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We Called It - Energy Still On The Rise & Software Stocks Recovering
This is a free preview of a paid episode. To hear more, visit thesimpleside.substack.com
Enjoy this article thanks to Nibbles!
Reminders: Copy Trading HerePortfolio Views HereMacro Indicators HereResearch Reports Here
Help Me Help You!
One of the things I want to do more than anything else is ensure that you all are getting what you want from me. Please take a bit of time this weekend to let me know what you think can be improved upon in the newsletter by clicking the link below. There aren’t a million questions, nor am I collecting data, I just want to hear from you.
Do I get to say that we called it yet?
Just about two weeks ago, I posted my typical Saturday Sendout newsletter & podcast. I was discussing how the software selloff seemed irrational. We were seeing a software stock selloff on AI replacement fears, and at the same time, we were seeing the mag 7 selloff on fears that AI capex wouldn’t generate substantial returns.
I titled the article: “The AI Paradox | Nobody Wins and Everyone Loses” for this reason.
Can we have both?
Can AI replace software companies while investment in AI loses its value?
The answer is glaringly obvious: No. It must be one way or the other, and it seems that other investors have been coming to the same consensus this week. Stocks like INTU, RELX, and TTAN were all huge losers during the AI scare that has been going on for really the past year. The stocks are down drastically from their highs: -55%, -50%, and -55%, respectively.
From the Tuesday after we posted that article, the stocks are now up 7.88%, 14.25%, and 18.67% while the SPY is up 0.46% and the NASDAQ 100 is up 1.04%.
Now, I am not saying that we called it perfectly and software stocks will continue rising for months on end and we are all going to get rich investing in them, but the more important takeaway is the framework we had to have to “rationalize” the market’s irrationality.
Ben Graham — mentor to Warren Buffett — was one of the first people to really make a point of this. He was reflecting on the fact that sentiment and news quickly adjust market prices. People vote on whether they think the news is bullish or bearish for a stock on a daily basis. In the long run, however, the market always returns to fundamentals (aka the weighing machine).
One of the most important ways investors, businessmen, or entrepreneurs have made their fortunes is through a process called “riding the wave.” I am sure you know what that means, but in case you don’t, let me give you a quick recap.
Picture a surfer. He is waiting in the water, then he turns and starts to paddle. Just as the wave starts to crest, he jumps on his board, and all he has to do is stay upright as the wave brings him along. This is one of the most powerful investing mental models.
There is always some sort of wave out there. Some are bigger than others, some bring you closer to the shore, some of them you don’t see, some can wreck you, and some can make you lots of money. The waves can be small and unseen by most, or they can be huge, and everyone stands witnesses. When Les Schwab started in the tire business, he struggled to compete with others around him. Tire manufacturers would open up stores right next to his, and these were the same tire manufacturers that he had to buy his tires from. How could he compete when the company would sell their tiers cheaper than he could buy them for? Well, Les rode the foreign tire wave.
Toyo tires entered the market with a cheaper alternative and wouldn’t force Les to overpay. Well, Les rode the foreign tire wave, and his company, Les Schwab Tire, would end up selling after his death for over $3 billion. Now, most people probably never saw the foreign tire wave, but it made Les Schwab a very wealthy man.
Les got lucky because he sort of fell into the wave he rode throughout his lifetime. Investors like us are not so lucky. We have to do something that Les never had to, and that something is the hardest thing to do for any and every one: developing the vision to find the wave early.
The Gold Rush & The AI Wave
I won’t bend your ear about this again, but I wrote this article months ago discussing the “second-hand effects” of the AI wave. I compared it to the gold rush that occurred back in the 1800s, where the people getting rich were not the ones panning for gold, but rather the ones selling them their picks and shovels.
Sure, every once in a while, someone would find gold and strike it rich, but the majority of the folks who went out there in search of fortune ended up with nothing more than the picks and shovels they bought when they went down there. In our initial article, we called out three key areas: semiconductor tool manufacturers/suppliers, data centers, and screens (we were a bit off on the screens thing). Some of the names we called out were ASML, AMAT, LRCX, and KLAC — all of which have had incredible runs since then. The one thing I missed back in June, which I posted about in November, was energy.
One of the things I realized when putting together that article in November was that energy would be the hardest part of the AI buildout to start and sustain. The complications were (and still are) endless: the lack of supply, the aging grid, the distaste toward nuclear. These are all mounting tailwinds for the energy sector.
Take it from the man who is driving a majority of the AI race: Nvidia CEO, Huang:
Not only does he say that energy is the limiting factor, but his business is showing it, too. Currently, NVDA's finished goods inventories have grown to historic levels. Part of the reason for this growing level of inventory is CEO Huang’s belief that the demand level in 2026 will require it; however, it shows quite clearly that GPUs are NOT the limiting supply factor and will not demand huge premiums forever (unless demand runs wild again this year).
