Cooper Investors Global Endowment

Markets rallied following the de-escalation of the Iran war and the increasingly rapid development of AI. For the June quarter, the main driver of the lag versus the benchmark return was the market being powered by semiconductor and AI-related exposures. The below chart from Apollo shows the calendar year-to-date performance of the S&P 500 being entirely driven by AI and energy.

The Fund’s largest holding is TSMC (6% of portfolio), which was up 37% in local currency during the quarter. So too, several holdings with direct or indirect AI exposures also benefitted, including Investor AB (INVE.B), from the strong performance of its holdings in ABB and Atlas Copco (ATCO), and Aker ASA (AKER), whose investment in AI cloud provider Nscale contributed positively.

This paled in comparison to the semiconductor index, however, which, as seen by the SOXX, was up 95% for the quarter. Micron Technology (MU) is now a $1.4trn company having risen 214% in the quarter. In fact, many component companies exposed to this thematic have seen their shares bid up to lofty multiples.

We maintain the large TSMC position as it is well placed in an uncertain world, given the business is tied to semiconductor production, as opposed to the capex cycle. In addition, its competitive position is strong and it is difficult to see TSMC being challenged anytime soon, while the large chip providers are in increasingly competitive environments with their hyperscale customers trying to do more and more themselves.