In May, while markets held their breath during negotiations over the US debt ceiling, investors witnessed an historic event: quarterly earnings from generative artificial intelligence giant Nvidia revealed that the adoption of this new technology, which is a game-changer for numerous industries, is massive, global and lightning-fast. By announcing that revenue was more than 50% higher than market consensus, and by hitting a record market cap of USD 200 billion the day earnings were announced, Nvidia sent a powerful signal which had a ripple effect across our entire portfolio.
The fund rose +0.75% in May, compared with –2.40% for its benchmark index. Given the conditions described above, it is hardly surprising that shares with exposure to the rise of AI were the fund’s strongest performers, as seen in semiconductors (ASML). More generally, investors were buying the entire technology sector, including software (Atoss, Dassault Systèmes) and even digital payment systems (Adyen). By contrast, Wolters Kluwer (media) is seen as “at risk” and came under pressure.
With regard to other share declines, investors avoided the luxury sector (Kering, LVMH, L’Oréal) and groups with exposure to China (Zeiss). This was because of the resurgence of Covid cases in China. Industrial groups (Legrand, Schneider and Interpump) continue to profit from upward revisions of consensus estimates.
We have opened a position in Heineken and benefited from the divestment offer of major shareholder FEMSA. The brewing company’s focus on premium branding provides an excellent example of what Pricing Power aims to find.