FFM Fund Newsletter - Jul 2026

July 2026

Dear Friends, Dear Investors,

This is turning out to be quite a strange year. The war in the Persian Gulf triggered wild moves in energy stocks and, more surprisingly, in semiconductor stocks, which have rallied strongly since April and show no signs of stopping. The thinking among investors is that, of all listed companies, semiconductors would be the least impacted by the war, as spending on artificial intelligence continues to race ahead.

At the start of the year, the hyperscalers (Amazon, Alphabet, Meta and Microsoft, along with Oracle) were spending around 2% of US GDP in capital expenditures related to AI. We are now at 2.5% and that figure should reach 3% of US GDP by 2027. To finance all of this, vast amounts of debt have been raised by these players, as their own cash flows are no longer sufficient. Alphabet went further still by raising USD 80 billion in new equity, the equivalent of SpaceX's IPO, the largest in history.

As we have already noted, all of this has the hallmarks of a bubble that will not end well. While we have not sold our semiconductor stocks, we were already underweight them, and our energy stocks have given back some of their gains. The valuations of the former no longer make much sense, but we will hold them as long as they keep rising, taking profits along the way. As for our energy stocks, bought mostly before the war and then added to during the correction, we are holding those as well. The world is sorely lacking in energy investment (the exact opposite of the AI bubble), and energy prices should rise over the coming years.

The war will only exacerbate this. Around one billion barrels of oil have gone missing from the market and energy infrastructure in the Gulf has been damaged. As we write this, hostilities appear to have resumed, with the fragile ceasefire looking increasingly precarious. As always, the key lies in stock selection, which is precisely what we continue to dedicate ourselves to with the same rigour and conviction, whatever the turbulence around us.

Best regards,

Your CaridaB Group Team