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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Markets are dangerously concentrated with AI representing 45% of the S&P despite unproven returns, while energy infrastructure sits at only 4%. Hyperscalers are spending over $800 billion annually with investment returns uncertain."
Despite geopolitical tensions from the unresolved Hormuz crisis, equity markets surged in Q2 2026 with the S&P reaching new highs driven by AI-related capital expenditure. The semiconductor index doubled while software stocks fell, reflecting a furious rotation within technology. Hyperscalers are forecast to spend $805 billion on AI in 2026 and $1.1 trillion in 2027, with these companies reinvesting every dollar of cashflow to stay competitive. However, AI investment returns remain unproven with small revenues, creating concentration risk as AI represents 45% of the S&P while energy represents only 4%. The second half of 2026 faces significant liquidity stress from approximately $1 trillion in SpaceX share unlocks and $300 billion in IPO supply. Private equity struggles with overvalued holdings, OECD bond markets face rising interest expenses, and Japan's rising rates may reverse decades of capital outflows. The manager recommends diversifying away from US concentration into Europe, Japan, and Emerging Markets, while viewing commodities essential to datacenter infrastructure as increasingly attractive after being ignored during the AI rally.
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