How Does a Value Investor Think About AI?

• We believe AI will reshape corporate workflows even more profoundly than the internet transformed business.

  
  

• In the short term, we do not believe AI data centers are overbuilt. Leading AI developers continue to report a significant shortage of compute capacity needed to train and run their models. In our view, this is fundamentally different from the internet bubble, when massive investments in excess fiber capacity were made in anticipation of demand that had yet to materialize.

  
  

• As we review second-quarter 2026 earnings and conference calls, we are hearing companies focus not only on expanding AI infrastructure but also on using AI to reduce costs and drive revenue growth.

RAM Value: Growth for Both Offense and Defense

The second pillar of our investment philosophy, the Ability to Grow, acknowledges that companies that are not growing, or that don’t have the potential to grow, are highly likely to melt into value traps. The key for RAM is to identify where growth expectations are too low, yielding room for valuation upside.

Two Categories of AI Winners? Sellers and Users

We see two separate categories of companies that are growing value from AI.

Sellers: We see the sellers of AI capacity growth as beneficiaries of the surging CAPX boom for compute expansion, i.e. Data Centers. The widely discussed boom in CAPX shows no signs of slowing demand.

The impact on the economy, beyond the model creators, will likely not be insignificant. We think the current Atlanta Fed GDPNow 3Q GDP estimate of 5.9% is a clear sign of strong business activity, likely driven by AI CAPX.* We have found and continue to see opportunity into beneficiaries of this spending in companies that sell cooling systems, electrical systems, racks and cables, cement and even contractors. Of course, we are cognizant of cyclical risks here and potential for tough comps into late 2027 or 2028.

Users: We note that behind the surge in revenues for AI model providers are users paying for the models and targeting positive returns from this spending.

A Productivity Surge Coming?

One of the lasting benefits of the internet boom was the sustained productivity gains that followed the initial capital spending. As companies integrated the internet into their operations, they improved efficiency, reduced costs, and created new sources of revenue. We believe AI has the potential to drive an even larger and faster wave of productivity gains.

In 2Q26, we have heard several companies, particularly in financial services and consulting, describe measurable cost savings from integrating AI into their workflows. We expect this trend to accelerate and broaden to most every industry as companies optimize their workflows, supply chains, product design, research and development and go to market strategies.

Of course, we are cognizant of the multitude of risks this new technology and the accompanied spending boom poses. There will almost certainly be both winners and losers from not only the impact of technology, but in the execution and vision of management teams as they navigate through change. Still, we think the users of AI will prove to have a more durable and long-lasting benefit from AI than the CAPX driven spenders are now enjoying.

*Atlanta Fed GDPNow Forecast as of 8/4/26. Source Federal Reserve Bank of Atlanta.

This material is for informational purposes only and is not a recommendation or advice. Investments and strategies mentioned are not suitable for all investors. This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Investing involves risk, including the risk of loss. No one can predict or project performance and forward-looking statements are not guarantees. There is no assurance that any securities discussed herein will remain in the portfolio at the time you receive this report or that the securities sold have not been repurchased. Securities discussed do not represent the entire portfolio and in aggregate may represent only a small percentage of the portfolio’s holdings. Before investing or using any strategy, individuals should consult with their tax, legal, or financial advisor.

Rewey Asset Management is a registered investment advisor in the State of New Jersey