A 'Tipping Point' for the AI Boom Is Coming in 2026

Editor's note: Every market "new era" ends with a tipping point investors don't see coming. In this issue, Keith Kaplan, CEO of our corporate affiliate TradeSmith, explains why the AI boom today could face that moment sooner than most expect – and why today's faster, algorithm-driven markets require a new approach to risk...

Nothing seduces investors quite like a new era...

In the Roaring '20s, it was the dizzying cocktail of electrification, automobiles, radios, aviation, and mass production. Productivity soared. Stocks soared with it.

Leading economists argued recessions had been tamed. Investors believed a permanent boom had arrived. Then, the 1929 crash brought the worst bear market in history.

In the 1960s, another new era dawned – this time with the rise of computing, electronics, and aerospace.

Brokers told their clients that the Nifty Fifty – a group of 50 fast-growing blue chips – were so great, you could buy them at any price.

By the mid-1970s, many had fallen 60% to 80%.

Then, in the late 1990s, the commercial Internet sparked new-era thinking again. It was the fastest boom of the century. Dot-com stocks with no profits became billion-dollar tickers overnight.

In March 2000, stocks peaked, the bubble burst, and the tech-filled Nasdaq Composite Index dropped almost 80% over the next two years.

Different decades... different technologies... and different new eras. But each ended the same way – with a tipping point nobody saw coming until it was too late.

Today, we find ourselves in another new era – driven by eye-widening advancements in artificial intelligence ("AI"). Once again, stocks are minting millionaires. And millions of investors believe they're living through an unstoppable boom.

But new eras don't last forever. Eventually, each one reaches a tipping point, and stocks thump back to Earth without much warning.

And the tipping point for the AI boom could come as soon as next year...

AI and Retail Investing Supercharged Market Volatility

First, it's important for you to understand why market moves are speeding up... and why you need a new kind of indicator to warn you ahead of these moves.

Outside of the 2008 financial crisis, the 10 biggest daily percentage moves in the S&P 500 Index over the past 30 years have all occurred since 2020.

Partly, that's due to shrinking holding times. In the late 1950s, investors typically held stocks for about eight years. By 2020, the average holding time was five and a half months.

And before the pandemic lockdowns, retail trading made up about 10% of U.S. stock trading volume. That doubled to about 20% in 2020... and peaked at 26% in 2021.

These are not pension-fund managers. They're rookies who move in packs, each trying to "stick it to the man."

When tens of millions of these folks have access to zero-commission, gamified trading, the market not only gets bigger... it gets faster.

And it's not just human traders who are responsible for these lightning-fast moves. It's also the algorithms.

Today, the New York Stock Exchange ("NYSE") processes about 1.2 trillion buy and sell orders a day – triple what we saw as recently as 2020.

And computers account for up to 80% of that trading volume.

Orders are now measured in millionths of a second. And according to some estimates, more than half of these algorithmic traders are enhanced with AI.

This creates a new kind of problem. Many of these systems are trained on the same data, learn the same patterns, and react at the same millisecond speeds. So they often make the same decision at the same moment – especially when they sense danger.

Think of the market like a packed stadium with only a few doors. If everyone stands up at once to leave, the exits clog, and people get crushed.

That's what happens when AI trading systems all pull their buy orders at the same time. Liquidity vanishes. Prices don't fall in steps – they drop straight through the floor.

We've already seen early versions of this...

In the 2010 "flash crash," a single automated sell order triggered a chain reaction that erased almost $1 trillion in market value. In 2015, opening-bell volatility caused more than 1,000 stocks and exchange-traded funds ("ETFs") to halt within the hour.

And in March 2020, the NYSE's "circuit breakers" tripped four times – each triggered by a sudden 7% plunge in the first minutes of trading.

The S&P 500 usually moves about 0.7% to 0.8% a day. Those drops were nearly 10 times larger... and they were happening in minutes. That's an order-of-magnitude jump in volatility.

And the next downturn could hit faster, harder, and with even less warning. If you're relying on traditional indicators to alert you, you won't keep up. You'll wake up one morning and find a large hole in your brokerage account.

The Next Evolution of Portfolio Protection

My team and I have created a new kind of sell signal with volatility, tipping points, and bear markets in mind. It's designed to help you avoid the whiplash-style sell-offs that are now routine.

Just like the AI-powered algorithms that have overtaken Wall Street... our early warning system is more reactive than anything we've built before.

You can set it up to monitor every stock you follow. If one begins to experience abnormal short-term volatility – an early sign of a steeper drop – our system will automatically alert you.

In our back tests, you would have been able to get out of:

• Freshpet (FRPT) before a 74% crash
• Lifetime Brands (LCUT) before a 77% crash
• Bloomin' Brands (BLMN) before a 72% crash
• Funko (FNKO) before an 86% crash
• Rocky Brands (RCKY) before a 75% crash
• American Eagle Outfitters (AEO) before a 69% crash
• The Gap (GAP) before a 72% crash
• QVC (QVCGA) before a 99% crash

In short, my team and I created a new kind of sell alert – built specifically for the volatility shocks, fast trend breaks, and tipping-point conditions we see ahead.

Just like every other new era of investing, the next tipping point won't announce itself...

And with the markets reacting at machine speed, it's easier than ever to be late – if you don't have the proper tools.

Regards,

Keith Kaplan

Editor's note: Earlier this week, Keith Kaplan joined Chaikin Analytics founder Marc Chaikin on camera to share the No. 1 step investors must take before January 1. Historical market patterns suggest we'll see heightened volatility in early 2026. That's why they unveiled a brand-new software designed to help investors navigate today's fast-moving markets... and lock in multiple 100% to 300% gains before it's too late.