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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"ACR Alpine raised cash to 25% amid historic market valuations driven by AI speculation. While $800 billion in AI capital expenditures inflate corporate profits, actual productivity gains remain unclear four years into the generative AI era."
ACR Alpine Capital maintains a cautious stance in Q2 2026 as AI hype drives markets to historic valuation levels. US equities hover near all-time highs relative to cyclically adjusted profits, representing unprecedented territory for the entire 2020s decade. The manager notes over $800 billion in AI-related capital expenditures are inflating corporate profits while creating uncertainty about actual returns on capital and productivity gains. Despite four years since generative AI's release, no signs of extraordinary productivity gains or mass unemployment have emerged at the macro level. The EQR strategy has increased cash to 25% through disciplined trimming as positions approach full value. However, the manager sees potential opportunities emerging in healthcare, food, and perceived AI casualties as market participants indiscriminately sell out-of-favor securities to fund AI allocations. Software is identified as a key area of disruption where AI may be eating the industry, creating both risks and selective opportunities. The investment team is conducting intensive company-by-company analysis but will only deploy capital after achieving high confidence that value is accumulating. The manager expects the AI buildout to unfold over the next decade or two, similar to the Internet era, requiring patience and selectivity in this speculative environment.
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