Atoms Meeting Intelligence: Mid-Year Update 2026

 To our Families, Clients and Friends:

Summer is here, Richmond is smoking hot under Canadian wildfire haze, and the markets are behaving roughly as we anticipated at the start of the year. Our January letter warned of a bumpy first half with a possible 10%+ correction, then in March we called Higher for Longer as Middle East disruptions ripped through the energy complex. We spent the spring positioned defensively with elevated cash, then rapidly deployed that cash into public and private investments as markets recovered following our thesis of the Exponential Age.

In early 2024, we borrowing this term from Raoul Pal of GMI to describe the macro shift into AI, robotics, quantum computing, genetics and biotech, energy abundance, and space exploration and exploitation. Two and a half years later, this thesis is accelerating. Confirmation came at CAZ Investments' January Themes event in Houston, and were further reinforced this quarter by David Friedberg's When Atoms and Intelligence Collide piece on The Exponentialist. In sum, intelligence is no longer just software — it is being poured into physical systems, and returns are compounding.

1H 2026

The first half of 2026 was defined by a massive "megadeal" M&A recovery, record-shattering AI-related public listings, and profound geopolitical shocks that triggered significant market volatility including:

1.     The War in Iran. Military escalation in the Middle East sparked a severe "risk-off" market reaction. Escalating tensions and temporary shipping blockades through the Strait of Hormuz caused crude oil prices to spike dramatically, briefly nearing $120 a barrel and reigniting global headline inflation fears.

2.     SpaceX IPO. The tech IPO runway exploded in 1H 2026, highlighted by a staggering $1.7 trillion public listing for SpaceX. Shortly thereafter, SPCX acquired sister AI venture xAI at a revised valuation of $250 billion. This monumental deal solidified the extreme valuation premium placed on frontier artificial intelligence models and heavily distorted private tech exit metrics. 

3.     Warsh Succeeds Powell at Federal Reserve. This highly anticipated leadership change at the US central bank took place in May 2026. Markets closely watched the transition for signs of central bank independence and shifts in handling sticky inflation. 

As a firm we did well navigating the big events of the year. We leaned into energy generation, rode the SpaceX IPO into a 10x+ return on our private investment several years ago, and maintained a reduced allocation to fixed income believing inflation is moderating and a Warsh-led Fed would not raise rates.

Compute Meets the Physical

Looking into the second half of 2026 and beyond, we find SpaceX front and center in the framework, of artificial intelligence having an impact beyond organizing and making available all of humanity’s information (think Google search gathered together by ChatGPT) to make real world companies and products more effective via three layers:

»      Foundation — chips, data centers, cooling, and the energy to power them.

»      Productivity — robots, humanoids, world models, and autonomous systems that supercharge legacy physical businesses (logistics, agriculture, manufacturing, distribution).

»      Knowledge Frontier —AI-driven drug discovery, materials science, and genetics.

Each layer feeds the next in a virtuous cycle or flywheel. More robots generate embodied data leading to better world models leading to faster scientific discovery leading to improved foundation tech. Indeed, economic data increasing shows that the physical is now interfacing with and being improved by intelligence, which may disprove the "AI kills everything" narrative that has flared up on social and legacy media.

Public tells are everywhere:  Amazon's fulfillment automation and humanoid robot trials; Walmart's ~20% unit-cost reductions from distribution-center robotics; John Deere's autonomous tractors and farm digital twins. "Old-economy" businesses are becoming tech-enabled platforms with proprietary data advantages. This dovetails with the HALO (Heavy Asset, Low Obsolescence) framing we discussed in March: real assets and essential services, now supercharged by AI.

Our access to much of these markets comes via our favorite early stage managers, Friends & Family Capital and Switch Ventures.

Realizing the Exponential Age

This intelligence-atoms collision, the Compute Cycle, and space/defense are three legs of the Exponential Age, but they are not the whole theme.

