“I can calculate the motions of heavenly bodies, but not the madness of people.” – Sir Isaac Newton
A new company recently went public. Its extensive dealings with the government and promises to capture markets in entire new worlds have electrified the populace. Its shares are the talk of the town, immediately shooting to prominence with one of the largest market capitalizations in the world despite generating no profits at all. Meanwhile, the government is at war, and its finances are stretched with debt-to-GDP having surged past 100%. SpaceX in the summer of 2026? You could be forgiven for thinking so, but the company we are describing is the South Sea Company, which went public in Britain in 1711.
The South Sea Company eventually ended up trading its shares for British debt in a convoluted government refinancing scheme in 1720 that ended in tears for everyone involved except the British Crown. Furthermore, its promised monopoly on trade in the “New World” of South America never came to pass as the Spanish had other ideas. Like the South Sea Company before it, SpaceX is already leveraging its highly inflated shares in impressive feats of financial engineering, announcing an all-stock deal to acquire Cursor, an AI software company, for $60 billion in stock just two days after its initial public offering, marking one of the largest software acquisitions in history.
SpaceX has undoubtedly built a successful rocket and satellite business with a lot of money from NASA. But for its two-trillion-dollar valuation to be justified, it must succeed in its stated mission “…to extend the light of consciousness to the stars.” While Elon Musk is indisputably a visionary businessman, he has failed at certain much easier tasks. Back here on Earth, he promised Tesla shareholders full self-driving robotaxis by 2018; eight years later, we are still waiting. We would not be surprised if the promised data centers in space or colonies on the Moon and Mars miss the mark by a decade or more. Needless to say, we’d avoid SpaceX shares for any reason other than entertainment value or owning a piece of a company that is likely to go down in history for its sheer audacity if nothing else. We view the shares as extremely speculative.
SpaceX isn’t the only company tapping the capital markets this summer. Google-parent Alphabet has raised $80 billion in equity and $32 billion in debt to finance their AI build-out, while Amazon and Meta have together borrowed over $100 billion in debt. This massive influx of capital puts pressure on Anthropic and OpenAI to go public, so they too can fund the enormous amounts required to compete in the leading-edge proprietary AI model market. Should both Anthropic and OpenAI make it public before the IPO window closes, the AI capital expenditure boom should have further room to run. All told, AI capex may approach $750 billion in 2026 and could top $1 trillion in 2027 if the capital markets remain open.
Eventually, however, we need to see businesses deploy AI in their everyday operations and reap great productivity benefits to justify this historic investment cycle. We feel confident that this adoption will happen, but it may not match the torrid timeline investors are expecting. We all knew the internet was “the future” as early as the mid-1990s, yet, by 1996 only 16% of the US population was using it. At the peak of the dot-com bubble in 2000, adoption sat at just 43%. It took until 2020 for internet usage to reach 90%. The real fortunes were made on that last 50% of the adoption curve.
We would not be at all surprised to see a temporary setback in AI enthusiasm at some point within the next couple of years. Even a small period of digestion might result in a big change in growth expectations and stock prices. During the dot-com era, following a decade of annual double-digit IT spending growth, a single 15% contraction in 2001 gutted tech stocks for years, even though growth resumed the following year. Conversely, plenty of companies outside of the technology sector – like consumer discretionary and basic materials – performed fine because they were both cheap and profitable.
We see a similar setup today. AI is the topic of the day, all that matters to the pundits, and every corporate earnings call is about how AI is impacting business. Those companies perceived to be AI bottlenecks, whether memory chips or power suppliers, are currently being bid up to extreme valuations. But chokepoints are temporary. Memory suppliers are already committing hundreds of billions to expand capacity. Ultimate value is created not in temporary shortages, but in using new technology productively over the long term. We believe that will be a much longer, and more profitable, journey.
In our opinion, most enterprises are going to need help making the transition from their old business models to new processes where AI is deeply embedded. And there is no company in the world that we believe is better positioned to help them with this pivot than Accenture, so we bought you some this quarter as the stock sits at multi-year lows.
Accenture has been successfully helping companies implement technological changes for decades. With the advent of cloud-based software, people feared that some of Accenture’s traditional workload would be lost as these platforms drove greater efficiency. Instead, Accenture generated substantial revenue helping companies deploy these new software solutions. AI is likely to follow a similar path. We expect organizations will use AI for entirely new capabilities, turning to Accenture, as they have historically, to navigate the execution and implementation.
Fears over AI automating away the need for consultants have compressed Accenture’s valuation to a very attractive 9x earnings and 15% free cash flow yield. With a dividend yield over 5%, we get paid to wait. If our thesis is correct and AI creates a large wave of implementation opportunities, the shares should do extremely well. While we don’t know if current levels are the ultimate bottom, we believe Accenture will deliver compounding returns in the coming years as it drives corporate clients up the AI adoption curve.
As we celebrate 250 years of this grand experiment we call the United States of America, we’ve been delighted to see so many visitors from abroad come to Dallas during the World Cup to appreciate the great things that our capitalist system has provided.
Only in America can someone like Arch “Beaver” Aplin build a privately-owned iconic truck stop with 100 gas pumps, spotless bathrooms, Texas brisket, and fresh fudge. The people have voted with their recurring interstate fill-ups, and now global soccer tourists are visiting Buc-ee’s many locations by the busload to appreciate American culture, buy ranch dressing to bring home, and enjoy the air conditioning on a hot Texas day.
There are plenty of things to worry about with wars, a troubled US fiscal situation, and another contentious election fast approaching in November. However, we hope you and yours have an opportunity to enjoy our wonderful home as much as the crazy soccer fans have this summer. Thanks for the continued trust you place in our team. And go USA!
Penn Davis McFarland, Inc.
July 2026
