Why Scottish Mortgage has reduced its stake in Nvidia

Scottish mortgage has revealed a shake-up in artificial intelligence exposure, with the trust cutting its stake in a chipmaker after a remarkable run of share price gains.

Baillie Gifford’s Tom Slater, the manager of the £14 billion trust, told shareholders on Friday that 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 AI semiconductor designer, in the first half of the 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 spending on capital equipment, including Nvidia chips.”

It is not clear when Scottish Mortgage sold Nvidia shares, which rose more than 200 percent in 2024 as profits soared.

But Nvidia remains Scottish Mortgage’s top holding, accounting for 6.8 percent of the portfolio, according to data from the Association of Investment Companies.

Slater said: “Our investment in the AI ​​ecosystem is not limited to Nvidia. We have increased our awareness of Meta Platforms, the parent company of Facebook, Instagram and WhatsApp.

‘AI will improve Meta’s products and its business model offers many opportunities to finance the necessary computing capacity. The leadership team has a strong track record of successfully integrating technological innovations, which gives us confidence in their future strategy.”

It came as Scottish Mortgage updated investors on its first half results.

The trust’s shares are up 33.4 percent in the past year, while total returns on net asset value are up 24.7 percent.

The benchmark index – the FTSE All-World – is up 29.2 percent over the same period.

Slator highlighted SpaceX’s “remarkable progress” as a major positive factor contributing to its performance in the six months to September 30.

Meanwhile, “underperforming” drug developer Moderna and European battery maker Northolt, which has suffered production delays, have hit earnings.

Like many London-listed investment funds, Scottish Mortgage continues to trade at a persistent discount of 9.6 per cent.

The company’s chairman, Justin Dowley, said the board has spoken with “several” key shareholders about possible efforts to address the discount.

He said: ‘Some are calling for more buybacks, while others believe capital is best deployed for long-term investments.

‘Balance is required. We take a pragmatic approach to making capital allocation choices between share repurchases and other uses of capital, such as making new investments and reducing debt.

“Together, the board and managers remain committed to continuing the buyback.”