Smart Investor: What’s Next for AI Stocks, How to Invest in Gold, and Beaten Down Software Stocks

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In this week’s newsletter:

• Weekly Market Update: Stocks Flat as Energy Rises and Financial Services Fall
• Beaten-Down Software Stocks Are Still Good Buys, Despite Investors’ AI Fears
• Gold Keeps Reaching New Heights. Here’s Why Investors Should Proceed With Caution
• What Widening Gaps in US Stock Returns Mean for Your Investments
• In a Mega-Cap World, This Micro-Cap Fund Has Delivered Decades of Outstanding Returns

The “TACO” truck was back in business this holiday-shortened week, as investors tried find Nuuk on a map and pondered whether the European Union would break out its trade bazooka in response to President Donald Trump’s threatened tariffs. After a relatively shallow selloff in stocks and bonds on Tuesday, the president reversed course, and so did the markets.

The limited reaction to Trump threatening tariffs due to Europe’s refusal to support his desired US takeover of Greenland suggests investors now mostly shrug at the president’s statements. But one sign that not everyone is convinced all is well is the price of gold, which has pushed to yet another set of highs. Amy Arnott weighs in on how investors should approach the precious metal in their portfolios, including how much gold it makes sense to hold.

Over in the stock market, Sarah Hansen takes a deep dive into the state of play for the AI trade. Euphoria around these stocks faded in the fourth quarter as investors increasingly worried about how companies will monetize or pay for their massive AI investments. Morningstar analysts say there is more room to run, but that we are out of an “AI tide lifting all boats” environment. Check out the story here, in which our analysts detail the AI stocks they feel remain attractive and which are looking pricey.

On that topic, there’s one set of tech stocks that hasn’t benefitted from the AI boom--in fact, shares have taken a hit. It’s software. But are the concerns here overblown? Hansen sat down with Morningstar senior analyst Dan Romanoff about why he thinks software stocks are a good buy right now.

Also this week, Dan Lefkovitz explains in his latest column what return “dispersion” is and why it matters for your portfolio.

Lastly, we look at one of the best-performing stock funds of the last 25 years. Given how markets have behaved in recent years, investors might expect that the only way to outperform is with mega-cap growth stocks. But this fund takes the opposite approach and invests in the tiniest stocks in the market. Check out our story on Oberweis Micro-Cap.

As always, be sure to visit our Markets page for our latest coverage and live stock market updates along with our full weekly calendar of key upcoming data