Most stock risk is tied up with the large capex spenders, says KAR's Julie Biel

Investment Strategy & Focus - Kayne Anderson Rudnick sees customer concentration risk in companies heavily reliant on CapEx spending by a few major players, questioning the return on investment [2][3] - The firm favors small-cap software companies already using generative AI in their operations, viewing AI as a leveler enabling smaller businesses to compete with larger ones [4] - The firm highlights profitable, niche small-cap software businesses that haven't benefited from the high beta rally [5] Specific Company Examples - Descartes is mentioned as a company with a real information advantage, handling approximately two-thirds of shipped packages through its network [5] - Encino is enabling small banks to compete with larger banks and has continued to grow despite a tough mortgage market [6] AI Market Perspective - There are concerns about a potential bubble inflating in the AI sector, with possible overinvestment and challenges in recouping investments [7][10] - The AI transformation is considered existential and impactful for the next decade, but not necessarily linear, drawing parallels to the aviation industry where returns took decades [8][9][10] Market Outlook - Expectations are optimistic heading into Q3 earnings season [11] - Companies have demonstrated an ability to manage uncertainty, particularly in supply chains, due to lessons learned during the pandemic and tariff implementations [12] - Companies are currently shouldering the burden of tariffs, with the potential for these costs to shift to consumers in the coming quarters [13]