1.     Genetics, biotech and longevity — AI-driven drug discovery is finally producing real molecules, not just vaporware PowerPoint presentations. We access this mainly through early stage investments in Revelation Partners and Genoa Ventures.

2.     Quantum computing — still early, still speculative, but the last twelve months have moved it from "science fair" to "capex line item" at the hyperscalers. We are investing in broad based tech funds as well as Amazon, Tesla/xAI and others in the space.

3.     Fusion and advanced nuclear —AI and the re-industrialization of America are power-demand stores. We need more electrons than ever from conventional, non-conventional and eco-friendly sources, aka all of the above. Consequently, we continue to add to our positions in the CAZ Investments Energy Evolution Fund, a variety of other private ventures, and public energy and utility equities.

4.     Materials science — new alloys, batteries, and rare-earth substitutes coming out of AI-designed labs. This is another Knowledge Frontier bucket we are tracking with initial allocations to funds such as Energy Innovation Capital.

5.     Digital assets — we fully exited crypto in January and stayed out through the Spring drawdown. Crypto remains a high-beta proxy for global liquidity, but we expect a continued bear market. Our long term investment in Pantera Capital’s Blockchain Fund provides visibility and access.

6.     Demographics — aging workforces in the developed world and China mean productivity gains are no longer coming from increasing populations, hence we look to AI and robotics to fill the gaps. Tesla’s Optimus and Apptronik’s Apollo platforms are major players here.

Space and Defense

The intelligence-atoms collision now extends off-planet, and this is one of our highest-conviction long-duration themes. Planet Labs' daily Earth imaging and Whole Earth World Model exemplify the simulation and data advantages flowing to agriculture, defense, insurance, and logistics. The Elon integrated stack — Tesla, Optimus data, Starlink, Starship, Boring Company — remains the ultimate expression of the collision, and our SpaceX and Astranis allocations continue to look promising. On the defense side, our investments in innovation-fund managers aligns squarely with national security priorities as well as commercialization of LEO, cislunar and GEO.

Other Opportunities

In addition to our investments in AI / Tech, energy, space and defense, we continue to look to other opportunities in public and private markets. We are adding to our position at CAZ for general partnership interests in 62 private asset management firms. We continue to invest in asset-backed, real estate and middle market private company credit funds and co-investment opportunities with Feenix Venture Partners, RRA Capital, Revere Capital and Star Mountain Capital. And we continue to tiptoe around real estate with Acre Homes and 2GR Equity for home ownership and commercial opportunities.

What We Are Watching

»      CPI and inflation prints — a benign July report keeps the Fed on its dovish, or at least unchanging, glide path.

»      Chinese demand and Hormuz normalization — energy remains the swing variable.

»      The seasonal summer swoon — historically due, and we will treat any 5–10% dislocation as an entry, not an exit.

»      The 2027 setup — a housing-led rebound catalyzed by lower rates could power a meaningful equity rally from late 2026 into 2027. Stagflation remains the risk case.

As always, our focus remains on compounding long-term value through thoughtful allocation, disciplined portfolio construction, and opportunistic deployment amid volatility. The Exponential Age is not a quarter or a year — it is a decade-plus regime, and we intend to be positioned for the whole ride.

We look forward to seeing many of you over the Summer. Please reach out with any questions or concerns.

Warmest regards from Smokin’ Hot Richmond,

Jeff & Biff

July 17, 2026

CrossGrain Family Investments, LLC (CrossGrainFI) is a federally-Registered Investment Adviser. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned. We may, from time to time, have a position in the securities mentioned and may execute transactions that may not be consistent with this communication's conclusions. Please contact us at (804) 217-2561 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions. Additionally, we recommend you compare any account reports from CrossGrainFI with the account statements from your Custodian. Please notify us if you do not receive statements from your Custodian on at least a quarterly basis. Our current disclosure brochure, Form ADV Part 2, is available for your review upon request, and on the SEC website, https://adviserinfo.sec.gov. This disclosure brochure, or a summary of material changes made, is also provided to our clients on an annual basis.