Q2 2025 Overview

The second quarter of 2025 was defined by a single macro fact: the Federal Reserve was not going to cut rates anytime soon. After two quarters of market participants pricing in imminent easing, the Fed's messaging through April and May made clear that inflation's last mile was proving sticky enough to justify an extended pause. For much of the market, this was disappointing. For GZC, it was a signal to reexamine our interest-rate-sensitive exposures and double down on the names where the investment thesis operates independent of the rate cycle.

Positioning Adjustments: What We Trimmed

Going into Q2, we held modest exposure to a small number of names where valuation had become dependent on a lower discount rate environment. These were not our core infrastructure bottleneck holdings — they were positions built on cyclical recovery assumptions that required the Fed's cooperation. As it became clear that cooperation was not coming in 2025's first half, we methodically reduced those positions.

The trims were not expressions of bearishness on the underlying businesses. They were exercises in portfolio discipline: when the thesis requires a macro tailwind that has stalled, position sizing should reflect that. We rotated those proceeds into names where the thesis rests on structural demand — procurement commitments already signed, supply chain relationships already locked in, and multi-year upgrade cycles that no interest rate decision can reverse.

Semiconductor Demand Durability: The Thesis Holds

One of the core convictions entering 2025 was that semiconductor infrastructure demand — particularly in HBM memory, advanced packaging, and power delivery — would prove durable regardless of Fed policy. Q2 validated this view. Hyperscaler capex commentary across earnings season was uniformly strong. Microsoft, Google, and Amazon all raised or maintained elevated infrastructure spend guidance despite the higher-for-longer rate environment.

This matters because it confirms the structural nature of the demand cycle. Data centers are not being built on speculation. They are being built on signed customer contracts, booked GPU orders, and commitments made to enterprise customers months in advance. The companies we own that sit in the physical infrastructure layer of this buildout — power delivery, thermal management, high-speed interconnect — are executing into that locked demand. Rate sensitivity is minimal when your backlog is measured in years.

Power Infrastructure: Gaining Conviction

If Q1 was about semiconductors, Q2 was increasingly about power. The conversation in our research process shifted meaningfully toward grid infrastructure as it became clearer that the pace of data center buildout was beginning to create real constraints at the transmission and distribution level. Transformer lead times, which we had been tracking as a secondary indicator, became a primary investment signal.

We added incrementally to one power infrastructure name during the quarter and initiated a monitoring position in a switchgear-adjacent company. Neither of these is a bet on rate cuts. Both are bets on the physical reality that you cannot build 100-megawatt data centers without the grid infrastructure to power them — and that infrastructure is currently 2 to 4 years behind the demand curve.

Mid-Year Portfolio Pulse

At the halfway mark of 2025, the portfolio reflects the following posture:

• Core equities pool: Weighted heavily toward semiconductor infrastructure and power delivery. Concentration in 8 to 12 names with high conviction and multi-year demand visibility.
• Commodities pool: Quiet quarter. Held existing energy positions with no major adds or trims. Gold and silver exposure maintained as macro insurance.
• Cash: Modest cash position maintained — not as a market timing call, but as dry powder for names on our watch list that have not yet entered our technical entry range.

Outlook for H2 2025

Our base case for the second half is continued strength in infrastructure-oriented technology names and a potential catalyst for commodity exposure if geopolitical dynamics escalate. We are watching three specific situations closely: the power transformer supply chain, HBM memory pricing dynamics heading into 2026 budget cycles, and oil and gas capital expenditure decisions from major producers as OPEC+ navigates a complex supply management challenge.

We remain concentrated. We remain patient. The names we own have not needed a Fed pivot to generate returns — and that is precisely the kind of portfolio we set out to build.

As always, we are grateful for your trust and partnership. Detailed performance documentation is available upon request through our standard due diligence process.

— Ahijah Ireland, Founder & CIO, Green Zone Capital