What I Said in Vegas

The rhyming has begun... My first AI recommendation... The greatest wealth-creation episode in human history... Gold investors should welcome this week's breather (and brace for more)... How fundamentals can change...

The stock market is right. Again...

That was the title of my (Dan Ferris') presentation at Stansberry Research's annual conference in Las Vegas... which I shared with attendees and our livestream viewers on Tuesday.

Most folks think of me as Stansberry's "bearish guy," the one who frets when market valuations get high.

But as I've been sharing recently in the Digest – and as I said on Tuesday in Vegas – sometimes technology changes everything.

We may be in the early days of a massive period of innovation and growth that'll keep the stock market rising.

I'm seeing echoes of the 1990s. And I'm not talking about the dot-com bust that followed. I'm focused on two parts of this stock market boom... wild gains in stock prices and the real value that the Internet created for businesses.

As long as the AI boom continues rhyming with the dot-com boom, we'll see both of these trends again.

The S&P 500 Index rose fivefold during the '90s as the Internet took off... And U.S. stocks rose from a total value of $3 trillion to $15 trillion in just 10 years.

Sure, part of that was due to the dot-com bubble... But the Internet really did transform the global economy and leave no business or person untouched. It really did change how we do practically everything.

And after the boom reached its peak, the market was also right to wipe out all the unsuccessful entrepreneurial experiments during the ensuing bust.

That's how capitalism works. It rewards wealth creation and punishes poor capital allocation.

Likewise, AI will leave no business and no person untouched. As I predicted last week, if you're not already having conversations with ChatGPT or another AI bot every day, you will be by this time next year. And if you're not already relying on AI heavily for work, that'll change soon, too.

Today, I just made my first AI stock recommendation...

This is not what folks are used to seeing from me. It's a new company, founded in 2015. It only just turned cash-flow positive (in terms of earnings before interest, taxes, depreciation, and amortization, or "EBITDA"). It won't generate net income for some time.

But it's growing revenues at near-triple-digit annualized rates, and it's building something extremely valuable, which I believe you will be using very soon, if you're not already.

I've come to believe that AI is sparking the greatest wealth-creation episode in human history. And this stock will be a part of that.

Stansberry Alliance members and subscribers to The Ferris Report can find this recommendation, plus more of my thoughts on AI's potential in general, in today's issue. (If you don't already have access, click here to learn about some of my other recent research and how to subscribe for 84% off our regular price.)

We'll be tracking this position with a 35% trailing stop. That'll protect us from big losses if this particular stock isn't the AI winner I'm predicting... and protect our gains when the AI boom runs out of steam.

But we're probably a long way from that. If AI follows a similar time frame to the dot-com boom, investors have another six years to take advantage of the resulting bull market.

The AI boom started on November 30, 2022 when OpenAI released ChatGPT... It rhymes with how user-friendly web browsers began making the Internet accessible in the early 1990s – the early days of the dot-com boom.

In December 1996, Federal Reserve Chair Alan Greenspan worried about 'irrational exuberance' in the stock market...

The boom was well underway by then. But it didn't top out for nearly another three and a half years.

Stocks rose pretty steadily during most of the dot-com boom. The S&P 500 suffered only one major drop – it fell a little more than 19% in the summer of 1998, when the Long-Term Capital Management hedge fund blew up.

Otherwise, it was fairly smooth, with just a few drawdowns in the high single digits and low double digits... mostly in the final year or so before the dot-com crash of 2000.

The AI boom will be a wilder, more volatile ride.

Less than three years into the AI boom, we've already had one big drawdown. It came earlier this year: the "tariff tantrum" that bottomed on April 8 and set off a blistering rally in... just about everything. More "orange swans" like I wrote about a couple weeks ago could generate similar results.

The lesson is that even in roaring bull markets, prices often don't go up in a straight line.

Gold investors just found that out...

Gold was up 30% in two months before its big drop this week.

Intraday gold prices fell more than 8% from Monday afternoon through Wednesday morning. The speed of gold's decline sparked a flurry of hand-wringing that the precious metal's bull market was over.

It's not.

Gold is volatile with a capital "V." And as I said at our conference this week, it's not unprecedented for gold to rise 30% in two months.

In the last massive bull market in gold, it ran from $35 an ounce to $850 an ounce at its January 1980 peak. This was an epic bull run, culminating in a frothy blow-off top.

In the years before the peak and the years after the peak, gold soared 30% or more in multiple two-month periods.

Big drops aren't unusual, either.

When any asset price goes ballistic the way gold's has over the past couple months, what follows is often not a sideways consolidation.

And if you got scared by gold's single-digit drawdown this week, you ain't seen nothing yet.

I expect that gold's rocket move will end with the price crashing back to its previous level from before it went nuts. That would be all the way back to August's price in the low $3,000s – nearly $1,000 per ounce less than today.

