That said, familiar caution flags remain. Valuations across AI-related sectors continue to stretch further from historical norms. The market’s late-June pullback in semiconductor stocks is a reminder that enthusiasm for the AI theme can reverse quickly, even amid otherwise favorable conditions. As previously noted, today’s data-center buildout carries echoes of the late-1990s fiber-optic expansion. The underlying technology is real and transformational, but the risk of overbuilding ahead of demand has not disappeared.

At Riverbridge, our focus remains on companies that deploy artificial intelligence to strengthen their competitive positions rather than those simply supplying the infrastructure behind it. We continue to see tangible evidence within our portfolios of AI-driven efficiency gains translating into margin expansion and durable earnings growth. In our view, this kind of fundamental progress is far more likely to sustain shareholder value than speculative enthusiasm alone.

Looking to the second half of 2026, the foundation for continued equity gains appears largely intact. Earnings growth remains robust while productivity gains are helping offset lingering inflation pressures. The labor market, while showing some signs of softening, remains healthy overall. Consumer spending has held up despite higher energy costs earlier in the year. Midterm election-year dynamics, the path of the Fed’s policy, and the sustainability of AI-related capital expenditures will likely be the key variables to watch in the months ahead. As always, we believe investors are best served by resisting the temptation to chase short-term momentum and instead remaining committed to a disciplined, long-term approach centered on high-quality, durable businesses.