In today’s Daily:

  • More bank failures ahead?: World’s largest bond fund warns that the financial sector is still in trouble.

  • Low volatility: What a historically low VIX means for markets.

  • Crypto meets AI: Crypto Capital editor Eric Wade unveils the next big bull market driver for cryptocurrencies.

Bank troubles haven’t gone away just yet…

We’re more than a year removed from the banking crisis that saw three of the largest bank failures in U.S. history. And the concern around the financial sector has subsided, with the SPDR S&P Financials Fund (XLF) hitting an all time high recently.

But we’re not out of the woods just yet…

PIMCO, the world’s largest bond fund, recently warned that “the real wave of distress is just starting.” PIMCO has about $2 trillion in assets under management, focused on fixed income. So when they speak on markets – especially the bond market – it’s smart to listen to what they have to say.

Right now, PIMCO is sounding the alarm on commercial real estate and regional banks…

Thanks to the Federal Reserve’s rate hikes, banks are still sitting on huge losses in their loan portfolios.

That’s exactly what took down those banks last year. Their loan portfolios were at losses as yields increased (driving price down). And they saw huge withdrawal requests from clients, but couldn’t cover them because of the lower loan values.

The issues from last year haven’t gone away – they’ve just faded from the headlines. 

If PIMCO’s warning is any indicator, we could see a return to the banking chaos from early 2023. That would throw some volatility into the broader markets, and may even spark another run on regional banks as folks rush to preserve their deposits.

But we still have calm seas for stocks…

It’s obvious that the broader market doesn’t share the same concerns as PIMCO. The S&P 500 just set a fresh all-time high, and we haven’t seen a market correction (as measured by a 10% decline from highs) since late last year.

Longtime investors will recognize the CBOE Volatility Index, the market’s “fear gauge.” The VIX tracks the options market to see how much investors believe process will move over the coming month.

Put simply, the VIX spikes higher when investors are worried about the market and are buying portfolio protection in the options market. On the other hand, the VIX remains low when investors are not rushing to protect themselves from market swings.

And that’s just the environment we’re in today…

The VIX sits at 13 today, right around the lowest level since the pandemic. And it even fell below 12 last month. With little “Fear” in the market, you could be forgiven for thinking that investors are getting complacent, and a drawdown could be coming. But that’s not the case…

As our colleague and True Wealth editor Brett Eversole explained in this morning’s DailyWealth e-letter, low volatility times like this can lead to strong performance in the coming 12 months. As Brett wrote…

Similar setups led to 2.9% gains in six months and 10.6% gains over a year. That means a slight slowdown is possible over the next few months… But over the next year, we can expect significant outperformance – and double-digit gains.

Many investors see a low VIX as the “calm before the storm.” But Brett’s data show that 

Moving on to another volatility indicator…

The VIX isn’t the only measure showing some calm out there. The cryptocurrency markets are famous for their volatility. Bitcoin, the world’s largest crypto, has been known to swing more than 10% in hours (and sometimes minutes).

But even the crypto space has cooled. Our colleague and Crypto Capital editor Eric Wade tracks the Crypto Volatility Index (“CVI”) – a measure he refers to as the crypto market’s VIX.

Much like the VIX, the CVI is showing calm waters. The CVI reads 56 today, where a reading of 100 represents “typical” market volatility.

Crypto volatility has dipped while bitcoin remains rangebound between $60,000 and $70,000. But Eric believes that a huge crypto bull market is on the way…

In today’s MarketWise Daily, originally from the June 7 DailyWealth, Eric tells readers how of graphic processing units (“GPUs”) helped boost his laptop’s computing power to profitably mine for cryptocurrencies.

Now, GPUs are in high demand for another exciting sector – artificial intelligence (“AI”). As Eric wrote…

GPUs are designed to handle challenging computations like processing video or running AI programs.

That’s why everyone from carmakers to movie studios to video-game players and AI developers are investing thousands of dollars into the newest and most advanced GPUs.

But GPUs aren’t leaving crypto behind. In fact, Eric explains that we’re headed for a huge convergence between crypto and AI. And this combination will be huge for the crypto space.

