The H.E.A.T. Formula

Using AI to pinpoint winners in AI Agents and from Google's Gemini

January 16, 2025

The H.E.A.T. Formula is a radically different way to look at investing your portfolio.

‍H- Hedges, you should always have hedges and be agnostic as to being long or short. Bonds are not a hedge

‍E-Edges, you should always look for edges. Preferably these are edges with some sort of psychological underpinning, structural edges, or some sort of barrier to entry.

‍A-Asymmetric. Everything you do, be it trades or your overall portfolio, should be designed so that heads you win a lot, tails you lose a little.

‍T-Themes. You should always be invested in the top themes. Most everything else is just noise.

Our Next Webinar will be January 23,2025 at 2pm EST.

‍How to Make Money In Markets During 4 Years of Trump

  • 3 Hidden Investment Themes Ready to Explode: Uncover the markets and sectors quietly poised for major moves—before the rest of the crowd catches on.

  • Harnessing AI to Pinpoint Winning Ideas: Learn the exact process for using artificial intelligence to zero in on high-potential themes and keep your portfolio ahead of the curve.

  • Structuring Trades for Asymmetric Returns: Discover how to engineer positions that limit your downside while preserving massive upside potential—perfect for a volatile market.

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We are doing something new, we will be hosting The Watchlist every Thursday. Jeremy Vreeland (Bullish Bears) and I will be discussing stocks we are currently watching, buying, or shorting. We will also be discussing how to structure trades for asymmetrical returns and we will take your questions. Click below to register:

Just published an article on Seeking Alpha about using AI in trading, it's behind a paywall though unless you are a subscriber:

Going to be on Fox Business News tomorrow at 7AM EST.

Softer CPI print took pressure off rates, which is the most important thing to stocks at the moment.

Markets up a bit so far this morning. Today is the confirmation hearing for Treasury secretary nominee Scott Bessent, which could be a catalyst for something depending on what he says, specifically around crypto and rates.

Speaking of crypto…..

Advisers say the surge in bitcoin last year, which more than doubled to touch $100,000, has spurred the interest of conservative trustees. Crypto analysts predict it could double again this year with the arrival of a pro-crypto Trump administration. The president-elect has vowed to make the US “the bitcoin superpower of the world” and end a regulatory crackdown on the sector. Matt Scott, a consultant at Mercer, which advises UK pension funds, said: “Since election day we have been getting a flood of queries in — trustees don’t like to think that there’s a hot asset class out there that they don’t know anything about.”

Regardless of what you think of it I do believe you should have exposure.

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After Jensen mentioned AI Agents last week I did asked GPT for the potential winners and GTLB was on the list.

Tools & Platforms that Complement AI Agents

  1. GitLab (GTLB)

    1. Why: DevOps platform integrating AI-based code suggestions and automations.

    2. As AI agents become more common, tools like GitLab that automate software pipelines could see increased adoption.

  2. Datadog (DDOG), Splunk (SPLK)

    1. Why: Observability and monitoring platforms. AI agents will generate significant data and logs that need performance monitoring.

    2. AI-driven analytics for complex, distributed systems.

  3. Cloudflare (NET), Fastly (FSLY)

    1. Why: Edge computing and content delivery networks (CDNs).

    2. AI agents that run partially at the edge or handle global user requests can benefit from robust edge infrastructure.

Google was caught flat-footed by the launch of ChatGPT in late 2022, despite being one of the pioneers of AI and spending years working on similar chatbots. The company has been scrambling to catch up ever since.

Gemini isn’t yet a serious moneymaker, but it is central to Google’s push to stay on the cutting edge of AI, a technology already starting to reshape the company’s core search and ads businesses.

I asked GPT which companies are the major suppliers to Google and which of them would likely have the biggest revenue impact…..

Summary Takeaway

If Google’s Gemini push dramatically increases HPC and data-center build-outs, the publicly traded suppliers most likely to see a material revenue impact (relative to their size) include:

  1. Arista Networks (ANET): Known to have significant hyperscale exposure; large deals with Google can boost results.

  2. Coherent Corp. (COHR): Could benefit from a surge in optical transceiver orders for high-speed data center interconnects.

  3. Broadcom (AVGO): Already a major chip provider for data center networking, though it’s quite large, so Google alone may not be a “major chunk” but can still be meaningful.

  4. Micron (MU) or other memory suppliers: Gains from higher demand for DRAM in AI servers, though it’s hard to isolate Google’s portion.

Ultimately, Google’s scale means it can shift procurement strategies or build certain components in-house, so no single supplier is wholly dependent on or drastically dominated by Google. But in terms of publicly traded companies most likely to see a noticeable revenue impact from a massive AI expansion at Google, the names above stand out as prime candidates.

Quantum computing could generate between $450 billion and $850 billion in economic value, making it potentially worth more than the current GDP of many countries.

The marriage of quantum computing and AI isn’t just another tech trend — it’s a seismic shift that will drive the next wave of innovations, reshape industries and open new possibilities for tackling some of the world’s most complex challenges. At this point, we’re still in the early stages of this technology. Today’s quantum computers are powerful research tools that push the boundaries of what’s possible, but there’s much work to be done before they’re ready for widespread, real-world applications.

I still think this is an area you need to be in. Yes, the smaller stocks are frothy and move like meme stocks. That’s why I play them with options, I know my risk to the penny. I did take some profits yesterday as my quantum positions got larger than I was comfortable with. Most of them are up big again so far this morning.

Buying a stock just because of a dividend is stupid. There still has to be some underlying theme. That’s why we helped in the launch of TGLR, it owns dividend stocks, but the main theme is old economy that benefits from AI.

Before you go: Here are ways I can help

‍

  1. ETFs: We offer innovative ETFs that cover all aspects of The H.E.A.T. Formula, Hedges, Edges, and Themes.

  2. Consulting: I'm happy to jump on the phone with financial advisors at no charge. I've built a wealth management firm and helped other advisors grow their practices through the use of substantially differentiated investment strategies. If you want to talk just send me an email at [email protected]

  3. Monthly investing webinars

  4. Weekly trading strategy podcast

  5. Weekly investing podcast-Coming Soon

  6. Wealth Management-Coming Soon