Regardless, one thing remains true AI is worthless without data to train on, that data cannot be trained on unless those GPUs are available, those GPUs are worthless unless they have the power needed to run them.
Everything comes back to the power supply.
A report from the International Energy Agency shows a great representation of what I have been talking about for the past year or so. We are still anywhere from 4 to 5 years out from energy demand/growth, even getting close to leveling off. The other tailwind we are looking at is the rising energy costs. As much as it sucks to hear for those struggling with energy bills, data centers and rising costs will not stop anytime soon. The only way to bring these costs down is to flip the supply-demand curve from heavy demand to heavy supply. Again, requiring more investment in American energy production.
I think the best investments to be made right now are still in the energy sector. The last thing I will leave you with is the performance of the S&P sectors YTD.
So, the question remains, “What is the right move to make?” and the answer isn’t super obvious; however, there are some simple adjustments you can make to stay ahead of the shifting global economy. The first thing I would recommend would be to shift capital into the AI Second-Hand Effects portfolio and the Flagship Fund if you want to put your capital to work.
The AI-Second Hand effects portfolio, which you can copy trade on Autopilot (use this link), is energy-centric and has been a clear winner over the past few months, and is outperforming the S&P by around 23% since July of 2025.
We have been discussing the potential diversification of this portfolio if we can find other opportunities within the AI second-hand market, but valuations are still extremely high, and we have no reason to be in a rush. Now, I am going to get into our portoflios for paid subscribers, but whether you are a free or a paid subscriber, be on the lookout for 2 energy names coming your way over the next week.
Quick Macro Views
Macro seems relatively stable from a numbers standpoint. With the war (something we cannot account for in numbers), this probably drops into hold or slight sell territory.
The general economy looks fine, again from a number standpoint. Sure, things have been "decreasing” over the past month, but in general no strong reaction from models either way. See the following for macro stances on SPY, GLD, and TLT.
These are available to paying subscribers in real time on my website: https://thesimpleside.news/macro-indicators
Portfolios & Next Week’s Moves
Whether or not you agree with me that energy is going to be the tail that wags the dog, I think you should pay attention to the current market’s price action. Now, I am going to give everyone an early access look at the stocks I will be posting research articles on next week. We have one name that is a very high-risk, high-reward play, and one that is set to have longer-term growth.
The two names we are looking at for next week are both going to be added to our AI second-hand effects portfolio next week. We are going to wait to see what price action looks like from the recent Iran attacks before going into new companies.
View all episodes
By The Simple SideThis is a free preview of a paid episode. To hear more, visit thesimpleside.substack.com
Enjoy this article thanks to Nibbles!
Reminders: Copy Trading HerePortfolio Views HereMacro Indicators HereResearch Reports Here
Help Me Help You!
One of the things I want to do more than anything else is ensure that you all are getting what you want from me. Please take a bit of time this weekend to let me know what you think can be improved upon in the newsletter by clicking the link below. There aren’t a million questions, nor am I collecting data, I just want to hear from you.
Do I get to say that we called it yet?
Just about two weeks ago, I posted my typical Saturday Sendout newsletter & podcast. I was discussing how the software selloff seemed irrational. We were seeing a software stock selloff on AI replacement fears, and at the same time, we were seeing the mag 7 selloff on fears that AI capex wouldn’t generate substantial returns.
I titled the article: “The AI Paradox | Nobody Wins and Everyone Loses” for this reason.
Can we have both?
Can AI replace software companies while investment in AI loses its value?
The answer is glaringly obvious: No. It must be one way or the other, and it seems that other investors have been coming to the same consensus this week. Stocks like INTU, RELX, and TTAN were all huge losers during the AI scare that has been going on for really the past year. The stocks are down drastically from their highs: -55%, -50%, and -55%, respectively.
From the Tuesday after we posted that article, the stocks are now up 7.88%, 14.25%, and 18.67% while the SPY is up 0.46% and the NASDAQ 100 is up 1.04%.
Now, I am not saying that we called it perfectly and software stocks will continue rising for months on end and we are all going to get rich investing in them, but the more important takeaway is the framework we had to have to “rationalize” the market’s irrationality.
Ben Graham — mentor to Warren Buffett — was one of the first people to really make a point of this. He was reflecting on the fact that sentiment and news quickly adjust market prices. People vote on whether they think the news is bullish or bearish for a stock on a daily basis. In the long run, however, the market always returns to fundamentals (aka the weighing machine).
One of the most important ways investors, businessmen, or entrepreneurs have made their fortunes is through a process called “riding the wave.” I am sure you know what that means, but in case you don’t, let me give you a quick recap.
Picture a surfer. He is waiting in the water, then he turns and starts to paddle. Just as the wave starts to crest, he jumps on his board, and all he has to do is stay upright as the wave brings him along. This is one of the most powerful investing mental models.