If you're long gold or gold stocks, you want that crash to happen...

The sooner gold lets off steam, the sooner it can get back on an orderly and sustainable uptrend.

Plenty of short-term speculators have jumped into gold lately. But you want to hold gold for the long term, not as a quick trade. Gold is wealth protection. And as I've outlined before, many factors will protect and increase its value.

Similarly, gold stocks will also benefit from this breather. The difference is, gold always belongs in your portfolio... while gold stocks are cyclical. There will definitely come a day when you will have to sell your gold stocks before the longer cycle turns against you.

If you're up 300% this year on your gold stocks, you might want to think about taking something off the table.

I started doing that earlier this week in my own portfolio... though I decided to wait for short-term sentiment to improve so I wasn't selling at the same time as everyone else.

On Wednesday, I shared my annual stock pick as part of our Alliance Meeting...

This time, it wasn't an AI stock or a gold stock. It was a domestic oil and gas producer with a highly disciplined management team that's focused on generating plenty of free cash flow and using it to provide a good return for shareholders.

I figure even if the market doesn't reward shareholders, management will continue to do so with a steady stream of rising dividends and sizable share repurchases.

The stock has gone sideways for three years, but it has maintained very thick margins and gushed free cash flow the whole time. I bet folks would be surprised at how quickly a stock like this can rise 50% to 100% if oil and gas prices move up.

It's also a low-cost producer that can make plenty of money even when energy prices remain low.

I can't share the company's name here in the Digest... But if you're an Alliance member who didn't make it to Vegas, watch your inbox for links to video replays of Alliance Day. They may be ready as early as next week.

By the way... I also told the audience that I'd learned something important about energy and mining companies.

Too many of them operate as though their purpose is to get capital and make holes in the ground. I prefer when management is focused on getting good returns on investments, rewarding shareholders, and maintaining a great balance sheet.

Such basic, fundamental concerns don't seem to be nearly as popular with investors today as they once were... But over time, they're an unstoppable force, pulling poorly managed companies down and lifting well-managed ones up.

My Alliance Day recommendation may not shoot up instantly. But it'll survive for the long term.

Fundamentals always matter, but the ones that matter can change over time...

For example, value-investing guru Ben Graham pioneered some methods in the wake of the 1929 crash. One of them was to buy companies trading at discounts to their net current assets. Net current assets means cash, inventory, and receivables minus debt.

If you find a company like that, it's basically trading below the value of its most liquid assets and you're getting the rest of the business free. Value investors call them "net-nets."

In practice, there are plenty of good reasons why companies get cheap enough to become net-nets. You have to sift through a lot of rubble to find the ones that are being unfairly punished by the market.

In the early 2000s, in the wake of the dot-com bust, you could score a few good net-nets. For example, in our Extreme Value service, I recommended computer maker Gateway and electronics retailer Circuit City in early 2003. Both were trading at discounts to net current assets. Gateway rose 124% in about five months, and Circuit City rose 95% in about 11 months.

It's a lot easier to find good net-nets near the bottom of a steep bear market. But overall, analysts and investors acknowledge that good net-nets are just too rare to depend on for an investment strategy.

It's the same with discounts to book value, the value of a company's total assets minus its total liabilities.

When the public markets were populated primarily with companies like railroads, manufacturers, oil and gas producers, chemical makers, and the like, their balance sheets were filled with the tangible assets they needed to operate. So if for some reason they traded at a discount to those assets, it's like you were getting the business on sale. Ben Graham liked to buy stocks trading for two-thirds or less of book value.

Nowadays, numerous businesses have their value in intangible assets. All they own are computers, offices, and phones. Their capital is invested as much in their people and their ideas as in anything else. They require far less capital investment, and so they tend to trade at high multiples of their book value.

The fundamentals that count today are the ones we focus on in Extreme Value: gushing free cash flow, consistent margins, good balance sheets, dividends and share repurchases, and various measures of the return a business gets on the capital it invests.

The greatest investor in history – Warren Buffett – started his career looking for net-nets and similar plays. Perhaps the most important thing he ever did was to change course and start looking for great businesses that could generate a growing stream of cash profits.

Plenty of older value investors will tell you that same thing. The old fundamentals gave way to the new.

The best example for me is the S&P 500's cyclically adjusted price-to-earnings ("CAPE") ratio... I've often used the CAPE ratio to show how expensive stocks are right now.

I still believe they're extremely expensive, historically speaking. But now I understand there are good reasons why the CAPE is high today and has been generally higher since the late 1990s.

All those newer software and Internet businesses require little capital spending, have thick margins, and generate consistently huge cash profits. So they're worth higher multiples of earnings than the older-economy, lower-margin, capital-intensive firms that once dominated the index.

That's how life is, too...

