| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 7.7% | 29.1% | 22.5% |
Sands Capital Emerging Markets Growth delivered its second-best quarter of absolute investment results on record, returning 29.1% net in Q2 2026, driven primarily by AI infrastructure businesses including SK hynix, Samsung Electronics, and Taiwan Semiconductor. The memory shortage broadened beyond high-bandwidth memory into conventional DRAM and NAND, with sequential price increases of 60-90% as AI inference and agentic workloads increase demand across the memory stack. Management views the supply-demand imbalance as structural and multiyear, with meaningful capacity additions difficult before H2 2027. The portfolio continued to broaden semiconductor exposure, adding Chroma ATE, Hyosung Heavy Industries, Montage Technology, and SK Square, while also tactically adding to cyclically oriented Indian businesses given improving valuations and macroeconomic resilience. China internet stocks lagged as investors rotated into AI infrastructure, though Alibaba's cloud revenue growth accelerated to 38% year-over-year. Despite the strong quarter, the portfolio ended trading at 13 times forward earnings, one of its lowest absolute valuation levels and lowest premiums to the MSCI EM. Management believes the portfolio's high earnings growth expectations combined with historically low valuations create an attractive setup for multiyear investors.
Sands Capital Emerging Markets Growth seeks to selectively own premier emerging market growth businesses benefiting from and driving secular change, including digitalization, industry consolidation and formalization, and life sciences innovation, with a concentrated portfolio of 44 businesses trading at 13 times forward earnings despite delivering nearly 30% returns in Q2 2026 driven primarily by earnings growth.
The opportunity set for growth investors is shifting, and the portfolio is positioned to go where management believes the growth will be. Technology and geopolitics are creating new business spaces and sources of durable earnings growth, but also new risks. AI infrastructure remains important, but these forces are also transforming businesses traditionally viewed as cyclical or capital intensive. Management believes this environment rewards research depth and adaptability, with the long time horizon remaining an advantage while the pace of change requires quicker action when new information alters the facts. The portfolio's high and rising earnings growth expectations, combined with a historically low valuation, are viewed as creating an attractive setup for investors with a multiyear horizon.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 30 2026 | 2026 Q2 | 000660 KS, 002594.SZ, 005930 KS, 0700.HK, 1299 HK, 2308.TW, 2454.TW, 402340 KS, BABA, SE, TSM | AI Infrastructure, China, emerging markets, India, Korea, Memory, semiconductors, Taiwan | - | Emerging Markets Growth returned 29% in Q2 2026, driven by AI infrastructure businesses as memory shortages broadened from HBM into conventional DRAM and NAND. Sequential memory price increases of 60-90% reflect structural, multiyear supply constraints. The portfolio broadened semiconductor exposure and tactically added Indian cyclicals given attractive valuations. Despite strong returns, the portfolio trades at 13x forward earnings with high earnings growth expectations, creating compelling multiyear value. |
| Apr 25 2026 | 2026 Q1 | 000660 KS, 005930 KS, 0700.HK, 300750.SZ, ASML, BAJFINANCE.NS, HDFCBANK.NS, MELI, NU, SE, TSM | AI, Asia, emerging markets, energy, Geopolitical, growth, semiconductors, technology | - | AI infrastructure drove strong gains but e-commerce headwinds and Iran conflict risks caused Q1 underperformance. Portfolio expanded AI exposure through new semiconductor equipment and power solution positions while trimming India and Korea. Valuation at historic lows with 29% expected earnings growth creates attractive five-year setup despite near-term geopolitical volatility. |
| Jan 22 2026 | 2025 Q4 | 000660.KS, 005930.KS, 0700.HK, 1211.HK, 122870.KS, 1299.HK, 1810.HK, 2269.HK, 2454.TW, 300750.SZ, 3690.HK, 4966.TW, 500570.BO, 532978.BO, APHS.NS, ASML, BABA, BBCA.JK, CPNG, DIDI, DNP.WA, FPT.VN, FTA, GLOB, GRAB, HDB, HDFCLIFE.NS, HTHT, ICT.PS, KSPI.L, MELI, NU, PHNX.NS, RADL3.SA, SE, TSM, WEGE3.SA, WMMVY | AI, China, E-Commerce, emerging markets, growth, Memory Chips, semiconductors, technology | - | Emerging Markets Growth delivered strong 21.6% absolute returns in 2025 but lagged benchmarks due to multiple compression in quality holdings. AI-driven semiconductor strength offset ecommerce headwinds from Sea, MercadoLibre, and Coupang. Portfolio positioned for secular digitalization and AI trends with historically attractive valuations and mid-20% expected earnings growth creating compelling long-term opportunity despite near-term performance challenges. |
