The Herd Is Missing Out on This Unloved Sector

The artificial-intelligence ("AI") craze continues...

Back in April, Alphabet (owner of Google) CEO Sundar Pichai made a strategic move during a call with analysts, reminding them that the search-engine company has been "AI first" since 2016.

This focus and investment is finally starting to pay off...

Alphabet (GOOGL) is now worth more than $2 trillion. It's currently the world's fourth most valuable public company, right behind Nvidia (NVDA), Apple (AAPL), and Microsoft (MSFT).

Most of this growth was due to the success of Google's search engine. But Pichai knows what analysts want to hear about... AI.

On the call, he claimed Google is "positioned for the next wave of AI innovation and the opportunity ahead."

But if you can look past the hype, you'll find that tech-related companies aren't the only opportunity in the market right now...

Take a look at how Alphabet's market cap has shot up recently...

Alphabet reported blockbuster earnings in late April. Earnings per share came in 25% higher than analyst projections. Revenue was 2.3% higher than projected.

Remember, this is no easy feat when so many eyeballs are on a company.

Pichai made sure to highlight the contributions of Google Cloud, which uses generative AI through Google's AI model, Gemini. Here's what he said...

In Cloud, we have announced more than 1,000 new products and features over the past eight months. At Google Cloud Next, more than 300 customers and partners spoke about their generative AI successes with Google Cloud, including global brands like Bayer, Cintas, Mercedes Benz, Walmart, and many more.

It's no secret what investors are clamoring for these days...

Investors want to hear about AI. They want to know the company is using AI to boost sales and profits. (Investors also loved hearing that Alphabet will start paying a dividend, something we value as shareholders.)

If your company uses AI and promotes the fact that it uses AI, then the stock is likely near an all-time high. Investors have been piling into AI stocks in droves...

The chart below looks at sector fund flows over the past 12 months. Since many companies that use AI are in the tech space, it makes sense that investors are buying tech stocks.

But what we're seeing today is an absurd rotation away from other sectors to tech...

It's true that tech profits have been high in recent quarters. But seeing this chart gives me pause... You don't want to be the person doing the exact same thing in the market as everyone else.

While piling into the hottest trend may work for a while, it usually leads you to buy at a top... and ultimately get burned.

I look at a chart like this and find myself getting interested in health care. Fund flows have been negative over the past 12 months. If folks aren't interested in the sector, that makes me want to be a buyer.

As always, contrarian investing is the best way to get long-term gains in the market.

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig

Editor's note: Most folks think of Big Tech leaders when they think of AI. But AI is revolutionizing all kinds of industries... And according to Doc, the massive growth in one overlooked space is just getting started. Thanks to this change, the health care sector could not only help protect your wealth in down markets... it could also soar to outsized returns in the years to come. Click here to learn more details.

Further Reading

"Anytime folks get overexcited about a new trend, they flood the market with money," Joel Litman writes. That's exactly what we're seeing with AI today. But not every AI-related company is a good investment. Make sure you don't miss these key red flags... Learn more here.

The U.S. Food and Drug Administration is approving dozens of new drugs every year. These groundbreaking medicines and technologies are transforming the health care industry – and creating huge opportunities for investors... Read more here.