I cherish ancient wisdom and things that don't change, like the value of honesty and integrity, and the importance of having good relationships. But the stuff of our everyday lives is undergoing constant change, and you must learn to adapt.

Nowhere is the skill of adapting to change more important than in financial markets.

I've had to adapt from emphasizing the bearish side of my outlook to focusing on AI's potential. I expect AI will transform our world at least as much as the Internet.

Entrepreneurs and innovators have created intelligent systems to do everything from driving us around town to keeping an extremely personalized eye on our health and even curing diseases in a very targeted manner. And we're still in the earliest days of the AI revolution.

I would hate to miss out on the excitement and wealth creation by making the classic novice mistake of thinking I know the future. Like I've always said, nobody knows the future, so prepare, don't predict.

And the main thing I believe you should be prepared for is massive wealth creation and innovation from AI.

New 52-week highs (as of 10/23/25): Applied Materials (AMAT), Alpha Architect 1-3 Month Box Fund (BOXX), Fanuc (FANUY), iShares U.S. Aerospace & Defense Fund (ITA), Grand Canyon Education (LOPE), VanEck Morningstar Wide Moat Fund (MOAT), Roivant Sciences (ROIV), United States Commodity Index Fund (USCI), and Valaris (VAL).

In today's mailbag, more feedback on robots and AI... and a question about Stansberry Research conference replays... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"1,000% agree with subscriber E.G. [in yesterday's mailbag]. How is anyone supposed to pay for anything if our jobs are lost to robotics? All the greatest medical treatments, innovations, etc. don't mean anything if 90% of society can't afford their healthcare or basic needs because there are no jobs. It seems to me that our government has checked out or is playing for the 1% team and we are rudderless in very dangerous waters. I hope I'm wrong, but I don't see this AI/Robot future as something to be very excited about." – Subscriber S.R.

"I see at least two big problems with AI and AI data centers. AI data centers take so much electricity that they will overburden the electric grid in the areas where they are built, which means that the rich companies running the data centers can pay extra to get what they need, while the common folk in the area will suffer with exorbitant prices for electric heating, cooking, etc., or suffer brownouts or outages while AI data centers get all they need.

"Another AI data centers problem is their extreme usage of copper and other currently strained metals supplies, including copper, lithium, silver, rare earth metals, etc. Again, because of the rich coffers of the AI data center builders, they can outbid other industries for the scarce supplies, including homebuilders, office and other commercial building construction companies, the overall electronics industry, the military/industrial complex, etc.

"Are we really willing to pay such a high personal cost for supporting AI?... We only seem to learn after the damage is already done, when it is almost impossible to fix the problems caused by our putting profit and convenience over our future health and happiness!" – Subscriber Lew M.

Corey McLaughlin comment: Thanks for the note, Lew. Yes, I think you're right... If or when electric bills and other commodity prices rise (which they have been in places already), you'll see more and more public pushback and criticism of AI spending and development. That'll be especially true as we get into another round of elections.

That doesn't mean AI development won't still happen, but it could dampen or slow the buzz that we've seen to this point.

Here in Maryland, we're already seeing it. The state has 41 data centers already and three more in the works. And many residents are against a proposed 70-mile power line running through the state from Pennsylvania that would help power "Data Center Alley" in Northern Virginia.

Some officials are raising concerns about it all, and rising energy prices in general. As the Baltimore Banner, a local news outlet, reported just yesterday...

PJM Interconnection is the regional power grid operator for Maryland and all or parts of 12 other states and Washington, D.C. It is forecasting a 32-gigawatt growth in peak load, which is the highest level of electricity consumption, by 2030. That triggers higher bills for ratepayers – as much $70 a month extra by 2028, according to the Natural Resources Defense Council, an environmental advocacy nonprofit.

About 30 GW of that increase comes directly from the data center boom, according to a letter from PJM in August...

The Maryland Office of People's Counsel, an independent state agency representing ratepayers, raised concerns about the grid operator's growth projections last week.

Over the last 100 years, Maryland's total peak demand has only reached 12 GW. Adding the projected 32 GW would be "the equivalent of about five states the size of Maryland in just the next five years," according to a statement from the agency.

That's staggering context that probably isn't appreciated in the market.

And I don't think Maryland is alone.

This situation is likely to play out across the country: Either a lot of infrastructure is going to be built relatively quickly (or it won't)... or a lot of people are going to be paying higher electric bills (or AI growth might face some restraints). Or something in the middle. Place your bets.

"Hi, just wondering, is there going to be a link to archived video of the Alliance Day discussions?" – Stansberry Alliance member Vincent P.

McLaughlin comment: Yes, stay tuned. There will be replays made available on the conference website. We'll send a notification and link to all Alliance members when the videos are ready, likely as soon as next week. As a reminder, all Alliance members are entitled to these videos... even if you didn't make it to the conference.

Good investing,

Dan Ferris
Medford, Oregon
October 24, 2025