Cryptos and AI Are Merging Faster Than You Think

I mined my first cryptocurrency in 2013.

I had a high-end laptop, so I figured I’d start accumulating bitcoin – the world’s most popular cryptocurrency.

Unfortunately, my laptop wasn’t as powerful as I thought…

I could let it run for days on end and only amass a nickel’s worth of bitcoin. I was paying more than that for the electricity and the wear and tear on the laptop’s cooling fans.

So I resigned myself to just buying bitcoin whenever I could.

But I wasn’t ready to give up on mining completely. I knew it was a great way to get tokens and coins that could go on to soar in value.

So over the next few years, I started building my own miners with powerful computing ability. And eventually, I was mining dozens of cryptocurrencies.

Thanks to one tiny chip, my days of underwhelming laptop mining were far behind me. And as I’ll explain today, the massive strides we’re seeing in artificial intelligence (“AI”) will make this process even easier – and transform the crypto space…

You see, I learned that some cryptocurrencies could be profitably mined using the power of graphics processing units (“GPUs”), or computer graphics cards.

GPUs are designed to handle challenging computations like processing video or running AI programs.

That’s why everyone from carmakers to movie studios to video-game players and AI developers are investing thousands of dollars into the newest and most advanced GPUs.

So it makes sense that demand is high for the best and fastest GPUs…

But these chips are difficult to manufacture. Only three companies make the chips in virtually all the top GPUs – Advanced Micro Devices (AMD), Intel (INTC), and Nvidia (NVDA).

I built my first miner with a Nvidia chip. As my mining operation grew, I expanded to include AMD chips. The Nvidia chips were easier to use, but AMD’s powerful chips could pay themselves off quickly.

Now, crypto miners can shop around for their preferred chips, like I did. But AI is virtually locked into using Nvidia…

You see, Nvidia has built the Compute Unified Device Architecture (“CUDA”) technology. It helps developers and programmers harness the full power of their chips.

CUDA allows GPUs to easily process complicated workloads in parallel. Just imagine thousands of tiny computers all working together to solve whatever graphics, data processing, or machine learning work they’re given.

CUDA is so good that developers who use it see increased performance from their applications (“apps”) compared with apps run on competing GPUs.

In March, I spoke with Yan Zhang, the co-founder of Delysium (AGI), about CUDA’s dominance. Before founding Delysium, Zhang was a senior software engineer at Nvidia working on its deep learning data pipeline for autonomous-vehicle AI technology.

Zhang said CUDA is such an advantage for developers that it has become a default of sorts. Baseball great Yogi Berra might put it like this: Everyone is using CUDA because everyone is using CUDA.

That’s why news site ExtremeTech reported that Nvidia owns 98% of the data-center GPU market earlier this year.

But Nvidia is also solidifying its lead in the space by finding and incubating cutting-edge technology startups…

The Nvidia Inception program looks for projects that have a unique value proposition, sufficient technical expertise, and an attention-worthy potential impact. Then it helps these startups grow their technology, expertise, and marketing.

And in turn, this ensures Nvidia will enjoy a new generation of projects that use its chips.

AI will be a big driver for crypto adoption going forward. That’s because this team-up offers numerous benefits to tech companies…

Used correctly, AI can measure massive quantities of information to make superhuman predictions and decisions in almost every sector you can think of… health care, e-commerce, fraud detection, and more.

For example, in a 2018 study, an AI system and 20 lawyers with decades of legal experience both reviewed five legal contracts. On average, the lawyers took 92 minutes to review the contracts and caught 85% of the mistakes. It took the AI system just 26 seconds – with 94% accuracy.

AI can simply analyze more information faster… And the best way to securely store that much information is the blockchain.

That’s why we’re seeing more users, companies, and governments integrate both crypto and AI to help run their systems, process transactions, store records, and plan major decisions.

These two disruptive technologies are working hand in hand today. We’ll see massive gains in this space because of it. And while Nvidia has a major edge today, the opportunities in both areas are likely to multiply.

That makes now a good time to consider investing in crypto, before this part of the market really takes off.