Sir Isaac Newton didn’t only define the fundamental laws of physics… change science… and lay the foundation for much of today’s technology.

He also lost millions of dollars in one of the biggest bubbles in market history. And to this day, bears continue to use mistakes like his to scare you out of the greatest investments of our lifetime.

See, Newton was an early investor in the South Sea Company, founded in 1711. It was a complicated arrangement, a public-private partnership to consolidate Britain’s national debt in exchange for a monopoly on trade with Spanish South America – which never materialized.

Still, prices soared. Starting in 1720, prices began to soar from their original price just over £100 to close to £300. Newton cashed out in April 1720 after doubling his money.

But the South Sea Company just kept going. Only a few months later in June, shares crested £400. Then £600. Then £800. By July, the company was trading close to £1,000 per share, jumping close to 10 times over the course of about eight months.

Did Newton stay on the sidelines? No. Fear of missing out spurred him into action. He bought back in somewhere around £700 per share.

But South Sea was at the center of a speculative, corruption-laced mania that couldn’t last. Shares crashed that autumn, and Newton wound up losing an estimated £22,000 – close to £4.5 million today.

“I can calculate the motions of heavenly bodies,” he said, “but not the madness of men.”

I don’t think anybody can.

That’s why I rely on data and analysis in my Quantum Edge system and in TradeSmith’s other tools.

Bubble talk bubbled up again just this week. Michael Burry, the famed investor from “The Big Short,” who made $700 million for his clients shorting the 2008 housing bubble, revealed he was shorting a couple of AI high fliers in Nvidia (NVDA) and Palantir (PLTR).

Palantir CEO Alex Karp had a colorful reaction. He told CNBC:

“The idea that chips and Ontology is what you want to short is batsh– crazy.”

Ontology being the framework behind Palantir’s $3 billion AI platform… yeah. Less poetic than Newton, no doubt – but Karp is right.

The South Sea Company was speculative and corrupt. Burry made a fortune shorting housing, which collapsed because unqualified buyers were given loans they couldn’t pay back.

But AI is real. It is transforming technology and our world. Companies are spending gobs of money to develop and incorporate it.

We’re in the early innings of a megatrend, not a bubble.

Sure, valuations will fluctuate. Stocks will rise and fall along the way.

But AI is one of three critical technologies that will drive tech’s latest revolution – and the stock market’s biggest moneymakers.

The Great Convergence Is Coming
Artificial intelligence gets all the attention right now. Deservedly so.

But it’s one high-tech leg of a three-legged stool. Information and communication in our digital world depend on the convergence of three breakthrough technologies:

  • Artificial Intelligence – the software of the present and future
  • Quantum Computing – the hardware of the future
  • Next-Gen Networking – the way AI and quantum computing will talk to each other

Understanding this is what leads us to incredible investment opportunities.

AI and networking are further along. Quantum computing is still in its earlier stages.

Current systems are the size of a large room, just like the old vacuum-tube computing systems. The race is on to shrink that size, but we won’t need to wait for the day when quantum computers replace laptops or desktops.

I’m not sure they ever will. But the day is coming when each one of us will be able to tap into the unimaginable speed and power of quantum computing.

How?

Through Hardware as a Service – or HaaS.

You’ve probably heard of Software as a Service, or SaaS. It’s a proven business model in which companies “rent” their software to users who connect to the cloud via networking.

Successful SaaS companies have made investors a ton of money. Microsoft (MSFT) and ServiceNow (NOW) both soared more than 900% in the last decade.

SaaS is linked to the idea of AI. Software companies that develop must-use AI tools will be able to use the same effective business model to sell them. Only this time, they’ll also sell access to the powerful computer required to run the most advanced models.

As quantum computing advances, we can invest in next-generation HaaS and SaaS companies now.

Top-Ranked HaaS and SaaS Stocks
The highest-scoring technology stock in my Quantum Edge system is central to this coming convergence.

But unlike the South Sea Company, it’s making money now.

Arista Networks (ANET) is a hardware and software company. Its high-speed, high-capacity networking solutions are essential for AI workloads and cloud data centers.

When the day comes that we are logging into quantum computers via the cloud, we’re going to need blazing connection speeds to use even a fraction of quantum computing’s power.

I wrote about this coming convergence and recommended ANET to my TradeSmith Investment Report readers in July 2023. We’ve tripled our money – now up 210% – and the data leads me to expect bigger numbers ahead.

That data points me to a company “firing on all cylinders”… at a time when its stock is also in high demand on Wall Street. That’s what ANET’s 93.8 Quantum Score tells us:

A score all the way in the mid-90s is a strong buy, reinforced by both fundamentals and technicals.

And it doesn’t get that without Big Money flowing in.

My Big Money Index shows 14 green bars since the end of June. Those bars indicate unusual buying activity – institutional footprints – and helped boost shares more than 50%.

Source: MoneyFlows.com

You may not think of the highest-rated SaaS stock in my system as an AI stock, but it is.

Then there’s Palo Alto Networks (PANW), a cybersecurity company – also critical in this age of networking – that’s increasingly focused on AI-related security.

PANW uses AI to deliver real-time threat detection, has developed security systems to defend against AI-specific threats, and uses AI internally to improve productivity.

Its quant ratings are similar to ANET’s with a 93.2 Quantum Score and equally impressive fundamentals and technicals.

That technical strength comes after shares zoomed nearly 30% in the last three months. I see one Big Money buy signal in that time, which is interesting. But I see 24 buy signals over the last two years – a steady average of one per month – in which the stock gained 75%.

I also recommended PANW to my TradeSmith Investment Report subscribers earlier this year. We’re up a nice 13%, but once again, the data tells me there are more gains to come.

Newton is less known for his investing mishaps than his contribution to physics. As it should be. But his scientific brilliance can help us as investors, too.

My research through the years shows clearly that a version of Newton’s First Law of Motion is true with stocks as well: A stock in motion tends to stay in motion.

Momentum builds. Profits generate more profits. New highs lead to more new highs.

Just think, the S&P 500 has hit 36 new all-time closing highs in 2025. Surprising, isn’t it? That follows a miserable sell-off early in the year.

I built this into my Quantum Edge system and its analysis, and it’s a key reason why it has helped my readers and me make money.

It’s also a key reason artificial intelligence stocks are not in a bubble. Valuations may adjust once in awhile – especially for the businesses that aren’t so rock-solid. But many more new highs await.

Talk soon,

Jason Bodner

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Source: TradeSmith