A New “Exponential Era” Has Arrived  | BY KEITH KAPLAN
CEO, TRADESMITH |
Rarely are investors lucky enough to see a period of rolling, continual opportunities to produce generational wealth. Now, and for the next several years, is one of those times. We’re living in an Exponential Era. Play it right, and exponential returns are yours. Miss it, and you may have to wait decades for the next chance. I’ll show you how to play it right today. First, let’s back up so you can see exactly what I’m talking about. The year was 1991. The Internet boom… before anyone knew it was a boom. Little by little, people were starting to communicate online. A vital aspect of business and everyday life was getting cheaper, better, faster, and proliferating everywhere. The real excitement sets in a few years later. On Oct. 13, 1994, the Netscape Navigator launches. It’s the first major consumer internet product. Then, the boom really takes off. In the back half of the ‘90s, a major bubble formed. The Nasdaq 100 returned 1,000% in a five-year span. Individual companies climbed thousands of percent in an all-out internet mania. Then the bubble popped in the early 2000s… and a lot of those gains evaporated. But the internet didn’t go away. We’re using it right now to write to you. You use it every day. The technology had staying power. Some public internet companies are still around from those days. Amazon (AMZN), eBay (EBAY), Nvidia (NVDA), Qualcomm (QCOM), Intuit (INTU)… All of these companies boomed, busted, survived, and are much higher today than they were at the dot-com peak. The gains are so large, I have to put the chart below in logarithmic scale. 
So many people got rich off of these stocks, both during the bubble and long afterward… Now, zoom back to 2020. Few people were talking about artificial intelligence (AI). We were a little busy with the pandemic. But in the background, it was being built out. Like the early ‘90s internet, AI was slowly but surely becoming a critical technology to business and everyday life. Making everything better, faster, cheaper, and showing up everywhere. Then ChatGPT releases on Nov. 30, 2022. It had the fastest mass adoption of any online technology ever. It had the fastest business efficiency impact of any technology ever. Just like in the back half of the ‘90s, AI companies are the hottest stocks in the market. For now, the old players are still soaking up most of the gains. But that will change. Just like in the dot-com bubble, the newest public companies with real application will explode in value, exponentially. Their price gains will far exceed what we’ve seen in Amazon, Nvidia, Google (GOOG), Microsoft (MSFT) and others over the past few years. So today, I’ll show you a dead-simple way you can keep your eye on the best, newest companies to play this unstoppable trend. It’s Still a Mega Melt Up If you’ve been following along this year, you know that here at TradeSmith, our data shows we’re in the middle of what we call a Mega Melt-Up… a rare confluence of factors that have historically driven asset prices much higher before a big bust. This has to do with market momentum and volatility as much as it does monetary policy and technology. 1926 saw the technological trend of electrification… along with the first retail stock traders and a revolution in consumer credit. 1995 was all about the internet, along with online brokerage accounts and a strong saving and investing environment for consumers. This time around, it’s all about AI… but it’s also about financial deregulation efforts… the potential falling interest rates… and a clamor among investors to find the top stocks to own as this mania plays out. It’s just as clear to me today as it was when I first wrote you about this idea back in February. And our Mega Melt-Up indicator that triggered in January of 2021 is still in play, despite the April volatility. 
As I showed you earlier, the best way to take advantage of these rare moments is to own the top quality stocks that have just recently gone public. Many of the stocks that saw the biggest returns throughout the dot-com boom were the ones that listed during the ‘90s. Amazon, Nvidia, eBay, and Qualcomm survived and thrived not just because they were tech stocks. Rather than the dozens of tech stocks that perished precisely because of the bubble… they survived because they were and still are great businesses. This is what you want to find now. The high-quality, recently listed stocks that have the best chance at making the most of the coming AI-driven Mega Melt-Up… as well as surviving the eventual meltdown. Here’s how we can find these stocks in our software… I recently built a screener for what I call Early Stage Innovators. These companies are defined by being public no more than five years, and for having some of the best fundamentals as judged by our quant expert Jason Bodner’s Quantum Edge system. Companies with high Fundamental scores on Jason’s system have strong earnings and revenue growth: two key factors in companies with strong share price appreciation and, just as important, staying power. By filtering for the rare few tech stocks that are new to the public markets, have already shown to be strong fundamental outperformers, and are up over the last year, we can quickly build a watchlist of technology stocks that should perform well as the Mega Melt-Up continues. As you can see, it’s a short list – just 11 stocks out of thousands. Below are the top four (and subscribers with Ideas by TradeSmith can run this screen themselves and tweak as they like by clicking this link): 
Since it IPO’d in 2020, Palantir (PLTR) has run exponentially higher than the Nasdaq 100 – returning more than 1,285%: 
That’s the runaway winner of the group. But let’s look at these smaller names. Toast (TOST), which launched just a few months before the 2022 bear market, has underperformed the Nasdaq 100 since its IPO. But it has tripled off its lows, compared to “just” 100% for the Nasdaq 100: 
Duolingo (DUOL) tracked the benchmark until July of last year, where it began to explode higher due in part to its integration of AI: 
Cloud computing and Big Data company Full Truck Alliance Co (YMM) is similar to Toast in that it’s down from its IPO but has risen higher than the market from the 2022 lows: 
These companies are showing strength in the new bull market just as AI is accelerating. This is the kind of price action you want to see when choosing the biggest potential winners of the next few years. The dot-com boom saw the Nasdaq 100 return 1,000% from 1995 to 2000, but along the way were more than a dozen pullbacks of 5% or more… and multiple pullbacks that crested “bear market territory” of 20% or more. That is exactly the kind of market we’re in right now: higher risk, but higher reward. Look, let me be blunt. There is a heaven and hell here. AI will cause both. It will make everything better – but in the process it will create major issues, eliminate jobs, cause fraud, scams, and so forth. But get on the right side of emerging technologies in public companies … and it could create generational wealth quicker than anything you’ve ever seen before. You have to be buying AI stocks… the tiny ones to the big ones. And you must not bet the farm on these plays. They are to be a much smaller part of your portfolio that you want to grow, compound, and turn into grand-slams. And if you do allocate your capital carefully, you can “smooth out” a lot of the volatility, as I showed you recently with our Pure Quant tool. Many AI stocks will also go to zero! So, be smart, use your trailing stop-losses, and prepare your portfolio for the best part of the exponential era we’re in now. All the best, 
Keith Kaplan
CEO, TradeSmith P.S. There are a few charts that I’ve got a close eye on lately, like utilities and silver – plus other growth stocks like Robinhood (HOOD) – so I’ve been taking to my X account to share what TradeSmith is signaling now. If you’re not following me, you can do so @KeithTradeSmith: I’d love for you to join the conversation there. It’s completely free for you to access and always will be! Look forward to seeing you there. | 
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