Magellan is betting on generative artificial intelligence (GenAI) in its flagship $7 billion Magellan Global Fund as it believes “major progressive evolutions” will develop in the space.
In an annual update from managers, Arvid Streimann and Nikki Thomas, the pair said they’re exploring how the growth of GenAI will create addressable markets and earning streams which can accelerate growth.
It is also expectant of industry disruption bringing down barriers to entry and creating cost advantages, despite any fears of bubble-like valuations developing.
“There have been comparisons of the upsurge in AI use as being like the late 1990s when the internet first became publicly available. Those comparisons are also extending to markets, with some seeing the potential for a 1999-style rally, which may imply that some parts of the market may move to bubble-like valuations over the next year or two.
“There is a period of heightened innovation ahead and while markets can, in the short term, overplay the excitement of new opportunities, we believe we are entering a period of extraordinary progress that will have lasting impacts on the world we live in, and we must be open-minded and curious as it plays out.
“We are confident some of our portfolio holdings are well positioned as enablers of the new AI era, with clear commercial applications.”
The fund’s largest holding is Microsoft at 6 per cent as of 30 June, and the managers said the technology company is proactively building commercial opportunities. The GenAI opportunity for Microsoft has already helped the mega technology firm to reverse poor financial results seen in the H2 2022.
Other top holdings that play into the GenAI trend include Amazon (5.5 per cent), which runs an AI Amazon Web Services division; semiconductor company ASML (4 per cent), which produces chips for firms such as Intel and NVIDIA; and Intuit (4 per cent), which introduced a GenAI operating system in June 2023.
They concluded: “The innovation in artificial intelligence is providing many new opportunities for companies, as well as disruption risks that always result from major progressive evolutions.”
The Magellan Global Fund has returned 20.6 per cent over one year to 30 June versus returns of 22.4 per cent by the MSCI World Index.
