Stand: 30.07.2025
Investment environment Information technology (IT) stocks extended a second quarter rally in July as investors welcomed signs of ongoing industry investments on artificial intelligence (AI). The rally in technology stocks was underpinned by strong corporate results from some of the Magnificent Seven large-cap technology stocks. Investors also welcomed easing US restrictions on technology exports, which gave US technology companies renewed access to markets such as China. Within the technology sector, electronic components makers were notable positive performers, along with companies that provide services support for electronics manufacturing. Shares of IT consulting and semiconductor materials companies lagged the broader technology sector. Portfolio review We were pleased to see renewed investor confidence in the earnings outlook for many technology companies, driven by ongoing innovations and investments in AI. Investors were reassured to see continued strong capital investment trends by large technology companies, while robust earnings growth highlighted that these companies may be starting to reap benefits from this investment. However, as is the case with any innovation cycle, we recognise that we may see continued volatility as investors seek clarity on the path to monetisation, as well as assurances that spending on AI will not overshoot demand. Positive indications around AI-related capital spending provided a tailwind for NVIDIA s share price performance. NVIDIA is a leading global supplier of data centre graphics processing units (GPUs) used in generative AI. The company has demonstrated exceptional growth, supported by surging adoption of its Blackwell next-generation GPUs and rising demand for its Spectrum-X Ethernet and NVLink networking products. Sentiment toward the stock increased further after the US government lifted restrictions on the export of GPUs into China. The fund holds an underweight position in NVIDIA, which is a stock that receives a very large weighting in the technology benchmark. This underweight position proved to be a detractor from relative fund performance. Relative performance was also hindered by a position in MercadoLibre, a stock not included in the technology benchmark. MercadoLibre is a leading online retailer and financial technology company gaining market share in Latin America, where e-commerce penetration is low relative to other geographic markets. Its share price fell in July as competitive pressures led MercadoLibre to reduce the order amount that qualifies for free shipping within Brazil. While this move was designed to strengthen its competitive positioning relative to other e-commerce companies, investors worried about the near-term impact on gross margins and earnings. Relative positive contributors included overweight positions in two of the dominant developers of electronic design automation (EDA) software, which helps companies design semiconductors and electronic systems. Such design software has become increasingly important as semiconductors have grown more complex, especially with the expansion of AI. These stocks received increased attention from investors after the US government eased controls on the sale of EDA solutions to Chinese customers. Cadence Design Systems reported strong second quarter top- and bottom-line results. It raised its full-year 2025 guidance (forecasts), as its management highlighted robust AI-driven demand, exceptional bookings strength, and impressive margin execution. Synopsys also delivered solid financial performance, as its AI tools have seen steady adoption and increased pricing power. It received regulatory clearance to complete its acquisition of Ansys, a deal that the company hopes will provide a strong competitive footing in silicon-to-systems design solutions.