Manning & Napier (MN) investor relations material

Macro and market environment

• US economic resilience is driven by high-end consumption and robust nonresidential fixed investment, especially in AI-related sectors.

• Inflation remains above the Fed's 2% target, with rising pressures in both goods and services.

• The Fed has shifted focus toward labor market softness, prompting rate cuts despite resilient headline growth.

• Market bifurcation is evident, with AI-linked equities showing exuberant returns and high retail participation.

AI value chain and investment approach

• The AI value chain is divided into application providers, model developers, data center operators, and foundational infrastructure/components.

• Data center buildouts are massive, with spending split roughly 40% on infrastructure and 60% on components, mainly chips.

• Investment focus is on companies with pricing power and less cyclicality, such as NVIDIA, TSM, and Cadence Design, while being cautious of overexposed or capital-intensive infrastructure plays.

• Hyperscalers (Amazon, Google, Microsoft, Meta) dominate CapEx spending, funding growth mainly through internal cash flows, while neo clouds rely on debt and vendor financing.

Risks and sustainability

• Neo cloud providers face high risk due to customer concentration, heavy debt, and uncertain payback periods, making their business models fragile.

• The current investment cycle is increasingly debt-fueled, raising concerns about overinvestment and potential bubbles.

• Most model providers are private, but public exposure is possible via companies like Oracle, Microsoft, Google, and Meta.