AI Selectivity and Fintech Opportunity
- Jul 8
- 4 min read
July 2026
Dear Investors,
June was a volatile month defined by a split between AI/tech leadership and a broad digital-asset drawdown, as some US megacaps and semiconductors hit record highs before a late-month selloff exposed stretched valuations. Digital assets were hit hard with Bitcoin falling to a year-to-date low near $58,200 (~30% YTD), with capital rotating out of crypto into AI bottlenecks. On macro, the Fed held rates at 3.50–3.75% at Kevin Warsh's first meeting as chair, where a revamped statement dropped its easing bias and the dot plot flipped from a projected 2026 cut to a possible hike as inflation reaccelerated (May CPI +4.2%). Geopolitically, the Iran conflict kept energy prices and inflation elevated through the quarter before an initial late-June peace agreement eased oil and helped stabilize sentiment into month-end.
We remain our conviction in calling the current flush-out of digital assets a healthy correction with opportunities to build exposures for the long-term. On the equity side of our portfolios, we remain focused on our core themes in tokenization, Crypto-AI datacenter convergence, and financial infrastructure updating, whilst exploring hedging opportunities in more frothy parts of the market.
Market View
The first half of the year was characterized by strong AI-related equity performance, but weak digital asset performance. In the coming months, we believe that we are entering a phase of consolidation and re-rating across a few dimensions:
We think the AI infused rally will slow down in pace, and as we have hinted in one of our recent publications [Link], we believe that caution and selectivity are now warranted (in names and in size). For example, the chart below shows the incredible rally of the memory sector (reflected with the “DRAM” ETF) vs. a custom selection of holdings in our funds, which we believe are more sustainable long-term holdings, with a healthy return potential whilst being less susceptible to an AI slowdown.
We think the selling pressure is slowing in digital assets, but unclear when the actual bottom is reached. Importantly, we do not believe in timing the market. Rather, we encourage building exposure over time during the current environment. Our composite timing indicator has also turned from bearish to slightly positive and we expect will shift more long, absent further declines.
There is one potential headwind, which is the issuance of new equity across the board, including major IPOs. This might “distract” other investors’ attention from the universe we are focusing on. This is a short-term dynamic which should not cause anxiety in a long-term investor, and in fact provides for an opportune time to build exposures (…and to “be greedy when others are fearful”)
Portfolio Strategy
As we review the current market conditions and prepare for the second half of the year, we summarize our view as follows:
Consolidate AI compute exposure, de-emphasize stretched hardware: Whilst AI valuations become challenged in some parts of the markets, we remain optimistic about general compute demand increasing over next few years. Our focus remains on the pure compute infrastructure part of the stack, with more cautious views on hardware and (known) bottleneck-infused parts of the market.
Core digital asset exposures are becoming increasingly attractive, but we acknowledge limited tailwinds in near-term. We overweight assets with either (a) scarcity and/or (b) clear value accrual mechanisms.
Fundamentals vs hype in fintech: We emphasize holdings in the financial services space that (a) are to benefit from blockchain technology and (b) that expand beyond pure crypto and exhibit attractive valuations with scalable business models. We attempt to avoid names with unclear value-drivers or moats.
If you would like to discuss any of our current market observations, please reach out to us via email.
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