Artificial intelligence remains a durable driver of innovation and investment, and markets have been shaped by a powerful tech-led run supported by rapid adoption and heavy investment in computing, data centers and power. At the same time, a more fragmented global order is changing what “growth” looks like—and where future beneficiaries may emerge.
We focus on a diversified path to participate in the AI cycle—expanding beyond crowded tech into adjacent structural themes tied to security, resilience and critical infrastructure—supported by active selection and a durable core. This matters because today’s AI narrative is full of contradictions—creating opportunity for long-term investors who can stay invested with intention through volatility.
In practice, a more fragmented world is widening the gap between relative outperformers and those likely to be disrupted. We emphasize the value of alpha — selecting the companies positioned to lead — and durable thematics like security, as ways to lean into the disruption while reinforcing portfolio resiliency.
Technology has been the engine of market leadership—and we believe the AI transformation still has further to run. Our starting point is simple: stay meaningfully invested in the innovation cycle, because AI is increasingly a durable driver of productivity, revenue opportunities, and long-term corporate value creation—not just a short-term market narrative.
At the same time, we want that exposure to be intentional—positioned to potentially benefit from AI’s growth potential while recognizing that the investment landscape is evolving quickly and can reward disciplined, long-term positioning.
Your optimism (and Tech’s outperformance) is not a mirage; it has been rooted in fundamentals. Earnings momentum has been exceptional, and the 1Q season showed strength that was broader than a narrow set of winners—even excluding the largest mega-cap leaders, Tech earnings grew 50% year-over-year, while margins improved across 8 of the 10 non‑Tech sectors.
Following that strong 1Q earnings season—particularly in Technology—we upgraded our outlook and now expect ~20% earnings growth in 2026. That supports our view that this cycle is being driven primarily by earnings delivery, not multiple expansion, with S&P 500 targets underpinned by a ~21x forward multiple and a YE 2026 range of 7,700–7,900.
Finally, the growth impulse appears sustainable and well funded. The AI infrastructure buildout remains a core driver: major hyperscalers increased their 2026 capex expectations by $130 billion, with analysts expecting $650 billion+ of total spending through the end of 2026 to expand cloud-based AI capacity—while the binding constraints increasingly extend into power and grid infrastructure, reinforcing the breadth of the capex cycle beyond “pure tech.”
The risk isn’t that Technology is “wrong”—it’s that many portfolios have become unintentionally concentrated in a single theme and a small set of dominant leaders. That concentration can raise portfolio sensitivity to a narrower set of outcomes, especially given how large Technology (including the “Magnificent Seven”) has become within the broader market.
Even if the long-term AI story is right, concentration can magnify drawdowns because creative destruction is a feature of technology cycles—and historically, many stocks experience severe, unrecovered losses. The message isn’t to avoid tech, but to avoid letting one theme dominate portfolio risk.
At the same time, the opportunity set is expanding beyond crowded tech. The world is structurally different than it was a decade ago, and global fragmentation and security/resilience priorities are reshaping where growth and beneficiaries can emerge—often overlapping with tech, but less congested and potentially offering better value and diversification.
The goal is not to “avoid tech”—it’s to own it intentionally, focus on the beneficiaries, size it appropriately, and diversify the drivers of returns. The world is structurally different than a decade ago, and we aim to build portfolios that can stay invested with intention rather than depend on any single version of the future.
A meaningful part of long-term growth now comes from investing in security and resilience, joining a strategic shift already underway across governments, companies, and institutions as geopolitical fragmentation reshapes capital flows. In practice, this can be expressed through exposures to defense and security spending beneficiaries, strategic supply‑chain resilience (e.g., semiconductors and advanced manufacturing), and commodity producers supporting these priorities—areas where sovereign balance sheets, treaty commitments, and multi-year procurement cycles are increasingly directing capital.
Within technology, we broaden AI exposure into a wider set of beneficiaries and bottlenecks—including the data‑center buildout and power generation, transmission, and storage, where AI demand is creating multi-year, infrastructure-heavy investment needs—and we look for select opportunities in private markets as parts of the AI ecosystem scale outside public indices.
Finally, we believe this environment rewards active management: dispersion is high, leadership has been narrowing, and the most attractive opportunities often sit at the intersection of AI, industrial capacity, and security priorities—making selectivity essential to identify beneficiaries. We pair that with a strong, well-rounded core to balance tracking error and manage concentration risk—including diversifying geographically to avoid excessive single-market exposure over time.
Long-term growth in this cycle won’t look like the last one. The leaders that defined the past decade may still play a meaningful role, but the next leg of returns is likely to be built on a wider foundation—one that includes the physical and strategic underpinnings of the AI economy, the industries enabling national resilience, and the regions positioned to benefit from a more multipolar world. The investors who do best from here will likely be those who treat innovation as a portfolio decision, not a portfolio, and who let conviction be guided by structural change rather than headlines.
That approach is what allows a portfolio to age well: durable enough to absorb shocks, flexible enough to evolve with new opportunities, and disciplined enough to avoid being defined by any single theme. Our role is to help you build that portfolio—stress-test it against the futures that could unfold and adjust with intention as the landscape shifts. The destination hasn’t changed; the path simply requires a broader map.
Indices are shown for illustrative purposes only. An index is unmanaged, is not an investment product, and may not be considered for direct investment. Index returns do not reflect the deduction of any fees or expenses, and assume reinvestment of dividends and interest. All indices are denominated in U.S. dollars unless noted otherwise. Indices are an inherently weak predictive or comparative tool. Indices provide a hypothetical representation for use as a benchmark
Foreign direct investment (FDI): Investment by a company or individual in one country into business operations or assets in another country, typically involving a lasting management interest and long-term economic relationship.
Magnificent Seven: The Magnificent Seven stocks are a group of influential companies in the U.S. stock market: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA and Tesla.
S&P 500®: Widely regarded as the premier gauge of the U.S. equities market, this index includes 500 leading companies across major industries, focusing on the large cap segment and representing approximately 80% of total market capitalization.
Earnings Per Share: Earnings per share (EPS) is a financial metric that indicates how much profit a company generates for each outstanding share of its stock. It is calculated by dividing a company's net income (minus preferred dividends) by its total number of outstanding shares.
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