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Rates are “likely to go higher”

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InvestorPlace – Stock Market News, Stock Advice & Trading Tips

How ChatGPT started compared to the iPhone… That’s a huge deal for technological advancements… How do you invest in AI today? … Luke Lango and Eric Fry take on what’s coming

Speaking on Capitol Hill this morning, Federal Reserve Chairman Jerome Powell disappointed the bulls by saying:

The latest economic data came in stronger than expected, suggesting that the final level of interest rates is likely to be higher than previously estimated.

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If the totality of the data indicates that faster tightening is necessary, we would be prepared to increase the pace of rate hikes.

This casts doubt on the bullish narrative of recent months that we are on the verge of stopping all interest rate hikes, and are in fact only months away from cutting rates.

From CNBC:

Those comments have two implications: one, that the peak, or final, level of the federal funds rate is likely to be higher than Fed officials have indicated in the past, and, two, that a small quarter-percentage change last month if inflation The point increase could be short-lived if statistics continue to heat up.

Immediately following the comments this morning, there was a massive sell-off on Wall Street. But as I wrote this afternoon, the bulls have recovered their losses. Wall Street is increasingly coming to terms with the reality that the Fed is committed to “longer highs”.

Powell will speak again on Capitol Hill tomorrow. We’ll bring you any highlights from his testimony affecting the markets.

How to Invest Regardless of the Fed

While Powell’s comments could move markets this week, one way to minimize their impact is to zero in on investment trends with long legs. In other words, those large-scale trends that can drive investor portfolios despite a “prolonged high” interest rate environment.

To set the stage for such a trend to outline, let’s turn back the clock for a moment…

“We’ll never have to write a book report again.”

It was the early 1990s, and my junior-high-school friend, Chip, was telling me about this new “thing” in computers that would usher in a whole new level of academic laziness…

“Internet,” whatever that was.

Anticipating my suspicions, Chip appeared, turned on his family’s comically large computer, then clicked a few buttons that resulted in a strange electronic sound (if you’re a young investor, please Google “dial modem sound”). and enjoy).

We finally got to some website where Chip typed in some search terms, then after waiting 15 – 20 minutes for the data to download, my jaw dropped when, right in front of me, was the equivalent of countless Saturday afternoons of research in the library.

I was overwhelmed, feeling that the supreme achievement of technology had finally arrived, and it meant one thing to the world…

No one ever has to read The Great Gatsby again.

Now, as wonderful as this was, and frankly, the huge internet-related advances that were made in the late 90s during the dot com bubble pale in comparison to what happened in 2007.

iPhone launch.

The power of the Internet can be divided into pre and post-iPhone. It was the watershed product that accelerated our social addiction to the Internet, as it ushered in a new world of technology-based advancements, products, and conveniences.

From an investment perspective, the launch of the iPhone was also a starting gun for FAANG stocks’ stunning rise.

Luke Lango, our hypergrowth expert, recently highlighted this for clients:

Just look at how revenue growth projections for Internet titans like Amazon (amzn), Alphabet (Google), and Netflix (nflx) changed dramatically after the launch of the iPhone.

Before the iPhone, Internet companies were on the rise. Thereafter, they started spreading like wildfire and took over the world.

It was a turning point – the “tipping point” for the Internet revolution…

That moment when everything changed.

Source: Bloomberg

Now, the reality is that investing in FAANGs in 2007 was actually a poor decision in the short term. Luke explains how each of these stocks dropped between 50% and 60% in 2008.

But for those investors who understood the importance of the iPhone before and after and stayed the course, well, you know the ending. But here’s Luke with the numbers:

Every $10,000 invested in Alphabet stock at the end of 2008 would be worth about $140,000 today.

A $10,000 investment in Amazon or Apple stock in late 2008 would be worth about $500,000 today.

And a $10,000 investment in Netflix stock in late 2008 would be worth more than $1 million today.

We’re revisiting the evolution of the iPhone and the FAANGs because another tech had its “iPhone moment”

We are talking about artificial intelligence (oh,

Just as the Internet has been around for years before the iPhone, AI has also been around for years and is already highly integrated into our lives…

It talks to us in our cars, giving us turn-by-turn directions on how to reach a destination we’ve never been to, all while avoiding the worst real-time traffic snarls…

When we talk to a smart speaker, it understands us and immediately follows hundreds of commands…

It learns about our preferences at alarming speed, and serves up movies, TV shows, songs, and/or products that we (usually) enjoy…

But while it’s no longer “new,” the astonishing potential of AI became real in a new way last fall.

