Happy Friday!
In this week’s letters,
– Protean Select on the political risks of AI
– North Sky Capital on the potential inflection point and Lunar mission
– Vltava Fund on five main concerns with AI tools
– Elevator pitches for SKAB SS, BKTI, and TOST
Quarter in progress: 17 fund letters of 2026 Q2 are live on our database!
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Q2 2026 INVESTOR LETTER SUMMARIES
- Markets have spent the better part of two years debating whether AI will deliver returns on its capex promises. But there is a different risk that the market is barely pricing at all, and we think it’s more dangerous than the productivity gap. It is political. And the reason it’s dangerous is precisely that the market has decided it isn’t.
- Think about how AI’s commercial logic works. Firms deploy models. Costs fall. Headcount shrinks or doesn’t grow. Margins expand. Shareholders benefit. This is the operating leverage narrative that has driven the re-rating of AI-adjacent names. It is not so much wrong as incomplete, because it only describes one side of the transaction.
- The other side is this: someone bears the cost. Workers bear it through displacement or the credible threat of it. Citizens bear it through rising electricity bills, driven in part by the data centres built to process their own data. Governments bear it through the erosion of tax bases, as labour income is replaced by capital income that is taxed differently and distributed very differently.
- A Potential Inflection Point. High-growth companies are attractive IPO candidates, but they are highly sensitive to interest rate movements—a dynamic longtime readers will recognize from our commentary over the past several years. Based on conversations with investment bankers, fund managers, and portfolio company CEOs, we believe the recent SpaceX IPO may be a harbinger of improved liquidity conditions.
- Emerging Risks Deserve Attention. That said, we are operating in a complex, fast-moving, and volatile environment, and new risks have emerged that buyers must weigh carefully. The first is geopolitical tension and the potential for energy or supply shocks. The second is the possibility of an AI valuation bubble, along with market concentration risk and, specifically, AI’s effect on the long-term value of certain sectors such as software.
- The Artemis II lunar mission is also worth mentioning. It launched on April 1, 2026, from Kennedy Space Center and was the first crewed flight beyond low Earth orbit since Apollo 17 in 1972. Over its roughly 10-day round trip, the four-person crew flew around the Moon before splashing down in the Pacific on April 10, capturing global attention, reinvigorating NASA’s space program, and further spurring interest in space exploration and aerospace innovation.
- We view AI as an extraordinarily useful tool but a very dangerous substitute for one’s own judgment. With that in mind, here are my five main points. First, intelligence is becoming more accessible, but sound judgment is not. For many years, investors’ competitive advantage lay partly in their better access to information and in the effort required to process it.
- The use of AI can reduce an investor’s information advantage while increasing their interpretive advantage. Information advantage depends on who knows more and who knows it sooner, whereas interpretive advantage belongs to those who better understand what the information means.
- The greatest danger is not that artificial intelligence will surpass us in thinking, but that it will unify our thinking. If professional investors use the same tools, and those tools are trained on similar data and designed to solve similar problems, then the likely result will not be brilliance or originality but a convergence of opinions.
ELEVATOR PITCHES BY FUNDS
Skanska AB (by Protean Select)
- New investment needs have emerged, driven by AI, the energy transition and increased defense spending. With around 90% of revenue generated by its Construction business, Skanska is well positioned to benefit from these structural investment themes.
- Since Anders Danielsson became CEO in 2018, the quality of Skanska’s order backlog has improved materially, with a much larger share of projects carrying higher gross margins than historically. Combined with an improving SG&A ratio, this supports further margin expansion as these projects are executed.
- The Construction business alone trades at ~13x EV/EBIT (2026E), below Skanska’s own 10-year average.
BK Technologies (by Atai Capital)
- Since our initial write-up on BKTI, things have been progressing well and in line with our expectations. They hosted their first investor day under John Suzuki’s leadership in early April, during which they provided further details on their ‘Vision 2030’ framework and financial targets.
- The company now expects to hit $170M in revenue at 60% gross margins and 35% EBITDA margins (~$60M), while generating $55M in free cash flow. For reference, as of the most recent quarter, the company had ~52% gross margins and ~19% EBITDA margins, while guiding to at least $90M in revenue for the full year.
Toast (by Adestella Investment)
- While multiple pockets of the SaaS industry will indeed be materially hurt by these generative tools, there were also several “baby with the bathwater” situations where concerns were overblown, creating opportunities for us to purchase shares at attractive prices.
- Two of our current favorites are Toast (TOST) and Okta (OKTA). These companies each have two characteristics that protect them from spun-up homegrown solutions: they serve as systems of record that handle mission critical business functions, and they tend to work with proprietary data that cannot be easily replicated or substituted.
HIGHLIGHT OF THIS WEEK
MEDIA APPEARANCES BY BSDs
How Elliott is becoming the hedge fund industry’s new ‘Tiger cub’ factory
- Elliott Management alumni are extending Paul Singer’s influence on Wall Street, as former staff use lessons learnt at the $80bn activist investor to launch firms of their own.
- Members of the “Elliott diaspora”, as some former staffers call it, have founded at least seven hedge funds since 2020, mirroring the “Tiger cubs” that came out of Julian Robertson’s Tiger Management around the turn of the millennium.
Michael Burry’s Short Call Dents Caterpillar’s AI-Fueled Rally
- Caterpillar Inc. stock slid from a record high Wednesday after Michael Burry, made famous in The Big Short for his bets against the US housing market ahead of the 2008 crisis, said he shorted the industrial heavyweight for the first time.
- The call comes as the bulldozer maker has rallied more than 150% over the past 12 months, since its power equipment business was tied to the artificial intelligence buildout. Burry sees this run coming to an end, while also calling time on a few other AI-driven stocks.
Jeremy Grantham’s Bitcoin Prediction Has One Big Problem
- Jeremy Grantham went on CNBC and said his Bitcoin prediction was that it would eventually “dwindle away with a whimper.” Joe Kernen pushed back, the conversation became personal, and the clip quickly traveled across the internet.
- That is hardly surprising. Put Jeremy Grantham, Bitcoin, CNBC, a prediction of zero and two strong personalities in the same conversation, and the internet will do the rest. I watched the exchange differently. I was less interested in whether Grantham likes Bitcoin than in whether his prediction was remotely useful to an investor.
