Top investing tips for both AI bulls and bears

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ANGELA WEISS / AFP

2025-11-03T12:22:47Z

• This post originally appeared in the First Trade newsletter.
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**Good morning and welcome to First Trade. **Disney pulled all of its channels, including ESPN and ABC, from YouTube TV… and its stock went up. Is there no justice in the world?

Rundown

• **The perfect data center ETF. **Ned Davis Research has pinpointed the fund it thinks is best-positioned to ride the boom and trounce the S&P 500.
• **A history lesson. **Six ways the stock market has changed a lot since the infamous crash of 1929.
• **Are healthcare stocks underrated? **Morgan Stanley seems to think so, citing AI advancement and M&A activity that could lead a comeback.

But first, there’s two sides to every story.

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Brendan McDermid/REUTERS

Market musings

Trade tips for all

In my years covering markets, I can’t recall a time when there’s been more polarizing views on the future of stocks.

Sure, there’s always chatter when indexes are near record highs about what could send it all crashing down. But it feels different now. The arguments are more multi-faceted, and go beyond the traditional “market-wide valuations are too high” takes.

Whether it’s concerns over AI capex spending, or cries of unprecedented mega-cap tech weightings in indexes, it seems like the bear case has more meat on the bone right now.

On the bullish side of the ledger, investors are happy to lean into the narrative that AI spending will eventually lead to transformational profit growth, pushing stocks even higher. They also see Fed rate cuts as rocket fuel for the entire market, since they’ve historically served as such, especially for economically sensitive sectors.

As a card-carrying (but possibly converted) member of the “not a bubble” camp, the huge sell-off in Meta last week got my attention. It showed that investors are ready to start questioning huge AI spending, even if the company’s more diversified tech peers didn’t absorb the same share-price hit.

But we see both sides of the coin here at First Trade, and have compiled investing recommendations specifically for bulls and bears.

For bulls

If you’re a member of this faction, it’s likely you see Fed rate cuts as a godsend, because they’ll stimulate economic activity. You also probably feel pretty good about inflation, despite it staying persistently above the Fed’s target.

Well, you’re in luck. Bank of America recently recommended the following sector ETFs that are due for a catch-up if the economy booms in the first quarter of 2026:

• State Street SPDR S&P Homebuilders ETF (XHB)
• iShares U.S. Real Estate ETF (IYR)
• State Street SPDR S&P Retail ETF (XRT)

If you’re looking to stick with the AI wave, UBS says these three under-the-radar names are poised for outperformance:

• Micron Technology (MU)
• Lam Research (LRCX)
• Teradyne (TER)

For bears

If you’re fearful of an AI-driven meltdown, fret not, BofA has you covered from this angle as well. The firm says these are the two best places to invest for upside protected from US tech exposure:

• Chinese stocks, for which the most popular fund is the iShares MSCI China ETF (MCHI)
• Gold, which can be either bought on a spot basis or through the SPDR Gold Shares ETF (GLD)

One additional way to continue outperforming during a tech-driven downturn is through the purchase of momentum stocks. The most popular fund for this is iShares MSCI USA Momentum Factor ETF (MTUM).

Jason Browne, the founder of Alexis Investment Partners, told BI this past week that the strategy is ideal for when one area of the market — like the tech sector — enters a lengthy rough patch.

With US economic data on ice for the foreseeable future, uncertainty reigns supreme in the market. But now you’re armed with some trades to deploy, regardless of where you line up.

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On the move

“If you come at the king, you best not miss.” — Omar Little from “The Wire”

Let’s just say I learned this the hard way, and am currently eating crow.

Last week, ahead of Amazon’s earnings, First Trade wrote about the drastic underperformance of the company’s stock over the past five years, relative to the Mag 7 and S&P 500. Well, Andy Jassy must’ve used it as bulletin-board material, because Amazon promptly crushed earnings and sent its stock spiking 10% (pictured above).

The main reason was the stellar performance of AWS, which is also one of the main areas of AI investment. In one fell swoop, Amazon dispatched lingering worries about a core business and assuaged concerns over huge AI spending.

The stock still has a long way to go to catch up with peers, but last week was a massive step in the right direction.

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BI market mix

• **Real estate investors share their secrets. **They told BI that multi-family properties are better for cash flow and efficiency — and explained the most affordable way to buy one.
• **Soft skills are key to the AI revolution. **Famed tech investor and former Tesla analyst Gene Munster thinks a lot of jobs will be replaced by AI. But he says people with the right mix of skills will be in demand.
• **Healthcare stocks may be primed for a comeback. **They’re only up 5% this year, lagging the S&P 500. But Morgan Stanley says a combination of AI enthusiasm and M&A activity could catalyze a resurgence.

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Chart of the day


Bank of America

This chart from Bank of America supports one of the recommendations from the Market Musings section above: buy Chinese stocks if you’re afraid of a US tech sell-off.

The light blue line — which plots Chinese stocks versus government bonds — is close to a multi-decade low, suggesting immense catch-up potential.

Compare that to the dark blue line, which offers the same ratio for US stocks versus sovereign bonds. It’s at multi-decade highs, implying limited relative upside.

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Build-a-portfolio workshop

In this section, a weekly feature on Mondays, we manage a hypothetical portfolio.

***Current stocks: ***Amazon, JPMorgan, Microsoft, Nvidia, Tesla

Now that’s more like it!

The First Trade index absolutely crushed it over the last week, and a big part of that was the new addition of Nvidia. Not to mention Amazon spiking 10% on Friday after blockbuster earnings. Those two stocks largely carried our basket of stocks to market-beating performance.

What we have here is a perfect example of the electric upside offered by the tech stalwarts that make up the Magnificent 7. These stocks are largely responsible for the stock market’s ongoing record-breaking rally, given their massive weightings, and the First Trade index got the same boost as the S&P 500 and Nasdaq 100.

When all was said and done, the First Trade index ended the week 6% higher, handily beating the S&P 500’s 1% return. Also, after trailing the S&P 500 last week, First Trade is now outperforming it by more than double since this project started.

Can we keep the roll going and do even better this week? Let me know at firsttrade@businessinsider.com (1) which stock you’d remove, and (2) which one you’d replace it with.

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Joe Ciolli, executive editor and anchor, in Chicago. Akin Oyedele, deputy editor, in New York. William Edwards, senior reporter, in New York. Steve Russolillo, chief news editor, in New York.

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