New AI Customer Trade Emerges as Insurers Capitalize on Efficiency Gains

By Josh Brown and Sean Russo of Ritholtz Wealth Management

In the first half of this year, investors celebrated the component companies involved in the AI capex buildout, from chips to electrification, construction equipment to memory. That trade is now on shaky ground as too much money was made too quickly and profit-takers are elbowing each other under the exit sign. I think those stocks will be fine, but another trade is beginning to rise in its place – the AI customers. The hyperscalers are on track to spend somewhere between $700 billion and $900 billion on AI infrastructure this year. Sequoia’s David Cahn estimates there is a $600 billion annual gap between what that compute is costing and what the AI ecosystem is generating in actual revenue. The infrastructure is being built. The returns are still being waited on. That gap is the setup for the next rotation. The companies that can prove AI is actually moving their income statement are a completely different trade than the ones selling the compute, and the market is starting to price that in. While the chip stocks and data center plays work through a meaningful correction from their highs, new highs are quietly being made elsewhere. The leadership is shifting toward companies where AI is showing up in the income statement. That shift is what is showing up on our Best Stocks in the Market list right now. One name that keeps rising to the top is Travelers (TRV), one of the largest property and casualty insurers in the country, which partnered with Anthropic to put personalized AI assistants in the hands of nearly 1,000 engineers, data scientists, and analysts, and is already talking publicly about what it is doing to their results. Sean has those details. I have the charts. Let’s go Knicks.

Risk Management

This one’s clean and easy. The 200-day moving average has been a BRICK WALL of support for Travelers Companies (TRV) over the past twelve months, with four separate tests and four clean recoveries. Every time the stock has touched that rising line, buyers have shown up and price has bounced. The most recent touch came in May, and the recovery since has TRV closing Wednesday at $303, back above the 50-day and pointed at the March highs near $308 to $310. A decisive break above that range opens the door to a fresh leg higher with no meaningful overhead resistance in sight. The RSI reading of 55 reflects a momentum reset that looks constructive. After the May selloff pushed the indicator to the low 30s, the recovery to a neutral reading from that washed-out condition is exactly the kind of base you want to see before a stock takes another run at highs. There is no excess to work off here. Purists with a technical discipline are waiting for a high volume push through $310. It may never come so we can protect ourselves from a rollover if we’re taking today’s entry price and jumping the gun before a breakout. For risk management, traders should use a close below the 200-day, currently at $289, as their exit signal. That is precisely where selling has exhausted itself four times in the past year. Investors can give the position slightly more room, with the March candlestick low near $285 as the structural level that defines the longer-term trend.

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