AI’s Biggest Untapped Gold Mine VIEW IN BROWSER By Michael Salvatore, Editor, TradeSmith Daily In This Digest: - No gains in 2026 show a market abound with worry
- How AI can solve a problem every human being faces
- Biotech + Quantum Score = AI drug discovery goldmine
- Predictive Alpha is still bullish on chips and bearish on software
Investors’ nerves are frayed in 2026… The price action in major U.S. markets so far this year is, in a word, skittish. Both the large-cap S&P 500 and the tech-focused Nasdaq 100 are basically flat for the year. Every single one of the Magnificent 7 mega-cap tech stocks is down – with standout, double-digit declines for the likes of Microsoft (MSFT) and Amazon (AMZN). That’s a painful change of pace compared to the previous three years, when these stocks dominated the AI theme. Investors are worrying if the hundreds of billions in spending on AI from these so-called “hyperscalers” will pay off. At the same time, they’re worrying whether rapidly advancing AI models will make some of the biggest software firms obsolete. As we’ve been covering here in the Daily, the iShares Expanded Tech-Software Sector ETF (IGV) is down more than 20% so far this year. And there’s no relief coming from the Federal Reserve. Yesterday’s FOMC meeting minutes showed several officials actually seek to raise interest rates sooner than they’d cut. That’s because job growth has been relatively strong while inflation remains stubborn. And this week, war drums have been beating near Iran, sending the price of oil from $66 to over $71 a barrel. These are the key factors driving investors into a worry spiral this year… and stocks on a long trip to nowhere. But for all these worries, there is a pocket of the market where AI holds enormous promise. And it’s something that benefits not just the share prices of a certain type of company… but humanity overall. Before we get there, though, we need to understand what AI really is… Most people don’t understand AI… Ask 10 investors what AI is, and nine of them will mention ChatGPT or Claude or say something about Nvidia… and stop there. To most folks, AI is just a highly effective piece of software that people use for writing emails or organizing spreadsheets. But understanding AI’s real capabilities gives you an enormous edge as an investor. When you distill it to its essence, AI excels at spotting patterns in giant data sets faster than any human. And that has massive implications for the most fundamental problems facing all of us – our health. AI is a potential lifesaver… When I say health, I’m not talking about ChatGPT designing you a workout and diet plan. I’m talking about something far more serious – how AI can play a role in lifesaving drug research and development. Before AI, drug development pipelines routinely took as long as 10 to 15 years from start to finish… and cost upward of $2 billion. That’s because drug discovery involves testing compounds over and over again in countless slightly different combinations and dosages until you get the result you need. AI changes that math completely. Instead of running endless physical experiments, machine learning models can predict how molecules will behave before they ever enter a lab. Where before researchers would have to fail, fail, and fail again just to inch closer to a solution… with AI, they can shrink the “possibility space” down to a fraction of what it was before. They can focus on only the most promising leads. This isn’t just theoretical. Boston-based Insilico Medicine used AI to develop the drug Rentosertib, which targets idiopathic pulmonary fibrosis – a serious lung disease. And Insilico took it from the discovery phase to human trials in about 30 months – a process that typically takes more than a decade. Insilico’s Hong Kong-listed stock is up more than 150% since it listed on Dec. 30, 2025. And you can bet that every biotech on the planet is scrambling to be the next company to bring an AI-discovered drug to trial… and eventually to market. But how do you find the next AI biotech breakthrough? There are two paths to take. One, you can become the foremost expert on publicly traded biotech companies. You can task yourself with watching every investor presentation, going to every biotech conference in the world, and understanding the deeply complex medical science that goes into drug discovery. It should only take you a year or two… Okay, more like 10. Now, I don’t know about you… but I don’t have a decade to devote myself to doing this. Especially when the trend of AI drug discovery is ramping up right now. Thankfully, TradeSmith has a much better alternative in Jason Bodner’s Quantum Score. Dedicated TradeSmith readers know Jason worked for decades on Wall Street as a key institutional dealmaker. His job was to fill orders worth hundreds of millions, even billions, of dollars for the wealthiest institutions on Wall Street. And he saw firsthand how this big institutional money consistently moves stocks well ahead of the crowd. To decode these moves, Jason developed the Quantum Score. It’s composed of two parts: - A Fundamental Score that measures key balance sheet figures like earnings, revenue, and profit margin growth.
