Investing in the Foundations of Modern Technology

May 2026 Client Letter

From Augusta’s quartz sand to the infrastructure behind artificial intelligence

            As we watched the Masters last month, my son mentioned something I had never considered: Augusta’s bright-white bunker sand is quartz.

            I had always noticed how striking it looked against the green fairways but not much beyond that. His comment led me to look further, and what I found connected a familiar scene at Augusta to something much larger: the physical infrastructure behind modern technology.

            The sand at Augusta is widely associated with high-purity quartz from Spruce Pine, North Carolina, a region known for some of the purest deposits in the world. This is where the story moves from sand traps to supply chains.

            Far from being confined to Augusta’s bunkers, high-purity quartz sits inside some of the most important supply chains in the world.

            The material has applications far beyond golf courses. It plays a role in semiconductor manufacturing, solar applications, and fiber-optic systems, key inputs behind much of modern technology.

            What appeared to be a small, visual detail turned out to reflect something much larger; the expansion of artificial intelligence and data centers rests on physical infrastructure.

            Before there can be AI, cloud computing, software, or digital communication, there must first be the foundations—materials, silicon, fiber, power, cooling, servers, storage, and networks.

            The most important parts of a system are often the ones we rarely stop to consider.

            That same idea can apply to investing. Investors sometimes only focus on the most talked-about companies or fast-moving themes. But durable value can also be created deeper within the infrastructure and services that allow everything else to function.

            This is especially relevant today. Many of the largest investment themes are described as if they are purely digital. Artificial intelligence sounds like software. Cloud computing sounds intangible. Data sounds weightless.

            But none of these exist without the physical capacity required to support them.

KEY TAKEAWAY

 The digital economy rests on physical foundations.

 Artificial intelligence, cloud computing, and modern communication systems may appear intangible; but they depend on materials, power, networking, storage, cooling, and physical infrastructure operating behind the scenes.

  Dell Technologies: Turning Complexity into Systems 

            Dell is often thought of as a personal computer company. While that remains part of the business, it no longer tells the full story.

            Today, Dell sits closer to the infrastructure behind modern computing. The company supplies servers, storage, networking, and related systems that businesses use to run operations, process data, and deploy artificial intelligence.

            Much of this activity operates within Dell’s Infrastructure Solutions Group (ISG), which focuses on data center and enterprise systems. While the personal computing segment remains sizable, the infrastructure business has become increasingly important as demand for data, cloud computing, and AI workloads continues to grow.

            Dell is not inventing every component within these systems. Instead, it often plays the role of integrator—bringing together technologies into scalable, usable systems.

            As computing becomes more complex, that role becomes more valuable.

            Deploying AI requires coordination across chips, memory, servers, networking, storage, software, power, cooling, and physical installation. The challenge is not just innovation; it is execution.

            Dell operates between invention and implementation.

            For many organizations, the question is no longer simply whether advanced technology exists. It is whether it can be deployed, managed, and scaled effectively.

            Dell helps bridge that gap.

            This positioning also provides a useful window into broader trends. Orders for large-scale systems often precede deployment, meaning activity at Dell can signal whether companies are actively building infrastructure.

            Recent results suggest this demand is tangible. Dell reported record ISG revenue along with a sizable backlog of AI-optimized servers, reflecting continued investment in data centers and related systems.

            There are still risks. The personal computer business remains cyclical, and enterprise spending can slow during weaker economic periods. Results may not move in a straight line. But the longer-term trend is clear: increasing computing demand requires increasing physical infrastructure.

            Over time, Dell has also strengthened customer relationships through support contracts, lifecycle management, and infrastructure services. These may not resemble traditional software subscriptions, but they can still contribute to recurring revenue and more durable cash flow.

            In that sense, Dell reflects a broader investment principle: value does not reside only in invention. It also resides in the ability to make complex systems usable at scale.

IBM: The Infrastructure of Data 

            If Dell helps build physical systems, IBM operates in another part of the system—how data is organized, governed, and used.

           During the Masters broadcast, IBM’s presence was prominent. Its name has been associated with the tournament for many years, and its role throughout the coverage led my son to ask a simple question: “What does IBM do?”

            It is a fair question.

            For many investors, especially younger ones, IBM may be less understood today. It is not often discussed alongside companies like Apple or NVIDIA. For others it might carry the image of an earlier era: “Big Blue” and mainframes.  

            That image is not wrong, but it is incomplete.

            For artificial intelligence to be effective, organizations need more than computing power. They need reliable data and systems that allow information to be used responsibly across large environments. This may receive less attention than chips or data centers, but it remains essential.

            We often hear that data is the new oil. That may be true, but only if it can be refined. Raw data has limited value until it is structured, organized, and made accessible.

            That is increasingly where IBM appears to be focused.

            The Masters offers a useful example. IBM supports elements of the tournament’s digital experience, enabling viewers to search historical moments, track performance, and access real-time insights. Much of the underlying information has existed for years. What has changed is the ability to organize it, analyze it, and make it more usable.

            That is a challenge many organizations face today. Data is abundant. The question is whether it can be organized, managed, and used effectively.

