- Tom Slater highlights ‘sustainability of current capital equipment spending’
- Scottish Mortgage chair outlines plans to tackle stubborn discount
Tom Slater: ‘The primary challenge hindering large-scale AI adoption remains the high cost’
Scottish Mortgage has revealed a shake-up of its artificial intelligence exposure, with the trust trimming its stake in a chip manufacturing behemoth after a remarkable run of share price growth.
Tom Slater of Baillie Gifford, the £14billion trust’s manager, told shareholders on Friday his team had narrowed its focus on the ‘high costs’ associated with adopting AI technology.
On this basis Scottish Mortgage reduced its exposure to Nvidia, the leading designer of semiconductors for AI, in the first half of its financial year.
Slater said: ‘Companies must find ways to offer competitively priced AI systems while managing the skyrocketing costs of training them.
‘This raises concerns about the sustainability of current capital equipment spending, including Nvidia chips.’
It is not clear when Scottish Mortgage sold the Nvidia shares, which soared more than 200 per cent in 2024 as profits have skyrocketed.
But Nvidia remains Scottish Mortgage’s top holding, representing 6.8 per cent of the portfolio, according to Association of Investment Companies data.
Slater said: ‘Our investment in the AI ecosystem is not limited to Nvidia. We’ve increased our exposure to Meta Platforms, the parent company of Facebook, Instagram, and WhatsApp.
‘AI will improve Meta’s products and its business model provides many options for funding the necessary computing capacity. Its leadership team has a strong track record of successfully integrating technology innovations, giving us confidence in their strategy moving forward.’
It came as Scottish Mortgage updated investors on its first-half performance.
The trust’s shares have added 33.4 per cent over the past year as its net asset value total return has climbed 24.7 per cent.
Its benchmark index – the FTSE All-World – has added 29.2 per cent over the same period.
Slator highlighted the ‘remarkable progress’ of SpaceX as a key positive contributing factor to performance in the six months to 30 September.
Meanwhile ‘underperforming’ drug developer Moderna and European battery manufacturer Northolt, which has struggled with production delays, have weighed on gains.
Like many London-listed investment trusts, Scottish Mortgage continues to trade at a stubborn discount of 9.6 per cent.
The company’s chair Justin Dowley said the board had been engaging with ‘several’ important shareholders on potential efforts to tackle the discount.
He said: ‘Some advocate for increased buyback activity, whilst others feel capital is best deployed into long-term investments.
‘Balance is required. We take a pragmatic approach in making capital allocation calls between buying back shares and other uses of capital such as making new investments and reducing debt.
‘Together, the Board and the Managers remain committed to the continuation of the buyback.’
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