- A Technical Score that measures price momentum and unusually strong buying volumes – the kind that likely come from the big money Jason follows.
By combining all these factors, Jason formed a simple rating system that grades stocks from 0-100. The higher the score, the better the stock. The Quantum Score is perfectly suited to finding great biotechs that are likely to pursue AI-based drug discovery. By filtering the broad biotech universe for only the stocks that are seeing fundamental growth alongside strong momentum and big money flows, you’re actually doing something quite similar to the AI drug researchers. You’re making the possibility space so small that your odds of finding a great AI-led biotech stock grow exponentially. Right now, 42 biotech companies rate above a 75 on the Quantum Score and are also lighting up on TradeSmith’s Long-Term Health Green Zone – our measure of a healthy uptrend. Here are the top five: 
Those stocks range from large caps like Amgen (AMGN) and Regeneron (REGN) to small caps like Phibro Animal (PAHC), Kiniksa Pharmaceuticals (KNSA), and Catalyst Pharmaceuticals (CPRX). And of this group, Amgen and Regeneron have both announced AI drug discovery initiatives. Bottom line, this system is the perfect fit for finding great opportunities not just in biotech… but across the entire market. And that’s why Jason teamed up with technologist and angel investor Jeff Brown of Brownstone Research to reveal a brand-new system that targets stocks just like these… The under-the-radar AI plays that most investors aren’t aware exist. Every trillion-dollar AI winner – Nvidia, Tesla (TSLA), Advanced Micro Devices (AMD), Palantir (PLTR), AppLovin (APP) – started in a similar "hidden" position before exploding higher. And a new batch is in that position right now. These “Secret AI Stocks” are quietly critical to AI’s future… even though the market still thinks of them as something else entirely… like these unassuming, under-the-radar pharma stocks. And the timing is critical: Jason and Jeff’s data shows waiting even a few weeks can reduce potential gains by a third or more. That’s why you should make a point to join Jeff and Jason for the Secret AI Stocks Summit on Wednesday, Feb. 25 at 8 p.m. ET. They’ll not only reveal a system for spotting these plays, but they’ll each also reveal one pick live during the webinar. Space is limited, so reserve your free seat here now. To wrap up, let’s check in with the Predictive Alpha leaderboard… Longtime readers know Predictive Alpha is TradeSmith’s AI-based stock forecasting model. It analyzes large amounts of historical price data and technical indicators to generate short-term price projections for stocks, ETFs, and funds. You can enter a stock ticker and receive a forecast of where the price may move, typically over the next 21 trading days, along with a confidence score. One great widget on the TradeSmith homepage shows the top Predictive Alpha forecasts – bullish and bearish – and lets you sort them by the forecasted gain and the historical accuracy ratings. The top bullish forecast right now is for semiconductor manufacturing equipment company MKS (MKSI). 
Predictive Alpha forecasts MKSI will rise 14%, to nearly $300 per share, by March 18. And these forecasts have been correct 92.2% of the time in the past. That’s a stock to watch closely, with one of the bigger short-term forecasted jumps we’ve seen. And a stock to avoid is HR software company TriNet Group (TNET): 
TriNet provides HR services for small and medium-sized businesses in the U.S. – think payroll, benefits, insurance, retirement plans, and the like. As AI gets better at doing exactly what TriNet does – handling the payroll, the benefits, the compliance paperwork – small business owners may start asking themselves why they’re still writing that check every month. TNET shares are already off more than 30% in just a couple weeks. But Predictive Alpha is forecasting a continued slide of more than 5.4% by March 3. And its forecasts on TNET have been right 87.5% of the time in the past. You should think of Predictive Alpha as not just a stock price forecasting tool, but as a way to identify broader themes taking place in the market. Right now, Predictive Alpha is telling us to continue to be bullish on semiconductor companies and bearish on software companies. Until that changes, that’s how your short-term trades should lean. To building wealth beyond measure, 
Michael Salvatore
Editor, TradeSmith Daily | 
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