Here’s Luke to explain:

The growing field of artificial intelligence (AI)oh) had its iPhone moment only last year, when Microsoft-backed OpenAI launched ChatGPT. It put the power of sophisticated AI in the hands of everyone with a computer.

Like the Internet of 2010, AI promises to transform every aspect of our global economy in the 2020s. This would represent a massive change in the way society operates and the way money flows in our economy.

It will change everything about everything. This will create a market of $15 trillion by 2030.

And that revolution had its iPhone moment.

Luke points out that coming out in 2022 may not feel the same. Most investors’ portfolios are still carrying over from last year, and there are plenty of reasons to feel concerned today.

But that’s exactly what investors found 15 years ago after the launch of the iPhone and the subsequent stock market crash. And Luke sees history repeating itself:

Today, ai stock crashing just months after their own “iPhone moment” as the economy grapples with a crisis.

Back then, “big-picture” investors who were able to zoom out and recognize the importance of the Internet and the iPhone — and buy the dip into Internet stocks — have made fortunes since then.

Today, “big-picture” investors who can recognize the importance of AI — and buy AI stocks on the decline — will give themselves a chance to make a fortune as well.

Unfortunately, this “big picture” can be difficult to understand.

Here’s Forbes to help us understand the enormity of what’s in front of us:

The human brain can easily estimate the rate of arithmetic growth (whereby numbers grow at a constant rate: 1, 2, 3, 4). And it does reasonably well in understanding geometric progression (a pattern that grows in constant proportion: 1, 3, 9, 27).

But the implications of sustained, exponential growth prove difficult for the human mind to grasp. When it comes to generative AI, that’s the rate of development to focus on.

Let’s assume that the power and speed of this new technology were to follow Moore’s Law, an assumption that computational progress roughly doubles every two years.

In that case, ChatGPT would be 32 times more powerful in a decade and 1,000 times more powerful in two decades.

It’s like trading your bicycle for a car and then, shortly after, a rocket ship.

So, what are the best ways to invest in AI?

A few moments ago, we highlighted the investing “opportunities” part of AI — that’s finding the stocks that will turn into the AI-equivalents of the 2010-FAANGs.

But wait…

If Microsoft has bought ChatGPT, and Google is introducing “Bard,” and many of the rest of the FAANGs are pouring ungodly amounts of capital into their own AI proposals, are FAANGs the best way to play AI?

Will 2020 Be “FAANG The Sequel”?

Not according to Luke:

Big tech stock AI is one way to play Gold Rush. We believe that companies like Microsoft and Apple will integrate sophisticated AI into their ecosystem of products.

And chip makers like Nvidia will see a huge increase in demand for their GPUs to power the next generation of AI systems.

However, they are multi-hundred-billion-dollar, even trillion-dollar companies. Even if their AI applications create a trillion-dollar empire – which is entirely possible, but also the best outcome – their stock will only rise 100%, versus 1000% for a smaller company.

Why? due to the “small firm effect”.

Luke explains that small-cap stocks tend to have higher growth potential than their large-cap counterparts because they have a greater amount of growth opportunities. This is the “small firm effect”.

So, how do you find the right small-cap AI stocks that will create huge wealth this decade?

Luke and our macro expert Eric Fry discussed never before on Investorplace last week AI Super Summit conference.

Luke describes this event as follows:

The first step in adopting something is to understand it.

So, at our AI Super Summit, Eric and I will be discussing how AI will change the world, which specific industries are going to have the biggest impact over the next 12 months, and of course, which AI stocks are the best stocks to buy. are available to buy now.

you can Click here to watch a free replay of the event,

AI just had its iPhone moment. From here the economic and investment effect will accelerate. Make sure you have your portfolio ready.

Here’s Luke with the last word:

The AI ​​revolution represents one of those once-in-a-lifetime investment opportunities where 1,000% and even 10,000% returns are entirely possible.

Don’t miss the opportunity of a lifetime – or take advantage of it now.

If you want to take advantage of this revolutionary moment, I highly suggest you check out our first AI Super Summit. It’s an event we’ve put together specifically to help investors capitalize on the biggest technological paradigm shift of our lifetimes.

We’ve also revealed some of our top AI stocks to buy now.

Now watch a replay of that incident.

have a good evening,

Jeff Remsburg

Post Rates are “likely to go higher” first appeared investorplace,

The views and opinions expressed here are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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