedge fund-level software tools and analytics in the hands of everyday investors. The reason it’s so important we achieve this mission is because of how hard it is to beat the market. That’s not just a gut feeling. It’s proven. In 2018, Arizona State finance professor Hendrik Bessembinder studied the lifetime returns of every U.S.-listed common stock on the Nasdaq and New York Stock Exchange since 1926. What he found shook the financial world… Out of tens of thousands of individual companies, only 4% contributed to the net gains of the stock market beyond Treasury bills. Naturally, a smaller fraction of this 4% beat the S&P 500 itself. Most people will hear that and feel dismayed of how hard it must be to find these winners. We felt inspired. What we heard was that there were a rare group of stocks that beat the market. An it quickly became part of our mission to isolate the qualities of a market-beating stock… and invent a way to quickly screen out all the rest. And that’s exactly what we’ve done with our latest major breakthrough… In our research, we’ve found that market-beating stocks tend to sport qualities from two distinct categories: fundamentals and technicals. By quantifying these categories, we can rank stocks in the market and only look for those near the top. On the fundamentals side, we look for stocks with a strong track record of growing their revenues, earnings, and profit margins. These are signs of accelerating productivity in the business. On the technicals side, we look for stocks with strong price momentum – that is, they have a history of going up faster than the market. In addition, we’re looking for stocks that exhibit signs of institutional scale order flow – big money flowing in. Wall Street’s biggest fund managers have an army of resources at hand to find the next big winners. When they find them, they try to stealthily move into these names without causing a stir – usually by gradually building up large positions over time. We’ve discovered a way to track these flows… and add them to our algorithm. All these factors become a simple scoring system that we call the Quantum Score. ranked 0-100 -- the higher the score, the better. So here’s what we’re going to do today… We’ll check the Quantum Score for the three stocks that TradeSmith’s users were looking for to start this week. Then, I’ll show you a way to check the score on any stock you like, as much as you like… while grabbing a free report of 10 top-ranked stocks to watch right now. Palantir (PLTR) is at the top of our list… It’s the AI stock that seems to defy gravity, rising from around $15 a share this time two years ago to more than $185 per share today. A lot has been said about PLTR’s valuation and for good reason. The lowest price-to-earnings (P/E) ratio this company has seen since it started reporting positive earnings in Q2 2024 was 149. In other words, if Palantir’s earnings stayed the same, and it was somehow able to distribute 100% of those earnings to shareholders each year, it would take 149 years to break even on this investment. And that was its lowest P/E ratio. As of Monday, it trades on a P/E of 618.6. But despite its lofty valuation, institutional money is flowing into this stock We know because of its Quantum Score. 
PLTR carries a score of 89.2 overall, a composite of its 92.9 Fundamental score and 86.7 Technical score. The strong fundamentals, especially, reflect its ability to grow earnings and revenue. And its Technical score reflects not only its upside momentum, but also the institutional scale buying volumes. Next on our list is AI chipmaker darling Nvidia (NVDA)… Thanks to its industry-leading AI chips, Nvidia is now the most valuable company in the world with a market cap of $4.4 trillion. Like Palantir, it’s trading at lofty valuations. But that’s a bit like saying the Eiffel Tower and the Burj Khalifa are both tall buildings. Nvidia trades at 58 times its past 12 months of earnings – a fraction of the expectations investors have baked into PLTR. All the same, this is a stock that big money investors are pouring money into. Take a look… 
NVDA rates the highest among the stocks we’ll discuss today, with a 93.2 composite score, 92.9 on the Fundamental reading, and a 93.4 on Technicals. Even after two years of running higher than most thought possible and becoming the most valuable company in the world – and in many ways because of this dominance – it is hard to do much better than this on our Quantum Score. Last up is NVDA’s distant but closest rival in the U.S. chip business, Advanced Micro Devices (AMD)… The new Quantum Score holds a very strong 89.9, with the recent bullish price action lending to a powerful Technical score of 93.4 – just as strong as NVDA – and a slightly weaker Fundamental score at 85. AMD also trades at nearly double NVDA’s trailing P/E ratio, at just under 100. 
AMD has plenty of catching up to do on NVDA, with it being a small fraction of the latter’s market cap. And our Quantum Score suggests it has much more room to run. Now, we aren’t leaving you in the lurch with just these three scores. Until tomorrow at 10am ET, you can use this same tool to check the Quantum Score for any stock you like… Use it to rate your own portfolio, potentially finding some weakness to trim or some strength to add to. Or use it to add another layer of confidence for a stock on your watchlist. Maybe you can even avoid a stock you would’ve bought without first consulting this tool. When you click this link to automatically register for this Thursday’s launch event with our CEO, Keith Kaplan, you’ll get unlimited access to this tool. Just don’t delay. We’re taking access down once the event begins on Thursday. And make sure to read through the information on that website to learn how you can access a research report containing 10 top-rated Quantum Score stocks to help your search. To building wealth beyond measure, 
Michael Salvatore
Editor, TradeSmith Daily | 
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