            From a portfolio perspective, IBM may not be the fastest-growing technology holding, but it offers a different profile. The company provides exposure to enterprise software, consulting, hybrid cloud, artificial intelligence adoption, and data management. It also offers a dividend component, which can help balance growth exposure with income in a sector that often prioritizes reinvestment.

            IBM has lagged parts of the broader technology sector this year. That type of divergence can occur when investor expectations shift, even if the underlying business continues to move in a constructive direction.

            In that sense, IBM’s role in a portfolio may resemble its role in technology—less prominent, but still important.

Owning Different Parts of the System

            IBM and Dell operate within the same sector, but they are influenced by different drivers.

            Dell is more closely tied to hardware and deployment, while IBM is more focused on software, data, and enterprise applications.

            Even within a single industry, companies can operate on different timelines. This year has provided a clear example. Dell’s stock has contributed more strongly to portfolio performance, while IBM’s stock has lagged. At first glance, that may seem inconsistent, but it reflects how diversified portfolios are intended to function.

            Not every holding responds to the same conditions at the same time.

            Some companies benefit earlier in the cycle. Others benefit later, as systems are adopted and used. Some are tied to capital spending, while others are tied to software and services.

            That variation is by design.

            Diversification is often described as owning many things. We tend to think about it more in terms of how businesses participate within the economy. The goal is not simply to own more companies but to own different roles within the economy.

            That sometimes means looking beyond the most well-known names and building exposure across the value chain—materials, infrastructure, hardware, systems, data, software, and end-market adoption.

            Over time, leadership shifts. The objective is not to ensure that every holding moves higher at the same time, but to build a portfolio that can participate across multiple drivers of growth, income, and durability.

            Diversification is not simply about owning more.

            It is about owning differently.

Market Backdrop: Beyond the Headlines 

            Last month’s headlines focused on developments in Iran and the broader Middle East, particularly around energy markets and the Strait of Hormuz. Those issues remain important, and geopolitical uncertainty can influence investor sentiment, especially over short periods of time.

            Yet markets have remained relatively resilient.

            Since the end of March major U.S. indexes have moved higher, with technology-oriented areas leading the advance. This raises a natural question: what are markets responding to?

            In the short term, markets can react to headlines. Over time they tend to respond more directly to earnings, cash flow, capital investment, and expectations for future growth.

            Recent earnings reports suggest many businesses continue to grow despite broader uncertainty. Risks have not disappeared, but investors appear to be balancing geopolitical concerns against corporate performance and longer-term expectations.

            One of the more important developments remains the continued investment in artificial intelligence and cloud infrastructure.

            Some Wall Street analysts estimate that AI-related capital spending could approach or exceed $1 trillion by 2027, with 2026 spending already projected to move toward the $700 billion range. What stands out is not just the size of the investment but the trajectory; the pace of investment increasingly reflects a broad, system-wide buildout rather than a temporary wave of spending.

            For many years technology growth was associated with asset-light business models. Software platforms could scale without the same level of physical investment required by traditional industries.

            That dynamic is changing.

            Several of the largest technology companies continue to commit significant capital toward data centers, computing capacity, power systems, and networking. This phase of growth depends not only on innovation but also on the ability to build and operate the physical systems behind it.

            Artificial intelligence may feel like a software story, but it depends on a wide set of physical systems. Chips, servers, memory, storage, fiber, power, cooling, land, and construction all play a role. The end application draws the most attention. Beneath it sits a much larger system.

            This is why we continue to focus not only on companies creating new technologies but also on the companies that enable new technology to function.

Bringing It Together 

            The Masters offers a simple reminder: the most important inputs are sometimes easy to overlook.

            The white sand at Augusta may look like a finishing touch, but it reflects a broader truth. Modern technology is built on physical foundations. Quartz, silicon, fiber, power, servers, storage, networks, and data systems all play a role. What appears incidental is often essential.

            As investors, we believe it is important to look beneath the surface. The companies that receive the most attention are not always the only ones creating value. Opportunity is often found in the parts of the system that allow broader trends to scale.

            IBM and Dell Technologies illustrate that idea. Dell represents the infrastructure required to deploy modern computing systems. IBM represents the data infrastructure needed to make that technology usable. Neither may be the most prominent example of today’s technology cycle, but both reflect how extensive the ecosystem has become.

            That does not remove risk. Technology cycles can be uneven. Capital spending can fluctuate. Geopolitical developments can escalate. Individual companies will not always move together, and not every investment theme develops as initially expected.

            This is why diversification remains central to our approach.

            We focus on owning securities that participate in different parts of the economy and across different drivers of long-term growth. Some provide income. Some benefit from infrastructure growth. Some reflect technology leadership. Others help provide stability when leadership shifts.

            The objective is not to chase every headline. It is to own a mix of businesses that can participate in durable trends while remaining balanced across a range of outcomes.

            In the end the future of technology may depend not only on what we see on our screens but on the foundation beneath it—the materials, infrastructure, and systems that quietly make the modern economy work.

            As always, we welcome the opportunity to discuss your specific situation. If you have questions, or if anything in your financial life has changed, please call us at (800) 843-7273. That conversation is always worth having.

 

Warm Regards,

 

 

 

Matthew A. Young
President and Chief Financial Officer