| Oct 20 2025 | 2025 Q3 | 000660.KS, 005930.KS, 0700.HK, 1211.HK, 1299.HK, 1810.HK, 2020.HK, 300750.SZ, APOLLOHOSP.NS, ASML, BAJFINANCE.NS, BHARTIARTL.NS, COSMAX.KS, CPNG, HDFCBANK.NS, MELI, NU, SE, TSM | AI, China, E-Commerce, emerging markets, Fintech, growth, India, semiconductors | - | Emerging Markets Growth underperformed in Q3 2025 due to reversals in strong first-half performers and country positioning effects. The portfolio added semiconductor exposure through Samsung Electronics and SK hynix while maintaining conviction in AI infrastructure, fintech growth, and China's innovation transition. Despite volatility expectations, the diversified portfolio trades at attractive valuations with improved earnings visibility. |
| Jul 21 2025 | 2025 Q2 | 0700.HK, 1211.HK, 1299.HK, 1810.HK, 2020.HK, 2454.TW, APOLLOHOSP.NS, ASML, BAJFINANCE.NS, BRITANNIA.NS, CPNG, HDFC.NS, HDFCBANK.NS, MELI, NU, RELIANCE.NS, SE, TITAN.NS, TSM, WALMEX.MX | AI, E-Commerce, emerging markets, Fintech, gaming, growth, semiconductors, technology | - | Emerging Markets Growth outperformed in Q2 2025 with 12.9% returns, led by Taiwan Semiconductor's AI-driven growth and strong digital platform performance from MercadoLibre, Sea, and Nu Holdings. The portfolio benefits from secular trends in digitalization and industry consolidation across emerging markets, with improved fundamentals despite expected volatility from AI developments and geopolitical factors. |
| Mar 31 2025 | 2025 Q1 | 0700.HK, 1211.HK, 1299.HK, 2020.HK, 2330.TW, APOLLOHOSP.NS, ASML, BAJFINANCE.NS, BRITANNIA.NS, CPNG, GLOB, GRAB, HDFCBANK.NS, MELI, NU, RELIANCE.NS, SE, WEGE3.SA | AI, China, E-Commerce, emerging markets, growth, India, semiconductors, technology | - | Emerging Markets Growth selectively owns premier growth businesses benefiting from digitalization and industry formalization. Despite growth stock headwinds, the strategy outperformed the EM Growth Index. Key contributors included Bajaj Finance, Sea, and Tencent. The portfolio has narrowed its China underweight while remaining cautious about trade tensions and recession risks from escalating tariffs. |
| Dec 31 2024 | 2024 Q4 | 006400.KS, 0700.HK, 1120.SR, 1179.HK, 1211.HK, 1299.HK, 1398.HK, 2020.HK, 300750.SZ, 6862.HK, APHS.NS, ASIANPAINT.NS, ASML, BABA, BAF.NS, BBCA.JK, BBRI.JK, BRIT.NS, CPNG, DMART.NS, DNP.WA, FPT.VN, GLOB, GRAB, HDB, HDFCLIFE.NS, ICT.PS, KSPI.L, MELI, NU, RADL3.SA, RELIANCE.NS, RENT3.SA, SE, TCS.NS, TSM, TTAN.NS, WEGE3.SA, XP | AI, Banking, China, Electric Vehicles, emerging markets, growth, semiconductors, technology | - | Sands Capital's emerging markets strategy delivered 3.1% returns in 2024 despite Q4 weakness, with portfolio companies showing 147% earnings growth over three years while valuations compressed. The concentrated 43-business portfolio targets digitalization, AI, and energy transition themes across Asia and Latin America, positioning for fundamental-driven recovery as market leadership broadens beyond mega-caps. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIAI infrastructure demand drove the majority of index returns, with semiconductor and hardware businesses accounting for 90% of the MSCI EM rise. The portfolio maintains material exposure to AI infrastructure businesses, including memory chips, foundries, and interconnect solutions. Management views AI-driven demand as creating new business spaces and sources of durable earnings growth, while also raising questions about competition and margins in software and internet segments. |
Infrastructure Data Centers Semiconductors Memory Accelerators |
SemiconductorsThe portfolio significantly increased semiconductor exposure during the quarter, focusing on memory, foundries, equipment, and testing businesses. SK hynix, Samsung, and TSMC were top contributors as memory shortages broadened beyond HBM into conventional DRAM and NAND. Management views the memory supply-demand imbalance as structural and multiyear, with meaningful capacity additions difficult before H2 2027. New positions include Chroma ATE, Montage Technology, and equipment suppliers. |
Memory Foundries Equipment HBM DRAM | |
MemoryMemory shortage broadened from HBM into conventional DRAM and NAND as AI inference and agentic workloads increase demand across the memory stack. SK hynix described the shortage as structural, multiyear, and across products. DRAM prices rose in the mid-60% to low-90% range sequentially, while NAND prices rose mid-70% to high-80%. Industry checks suggest prices could continue rising in H2 2026 as AI data center demand absorbs available supply. |
