1H26 - TECH BUBBLE 2.0?

All OppoQuest strategies delivered exceptionally strong performance for 1H26 and significantly outperformed their respective benchmarks.  Our consistent and tested investment process continues to payoff for our valued investors.  Below is the 1H26 performance summary:

OppoQuest Strategy	1H26 Gross Return	Strategy Benchmark	1H26 Gross Return	Outperformance / (Underperformance)
AGGRESSIVE *	+15.24 %	S&P Target Risk Aggressive Index **	+9.61 %	+5.63 %
MODERATE	+16.87 %	S&P Target Risk Moderate Index	+5.32 %	+11.55 %
CONSERVATIVE	+15.78 %	S&P Target Risk Conservative Index	+4.25 %	+11.53 %

*   Previously named GROWTH.  Change effective 01-01-2026 and pursuant to reevaluation of the description of the strategy’s stated objective.

**  Previously measured against S&P Target Risk Balanced Index. Change effective 01-01- 2026 and pursuant to reevaluation of the appropriate  RISK measurement for the strategy’s intent.

Staying with our equities-heavy and tech-centric positioning was a significant factor contributing to the outperformance.  We maintained long Technology positions even after being retested in the initial part of the year when software stocks came under renewed pressure.  Semiconductor positions too saw notable stress after the U.S. attacks on Iran commenced at the end of February.  None of these events shook our convictions.  We remained solidly positive on these two subsectors despite both exhibiting diagonally opposite price action…software trading at multi-year lows and semiconductors trading at all-time highs.  As explained in our previous letter, we firmly believe that Artificial Intelligence (AI) is not only going to benefit hardware suppliers but is also going to be a big catalyst for some software businesses…the key is to identify and be exposed to the winning ones. 

That leads us to the second factor contributing to the outperformance – security selection.  Frankly, we think it is a bigger factor and are pleased to see its primary contribution.  Below are some examples of prior security selections which had high impact in 1H26:

1)    Semiconductor positions Arm Holding (ARM) and Marvell (MRVL) were the top two contributors with returns of ~ +222% and ~ +250% respectively versus ~ +82% for the semiconductor index.

2)    Despite an intensely negative narrative surrounding software industry, our Cybersecurity position (BUG) was positive (~ +25%) and in the top 5 contributors across all strategies

3)    Healthcare sector was up ~ +4% for 1H26, versus our holding UnitedHealth Group (UNH) which was up ~ +26%

4)    Finally, data center infrastructure names GE Vernova (GEV) and Corning (GLW) were standout performers (~ +78% & ~ +191% respectively) versus ~ +18% for the Industrial sector. 

With respect to strategy reallocations, there were two major actions:

1)    Decreased exposure to Decentralized Finance (DeFi) area with the elimination of

stablecoin issuer Circle Internet (CRCL) position.  While we still believe that stablecoin Industry will grow substantially over the next decade, competition from deep-pocketed legacy financial institutions is going to rise materially given the launch announcement of OPEN USD.  Adding to the negativity was the continuing delay in passing the Clarity Act which we had viewed as vital for the stablecoin adoption to pick up. 

2)    Initiated position immediately after 1H26 closed in the space and defense industries through Rocket Lab (RKLB) and Huntington Ingalls (HII) respectively.  RKLB had been on a downward trend into the SpaceX (SPCX) IPO on 06/12/26, partly due to the expectations that SPCX would crowd out other space industry names.  We saw that as an opportunity to get our long-desired exposure to RKLB which we believe gives us high-quality pureplay exposure to the Space industry with long runway ahead.   On HII, we think USA’s renewed emphasis on domestic shipbuilding and the recognition of important role naval assets are currently playing across middle east and south America should disproportionately benefit HII given its position as one of the largest shipbuilding companies in USA. 

OUTLOOK

We continue to remain constructive on risk assets despite the apparent risks that the conflict in Middle East possesses. The biggest and most obvious risk is a spike in oil prices which could lead to higher inflation expectations.  While we acknowledge these risks, crude oil price action since the conflict began has been quite underwhelming. 

As the chart below shows, prices did spike to a high of $110 per barrel in May but have since

been on a downward trend and hover around $80 per barrel as of this writing.  Given the disruption already seen in the Strait of Hormuz (~5 million barrels flowing currently versus 20 million barrels pre-conflict), we think the $80 mark indicates a thoughtful and rational market response – no panic or fear!

Another reason we are not too worried about oil prices spiking over $100 a barrel is the anticipated supply response from major producers and the eventual recovery of disrupted Middle East flows. EIA estimates in the chart below show strong recovery in oil supplies for

2027 with main contributions coming from Americas, OPEC+, and Venezuela.  The subdued reaction in oil prices is clearly a reflection of the market’s expectation that supply is unlikely to be a major constraint.

 On the domestic front, one of the questions we have fielded frequently over the last few months is about the spending by Hyperscalers (AMZN, MSFT, GOOG & META) and whether that spending creates risk for the broader equity markets.  It is an important issue especially for folks who still bear the scars of the 2000 Tech bubble.  So, are we in a Tech bubble 2.0?

No, we don’t think so. 

While the magnitude of the spending is truly astonishing, as the data below from Statistica

shows, there are real revenues being generated from these investments as well.  Amazon is projected to report ~ $150B in 2026 revenues for its data center business.  Microsoft ~ $120B and Google Cloud ~ $100B.  Major AI customers of these data centers, OpenAI and Anthropic, are reported running at ~ $40B+ annualized revenue rate.  Back in 2000, companies had scant revenues to show for the investments they were making.

Another big difference between now and 2000 is that the players making these big investments are deep-pocketed cash generating tech behemoths.  Moreover, they have stellar balance sheets to support taking on debt as needed.  Indeed, we have seen most of them tapping the fixed income markets and raising notable amounts. 

So, despite the massive scale of these investments, we do not believe Hyperscalers are in any danger of causing a collapse in the broader equity markets.  The more probable outcome is a slowdown in the growth rates of the data center build out over time which will certainly pull down the multiples of the beneficiaries of this spending like semiconductors and power infrastructure.  Market will have already factored that in and priced accordingly.  But by then maybe robotics picks up the baton…we don’t know…but what we do know for sure is that innovation will not stop!

One risk factor that did get resolved in 1H26, was regarding tariffs.  In a 5-4 verdict, the U.S. Supreme Court (SCOTUS) invalidated Trump administration’s authority to impose reciprocal tariffs under IEEPA.  Recall that we had telegraphed the likelihood of an adverse outcome in our last letter.  To our surprise, the markets didn’t have a big reaction.  The administration was quick to use other authorities and achieve its stated objectives, although the path has become a bit onerous.  We continue to believe that tariffs are incentivizing many multinationals to reshore manufacturing in USA and hence see reasonable rationale in the administration’s case.

Our gameplan for the remainder of 2026 is to continue selling into strength of equity markets and use dips as buying opportunities.  We remain biased towards raising cash levels in all our strategies from the current 10-15%.  We no longer expect a correction in equities later in the second half of 2026, given that interest rates have already moved up (2Y = +68 bps and 10Y = +32 bps) and, as mentioned earlier, the risk of oil prices spiking is low.  In fact, we expect rates to move lower if there is even semi-resolution to the middle east conflict.  Meanwhile, AI and reshoring should continue to drive economic activity at a decent clip which should be good enough for the market to maintian the uptrend.

In other words, we continue to expect a strong finish to the year!

Sincerely,

For OppoQuest, LLC

PARESH JAIN

Founder & Portfolio Manager