In the first quarter of 2026, we realigned the portfolio to capitalize on high-conviction growth in semiconductors and experience-based travel while trimming exposure to sectors vulnerable to AI disruption and shifting energy trends.

In the energy sector, we trimmed our positions in Chevron (tkr: CVX) and Exxon Mobil (tkr: XOM), moving from an overweight stance to a neutral allocation in line with the S&P 500.

Within the technology sector, we executed several strategic moves to capture growth while managing individual stock risk. We increased our diversified tech exposure by adding to the Technology Select Sector SPDR® ETF (tkr: XLK). Additionally, we trimmed our position in Qualcomm (tkr: QCOM) and redistributed the proceeds into Nvidia (tkr: NVDA). The decision stems from concerns that the persistent memory chip shortage will squeeze Qualcomm’s margins, as suppliers favor data center demand over the smartphone market. While Qualcomm has made substantial efforts to diversify its revenue, the company’s bottom line is still largely dictated by the health of the smartphone industry. On the other hand, we believe Nvidia offers a compelling buying opportunity given its artificial intelligence tailwinds, dominant financial performance, wide moat, and attractive valuation.

Throughout the quarter, we also evaluated our core portfolio through the lens of potential AI-driven disruption which led us to trim our positions in Roper Technologies (tkr: ROP) and S&P Global (tkr: SPGI). Roper owns dozens of niche software and data businesses, and advances in AI could enable customers to replicate or automate some of the workflows these platforms support, potentially reducing reliance on Roper’s specialized software solutions. S&P global is more vulnerable to AI disruption through the potential commoditization of proprietary data sets.

Another company facing AI disruption concerns is Booking Holdings (tkr: BKNG), which we decided to exit completely. We are concerned that agentic AI could collapse the traditional travel funnel into a single conversational interface, undermining established booking platforms. However, we still believe the travel industry itself remains resilient and opted to reallocate that capital into a new position in Royal Caribbean (tkr: RCL). We view Royal Caribbean as a best-in-class operator with higher margins than peers and is well-positioned to benefit from strong experience-based travel demand that persists despite broader consumer headwinds. Royal Caribbean has hedged roughly 60% of its fuel costs for 2026, mitigating the impact of recent oil price volatility.

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