Eagle Capital Management, an investment management company, released its second quarter 2026 investor letter. A copy of the letter can be downloaded here. In the quarter, Eagle Capital Management discussed how enthusiasm around AI capital spending has driven strong S&P 500 earnings growth while also increasing risks from elevated valuations, concentrated demand, and aggressive investment assumptions. Eagle remains a strong believer in AI but prefers constructing a portfolio that can perform across multiple outcomes rather than relying on one forecast. The firm believes current earnings can overstate underlying economics because semiconductor equipment is depreciated over several years, while free cash flow growth remains much weaker. It also expects competition and additional capacity across AI labs, hyperscalers, and semiconductors to eventually create winners and losers. These dynamics are encouraging Eagle to recycle capital toward attractive opportunities outside the most crowded AI trades while maintaining selective exposure to high quality beneficiaries. The portfolio trades at a 20% market discount with faster expected EPS growth. Please review the Strategy’s top five holdings for key selections.
In its second-quarter 2026 investor letter, Eagle Capital Management highlighted Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM). Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures, packages, tests, and sells integrated circuits and other semiconductor devices in Taiwan and internationally. On August 18, 2026, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) closed at $413.41 per share. The one-month return of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was -0.99% and its shares gained 82.43% over the past 52 weeks. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) has a market capitalization of $1.95 trillion.
Eagle Capital Management stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q2 2026 investor letter:
“Half of our capital here is invested in Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and ASML, two of the most dominant businesses in the semiconductor supply chain. The other half is invested across the three major hyperscalers. We ascribe a portion of the value of each of these three companies to their cloud business and the balance to the remainder of the company; i.e., 60% of the value of Amazon is from AWS and 40% is from retail.
TSMC and ASML are two of the best businesses in the semiconductor industry. TSMC is the world’s fab, where most leading-edge logic chips, ranging from Apple to NVIDIA, are made. Both companies are well positioned over the next 5-10 years to participate in the sector’s secular growth while maintaining their competitive positions. That said, they will face pressures when the next downturn comes.
As previously discussed, we think the hyperscalers have wide competitive advantages over neoclouds. Earnings have accelerated as the companies have significantly increased data center capex. Our central case is that they will provide control-plane solutions that let customers choose among Al models and capabilities, and that Al will diffuse broadly enough to mitigate, but not eliminate, customer concentration risk with Anthropic and OpenAl. Returns on capital should still be attractive, albeit not as high as before. Earnings growth and earnings should be much higher in the coming years given the magnitude of the investment and opportunity. We expect EPS growth of 15-20% over the next several years.”
