We are pleased to report that your portfolio performed well again in 2025, building upon strong gains in recent years. Much of this success stems from owning high-quality businesses that continue to build–and benefit from–the foundation of a new industrial revolution. The artificial intelligence era is young, but its impact is already reshaping important aspects of the global economy. By the end of this decade, AI could be as deeply embedded in your daily life as the internet is today.
Thus far, the primary focus remains on the essential infrastructure powering this transformation. From 2025 through the end of the decade, sales of advanced AI processors alone may exceed one trillion dollars. And when you consider everything required to support this technology–servers, networking, electrical equipment, industrial-scale cooling, and upgrades to the power grid–the scope of this undertaking becomes even more extraordinary.
Major cloud infrastructure providers (“hyperscalers”) clearly recognize the size and impact of this opportunity and are investing accordingly. You continue to benefit from ownership of these industry leaders; many long-term clients hold positions that are multiples larger than initially invested. These companies generate substantial daily cash flows, maintain exceptionally strong balance sheets, and are led by management teams capable of funding and forging the next wave of innovation.
The hyperscalers’ pace of AI investment has been aggressive, but arguably rational, given the stakes. Over-investing in infrastructure carries less risk than under-investing and falling behind competitors. Thus far, the majority of this spending has been funded directly through operating cash flows. However, more recently, firms like Amazon, Meta, and Oracle are selectively using debt to finance a portion of their capital expenditures. Aside from Oracle, this is not a debt-fueled binge, but a tactical capital allocation plan that maximizes flexibility, transfers risk to partners in capital markets, and enhances return on equity. The responsible use of debt ultimately depends on the strength of a company’s cash generation–and as demand for computing power grows, so do the hyperscalers’ cash flows.
Importantly, today’s AI buildout differs from historical infrastructure booms. In prior eras–such as the early 1900s railroad expansion–massive networks had to be constructed well before demand materialized. In contrast, today’s AI “rails” are being built alongside substantial, immediate demand. Cash starts flowing the moment the data centers power up, reducing the risk of stranded or underutilized assets.
Increasingly, reliable electricity has become one of the most important–and most constrained–resources in the entire ecosystem. Many of these new and proposed facilities require power on the scale of entire cities. The combination of grid bottlenecks, equipment delays, regulatory hurdles, and soaring demand is pushing developers toward locations where large amounts of power can be secured expeditiously and for multiple years.
To bridge the gap, data center operators are turning to on-site power solutions. These can include natural-gas turbines, reciprocating engines, fuel cells, renewable energy paired with battery storage, and other scalable technologies that provide dependable electricity. At the same time, large nuclear power plants are being restarted, and small modular reactors continue to progress as a promising long-term option. AI holds extraordinary potential, but without sufficient power, progress stalls. This surge in electricity demand is creating durable and attractive investment opportunities across the broader energy sector.
Outside of AI, a significant source of your outperformance in 2025 stemmed from an “overweight” allocation to gold, silver, copper, and the companies that produce them. Last year, gold gained 70%, silver soared 138%, and copper climbed 38%. For the first time in 45 years, these three metals reached new all-time highs together.[1] The forces supporting this trend remain firmly in place: (1) fiscal deficits are widening; (2) geopolitical tensions are rising; (3) central banks around the world are diversifying away from the U.S. dollar; (4) new gold supply is struggling to keep up with global demand; (5) improving inflation data should allow the Federal Reserve to cut interest rates. This environment continues to favor higher precious metal prices.
Copper, while often viewed simply as an industrial metal, is benefiting from equally powerful tailwinds. Every major theme driving global growth–including artificial intelligence, grid modernization, electric vehicles, and renewable energy development–relies heavily on copper. Despite these compelling fundamentals, most investors–and benchmarks–remain significantly underexposed to precious metals and the basic materials sector, but not us.[2] On average, your portfolios have 10-15% allocated to this critical and overlooked sector.
Looking ahead, we remain optimistic about the opportunities emerging beyond the infrastructure phase of AI. The next wave of value will come from companies using AI rather than those enabling it. Biotechnology is one of the most promising areas, where AI has the potential to reduce drug-development timelines dramatically–from the traditional 10-15 years to as little as 1-2 years–while improving success rates and lowering costs. This is just one example. Ultimately, AI-powered tools will reshape every major industry. As adoption accelerates, we expect meaningful gains in productivity, efficiency, and economic growth. Across sectors, companies that harness AI effectively are likely to enjoy durable competitive advantages, and your portfolio is positioned to participate in this expanding set of opportunities.
Despite our optimistic long-term outlook, a healthy degree of near-term caution is warranted. Markets will experience periods of volatility. What remains challenging, however, is predicting their cause, duration, and magnitude. For this reason, a portion of your portfolio is intentionally allocated to government-guaranteed money market funds, U.S. Treasuries, municipal bonds, or other high-quality fixed income holdings–more if you are retired or taking regular distributions. This liquidity provides stability and flexibility, allowing us to take advantage of opportunities when markets temporarily misprice great businesses due to excessive fear or uncertainty. This disciplined approach–balancing long-term growth themes with prudent risk management–helps ensure that your portfolio remains resilient across a variety of market environments.
While volatility is inevitable, we believe the current backdrop represents a multi-year opportunity that could extend through the end of the decade. Your portfolio is positioned to capture these opportunities by identifying leadership in AI hardware, hyperscalers, energy solutions, and precious metals–all areas benefiting from durable, long-term tailwinds. We hope to see these tailwinds expand to the rest of the US economy beginning in 2026.
As always, it is essential to remain nimble and open to new information that could alter financial conditions. Today’s economic data supports an optimistic outlook; however, should an unforeseen event or major development arise, we are prepared to adjust your portfolio accordingly.
We wish you a blessed and prosperous 2026 and beyond. This is an opportunistic and transformative time to be investors, and we are grateful for your continued trust and confidence.
[1] https://www.morningstar.com/news/marketwatch/2025120229/gold-silver-and-copper-are-reaching-record-highs-together-for-the-first-time-in-45-years-heres-why-more-gains-could-follow
[2] The basic materials sector is 1.7% of the S&P 500 index as of 11-28-25. http://www.spglobal.com/