Three months ago, the script seemed already written: conflict with Iran, oil at $100 a barrel, a resurgence of inflation, a U.S. recession, and fragile financial markets.​

Three months later, the global economy has proven resilient. Energy prices have eased. The anticipated recession has been pushed back. Markets have rebounded.​

MARKETS IN PERSPECTIVE​

This rebound tells a highly uneven story. Emerging markets excluding China led the way, driven by Taiwan, South Korea, and the semiconductor sector. The United States recovered its March losses thanks to the major technology companies. Europe and Japan advanced more gradually. China was the only major market to end the period below its September level.​

The key point lies elsewhere: corporate earnings have grown faster than stock markets have risen. As a result, parts of the market have actually become cheaper despite the broad-based increase in share prices.​

In the United States, productivity gains continue to accelerate, but government debt is imposing its own discipline. Annual interest payments on federal debt now exceed $1 trillion.​

ARTIFICIAL INTELLIGENCE IS ENTERING A NEW PHASE​

Anthropic, the company behind the Claude artificial intelligence model, has recently raised capital at a valuation of $965 billion. The company is only five years old.​

Its competitor OpenAI has seen ChatGPT surpass one billion monthly users in less than three years.​

These figures are staggering and help explain the growing impact of artificial intelligence on the earnings of companies across its value chain.​

The comparison with the rise of the Internet is an interesting one. In 1999, companies were selling the promise of the future before generating profits. Today, the difference is that the leading technology companies are already highly profitable. They benefit from strong margins, large customer bases, vast datasets, and unmatched computing power, while financing much of their investment through their own cash flows.

The question of valuation, however, remains.​

To maintain their competitive advantage, these companies are investing enormous sums in chips, data centres, energy infrastructure, and talent. Markets are not only valuing today's profits, but also pricing in nearly flawless execution over many years.​

And that is where the risk begins.​

PRICE REMAINS THE ULTIMATE JUDGE 

In financial markets, even the best stories become dangerous when they attract too much capital.​

Artificial intelligence is real. Semiconductors are essential. Data centres will be indispensable. But even a great story becomes a poor investment if you pay too much for it.​

Isaac Newton famously learned this lesson during the South Sea Bubble. After selling his shares in the South Sea Company, he bought them back for fear of missing out. When the bubble eventually burst and he lost a substantial part of his fortune, he remarked that he could calculate the motions of the heavenly bodies, but not the madness of people.​

At the same time, a cheap company is not necessarily a better investment. Warren Buffett and Charlie Munger abandoned the search for "cigar butts"—mediocre businesses trading at extremely low valuations that may offer one last puff of returns but ultimately disappoint.​

Their lesson is more demanding: buy high-quality companies capable of compounding over time, at prices that still provide a margin of safety.​

Quality at a reasonable price.​

OUR APPROACH​

At TreeTop, this is the discipline we follow: searching for opportunities across the world, combining valuation with quality, and consistently analysing thousands of data points.​

Dell Technologies illustrates this philosophy. It is a high-quality company generating significant cash flows, identified by our investment process at the end of last year. This quarter, it was among our strongest contributors to performance.​

The lesson from this quarter can be summed up in one sentence: fear is expensive, but so is euphoria.​

Those who sold during the tariff shock of April 2025 turned a temporary correction into a permanent loss. Those who fled the energy shock earlier this year missed the subsequent recovery. 

Today, buying the market's most exciting stories at perfection-level valuations creates another risk, more subtle, but just as real.

Our role is to remain invested in progress with discipline, diversification, and a rigorous focus on valuation.​

Artificial intelligence will change the world.​

For investors, however, the fundamental questions remain unchanged: who will capture that value over the long term, and at what price can it reasonably be purchased?