Ask the Manager: Jacob Hemmer on Discipline in an AI-Driven Market

Artificial intelligence dominates earnings calls, index leadership is concentrated, and capital spending is accelerating at historic levels. Yet history suggests that innovation cycles are rarely linear. We spoke with Jacob about how he’s navigating today’s AI-driven environment, and why discipline may matter more than narrative.

We’re in the middle of earnings season and it feels like nearly every management team is emphasizing AI investment or disruption. At the same time, we’re seeing sharp post-earnings moves, even when results look solid. How are you thinking about that?

It’s a fascinating moment. The surge in AI commentary isn’t surprising as management teams want to demonstrate alignment with structural change. But markets aren’t rewarding participation. They’re rewarding proof.

What we’re seeing in these sharp post-earnings reactions is extreme sensitivity to incremental information. A company can report strong numbers, but if forward expectations don’t move higher, the stock sells off. That tells you something important: expectations were already ambitious.

We’ve seen versions of this before. In the late 1990s, every company had an internet strategy. In the early 2010s, cloud infrastructure dominated calls. In prior capital spending cycles, expansion plans drove enthusiasm.

The pattern tends to repeat: early capital deployment excites markets. Later, returns on that capital determine outcomes.

In the short term, markets vote. In the long term, they weigh. What’s easy to forget is how long the voting phase can last — and how abrupt the weighing phase can feel when it arrives.

You mentioned expectations getting embedded in prices. Another dynamic investors are aware of is how interconnected many of the AI leaders are. Why does that matter right now?

The interconnection itself isn’t new. What’s changed is the scale and capital intensity.

When capital deployment accelerates within an ecosystem, interdependence increases. If one participant adjusts spending or demand assumptions, others feel it — sometimes quickly.

That doesn’t predict decline. It explains volatility.

History provides perspective. During the early 2000s telecom buildout, infrastructure providers were tightly linked to one another’s expansion plans. When expectations recalibrated, volatility rose even though long-term technological progress continued.

The lesson isn’t that innovation fails. It’s that interconnection amplifies outcomes as capital cycles mature.

As dominant themes mature and volatility increases, we’ve also seen quieter participation from other parts of the market. You’ve suggested opportunities may lie outside the spotlight. Where does that show up today?

When capital crowds into a dominant narrative, it often leaves other areas less examined — and sometimes less demanding.

Over time, returns come down to two variables: earnings growth and the multiple you pay. When expectations are elevated, growth has to exceed already high assumptions. That’s a difficult hurdle.

In many mid-cap businesses — industrial firms, housing-linked companies, transportation names — the expectations embedded in price can be more measured.

This isn’t a short-term call about immediate outperformance. It’s about structural resilience. Diversified earnings drivers reduce dependence on a single theme continuing uninterrupted.

Frankly, investing directly in the dominant trend is often the hardest way to generate excess returns. Everyone is studying the same companies, building the same models, reacting to the same headlines. That’s where the emotional pull is strongest — and so is the competition.

How does your philosophy help you stay disciplined when markets feel this urgent?

Our foundation is straightforward: durable businesses, strong balance sheets, rational capital allocation, and prices that don’t require perfection. There’s an old Buffett line that investing is a no-called-strike game. You don’t have to swing at every pitch — even when the crowd is urging you to. In fact, sometimes waiting is the edge.

Being based in Salina, Kansas probably helps more than people realize. We’re not immersed in daily market noise. That distance allows us to step back and ask:

What are the economics of this business? What assumptions are we underwriting? What does the weighing machine say?

The market’s job is to create urgency. Our job is to remain steady. Over time, valuation still determines return.