Ryan Grabinski
Portfolio Manager
SAMT Update: More Defensively Positioned
10/30/2026
As we head into the final months of the year, we remain mindful of the growing “wall of worry” and are closely monitoring how these risks evolve. AI capital expenditures continue to appear robust, although questions around the funding required to sustain this level of investment are becoming more prominent. Meanwhile, the Federal Reserve and other central banks are widely expected to continue raising interest rates, potentially tightening financial conditions further. The upcoming midterm elections also remain a key area of focus as we assess the broader market outlook.
Capex Related to AI Reaching a Tipping Point
Amid growing uncertainty around the sustainability and funding of AI capex, we feel it's prudent to wait for clarity on future spending. While a meaningful pullback in investment appears unlikely, increasing scrutiny of free cash flow and the potential for additional capital raises could create volatility and downside risk, particularly for AI facilitators. With markets facing several key catalysts that could shape the outlook over the coming months, holding additional cash provides flexibility to navigate uncertainty, manage risk, and capitalize on potential investment opportunities as they arise.
Rising Federal and Global Financing Costs
Another reason for holding higher levels of cash pertains to central banks globally initiating tightening policies, uncertainty around the interest rate outlook, and the potential for renewed upward pressure on longer-term yields. While recent rate stabilization has supported risk assets, the possibility of further tightening could weigh on longer-duration equities and increase funding challenges for lower-quality companies. With signs of persistent inflation and increasingly differentiated access to capital across companies, maintaining elevated cash provides flexibility to manage downside risk and navigate potential market volatility.
Lasting Impacts of the Midterm Election
Ahead of the upcoming midterm elections, uncertainty around the composition of Congress and the resulting policy outlook could drive market volatility. One particular concern is the potential for state and local restrictions on data centers and AI infrastructure, which could weigh on AI investment and extend the market rotation away from associated beneficiaries. While historical equity performance following midterm elections has generally been supportive, the implications of different political outcomes for risk assets remain uncertain. Holding additional cash provides flexibility to navigate potential policy-driven volatility and can capitalize on opportunities as the market adjusts.
SUMMARY
SAMT currently invests in three themes: Artificial Intelligence 2.0, Deglobalization, and Analog Edge, and we remain optimistic. However, rising global rates make the current pace of AI capex increasingly difficult to sustain, as most of it is financed through debt. We believe markets are underestimating both the effect of a higher-rate environment on future capex and the risk that voter pressure leads to a moratorium on new data center construction. Holding roughly 27% in cash keeps SAMT invested in its themes while preserving the flexibility to act if these risks materialize. If these risks subsided, it would give us the comfort to put that cash to work.
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SAMT Update: More Defensively Positioned
Oct 30 2026