There is always some sort of wave out there. Some are bigger than others, some bring you closer to the shore, some of them you don’t see, some can wreck you, and some can make you lots of money. The waves can be small and unseen by most, or they can be huge, and everyone stands witnesses. When Les Schwab started in the tire business, he struggled to compete with others around him. Tire manufacturers would open up stores right next to his, and these were the same tire manufacturers that he had to buy his tires from. How could he compete when the company would sell their tiers cheaper than he could buy them for? Well, Les rode the foreign tire wave.
Toyo tires entered the market with a cheaper alternative and wouldn’t force Les to overpay. Well, Les rode the foreign tire wave, and his company, Les Schwab Tire, would end up selling after his death for over $3 billion. Now, most people probably never saw the foreign tire wave, but it made Les Schwab a very wealthy man.
Les got lucky because he sort of fell into the wave he rode throughout his lifetime. Investors like us are not so lucky. We have to do something that Les never had to, and that something is the hardest thing to do for any and every one: developing the vision to find the wave early.
The Gold Rush & The AI Wave
I won’t bend your ear about this again, but I wrote this article months ago discussing the “second-hand effects” of the AI wave. I compared it to the gold rush that occurred back in the 1800s, where the people getting rich were not the ones panning for gold, but rather the ones selling them their picks and shovels.
Sure, every once in a while, someone would find gold and strike it rich, but the majority of the folks who went out there in search of fortune ended up with nothing more than the picks and shovels they bought when they went down there. In our initial article, we called out three key areas: semiconductor tool manufacturers/suppliers, data centers, and screens (we were a bit off on the screens thing). Some of the names we called out were ASML, AMAT, LRCX, and KLAC — all of which have had incredible runs since then. The one thing I missed back in June, which I posted about in November, was energy.
One of the things I realized when putting together that article in November was that energy would be the hardest part of the AI buildout to start and sustain. The complications were (and still are) endless: the lack of supply, the aging grid, the distaste toward nuclear. These are all mounting tailwinds for the energy sector.
Take it from the man who is driving a majority of the AI race: Nvidia CEO, Huang:
Not only does he say that energy is the limiting factor, but his business is showing it, too. Currently, NVDA's finished goods inventories have grown to historic levels. Part of the reason for this growing level of inventory is CEO Huang’s belief that the demand level in 2026 will require it; however, it shows quite clearly that GPUs are NOT the limiting supply factor and will not demand huge premiums forever (unless demand runs wild again this year).
Regardless, one thing remains true AI is worthless without data to train on, that data cannot be trained on unless those GPUs are available, those GPUs are worthless unless they have the power needed to run them.
Everything comes back to the power supply.
A report from the International Energy Agency shows a great representation of what I have been talking about for the past year or so. We are still anywhere from 4 to 5 years out from energy demand/growth, even getting close to leveling off. The other tailwind we are looking at is the rising energy costs. As much as it sucks to hear for those struggling with energy bills, data centers and rising costs will not stop anytime soon. The only way to bring these costs down is to flip the supply-demand curve from heavy demand to heavy supply. Again, requiring more investment in American energy production.
I think the best investments to be made right now are still in the energy sector. The last thing I will leave you with is the performance of the S&P sectors YTD.
So, the question remains, “What is the right move to make?” and the answer isn’t super obvious; however, there are some simple adjustments you can make to stay ahead of the shifting global economy. The first thing I would recommend would be to shift capital into the AI Second-Hand Effects portfolio and the Flagship Fund if you want to put your capital to work.
The AI-Second Hand effects portfolio, which you can copy trade on Autopilot (use this link), is energy-centric and has been a clear winner over the past few months, and is outperforming the S&P by around 23% since July of 2025.
We have been discussing the potential diversification of this portfolio if we can find other opportunities within the AI second-hand market, but valuations are still extremely high, and we have no reason to be in a rush. Now, I am going to get into our portoflios for paid subscribers, but whether you are a free or a paid subscriber, be on the lookout for 2 energy names coming your way over the next week.
Quick Macro Views
Macro seems relatively stable from a numbers standpoint. With the war (something we cannot account for in numbers), this probably drops into hold or slight sell territory.
The general economy looks fine, again from a number standpoint. Sure, things have been "decreasing” over the past month, but in general no strong reaction from models either way. See the following for macro stances on SPY, GLD, and TLT.
These are available to paying subscribers in real time on my website: https://thesimpleside.news/macro-indicators
Portfolios & Next Week’s Moves
Whether or not you agree with me that energy is going to be the tail that wags the dog, I think you should pay attention to the current market’s price action. Now, I am going to give everyone an early access look at the stocks I will be posting research articles on next week. We have one name that is a very high-risk, high-reward play, and one that is set to have longer-term growth.
The two names we are looking at for next week are both going to be added to our AI second-hand effects portfolio next week. We are going to wait to see what price action looks like from the recent Iran attacks before going into new companies.