Josh Brown says a new AI trade is emerging and this ‘Best Stock’ is benefiting
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — 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 10,000 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. Best Stock Spotlight: The Travelers Cos., Inc. (TRV) Sean — Travelers Companies is one of the largest property and casualty insurers in the U.S. The stock has been a massive market share-taker in the insurance industry. Over the past five years, TRV has returned roughly 113% on a total return basis, nearly double the 58% delivered by the insurance industry ETF (KIE) . The gap opened in 2022, when Travelers stayed positive while its peers were down, and widened its lead considerably through 2024 with strong underwriting results and pricing power. The stock has traded sideways for most of this year while insurance as a whole has traded lower, another sign of strength for the company. Travelers has been a case study on how implementing AI can expand the bottom line. Management linked a 21% jump in Q4 2025 underwriting income to AI-driven efficiency gains, and in February the company launched an AI Claim Assistant built on OpenAI models to handle auto damage claim calls. Net income grew from $2.7 billion in FY2020 to $6.3 billion in FY2025 — a 133% increase over five years with diluted EPS climbing from $10.52 to $27.43. The path wasn’t a straight line, with 2022 taking a hit from elevated catastrophe losses, but margins and investment income have accelerated sharply, coinciding nicely with the implementation of AI and higher-for-longer interest rates. The forward guidance is solid, too. On the Q1 2026 call, management guided to a steady expense ratio and a ramp in net investment income, from about $810 million in Q2 to $870 million by Q4. The board raised the quarterly dividend 14% to $1.25 per share — the 22nd consecutive annual increase. And to put a cherry on top, there’s over $5.2 billion left in its buyback authorization, after a $2B buyback in the first quarter of 2026. Risk management Josh — 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. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. ASSUMPTIONS MADE WITHIN THE ANALYSIS ARE NOT REFLECTIVE OF THE POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC” TO THE END OF OUR DISCLOSURE. Click here for the full disclaimer.