HBM DRAM NAND Pricing Supply | |
ChinaChina lagged the MSCI EM by more than 30 percentage points, driven by weakness in internet stocks as investors rotated into AI infrastructure. Alibaba faced concerns about weak consumption and rising AI capex, though cloud revenue growth accelerated to 38% year-over-year. Management believes Alibaba is well positioned to benefit from China's rapid AI adoption, power supply advantages, and deep technical talent pool. Tencent declined amid debate about its position in AI, though core business remained solid. |
Internet Cloud Consumption AI adoption | |
IndiaManagement became increasingly constructive on India's macroeconomic backdrop and market setup, tactically adding to cyclically oriented businesses late in the quarter. India's economy has remained resilient despite higher energy costs and geopolitical uncertainty. Foreign investor outflows, tariff concerns, and rotation toward AI hardware have weighed on Indian equities, leaving valuations more attractive than in several years. Management believes India could play a meaningful role in the next phase of AI adoption given its technical talent, domestic market, cost-competitive infrastructure, and geopolitical relationships. |
Valuations Infrastructure AI talent Consumption | |
Power EquipmentThe portfolio added Hyosung Heavy Industries, a Korean power equipment manufacturer, to benefit from secular demand driven by aging grid replacement, AI-driven electricity demand, and renewable energy integration. Global transformer supply is expected to remain structurally constrained through at least 2030, supporting a favorable pricing environment. HHI is the global market share leader in 765-kilovolt transformers and the only scaled producer serving the U.S. market, with a joint venture with Quanta Services announced in June 2026. |
Transformers Grid Data Centers Pricing power | |
E-commerceE-commerce holdings faced headwinds during the quarter. MercadoLibre was a top detractor over the trailing one-year period. Sea declined as consumer discretionary remained weak and was the index's worst-performing sector. The portfolio maintains exposure through MercadoLibre, Sea, Alibaba, and Coupang, though these businesses faced pressure from weak consumption trends and rotation into AI infrastructure. |
Consumer discretionary LatAm Southeast Asia | |
Electric VehiclesBYD was a top detractor, trading lower alongside Chinese equities with company-specific pressure from the U.S. Department of Defense adding it to the Section 1260H list of Chinese military companies. Management sees early signs of improvement across faster international volume growth, better profit per vehicle, and domestic volume recovery. BYD's May ADAS Technology Day reinforced its technology-driven positioning with the introduction of its in-house Xuanji A3 ADAS chip and insurance coverage for city-level ADAS accidents. |
China autos ADAS International expansion Batteries | |
| 2026 Q1 |
AIAI infrastructure drove strong performance with accelerating demand for AI accelerators, memory chips, and data center equipment. TSMC raised AI revenue growth expectations to 55% annually through 2029, while memory companies benefited from AI-driven supply-demand imbalances requiring 1-2 zettabytes of fast memory. |
Infrastructure Accelerators Memory Data Centers Compute |
SemiconductorsSemiconductor businesses led index performance with strong pricing dynamics in memory markets. DRAM prices rose 40% quarter-over-quarter while NAND increased mid-20% range, driven by AI demand and constrained supply growth. |
Memory DRAM NAND Pricing Supply | |
E-commerceE-commerce platforms faced headwinds from competition concerns with TikTok and AI disruption fears. Sea declined on investment cycle concerns while MercadoLibre's strong 45% revenue growth was overshadowed by margin uncertainty and AI disruption debates. |
Platforms Competition TikTok Margins Disruption | |
Energy TransitionCATL demonstrated strong performance in electric vehicle batteries and energy storage, maintaining market leadership with 40% volume growth and 100% capacity utilization. The Iran conflict boosted clean energy expectations. |
Batteries Electric Vehicles Storage Leadership | |
IndiaIndia exposure was trimmed due to energy shock risks from Iran conflict, given deep economic linkages through energy imports, trade, and remittances. Banking sector faced leadership uncertainty at HDFC Bank and elevated provisions at Bajaj Finance. |
Energy Banking Leadership Provisions | |
ChinaChinese technology companies faced pressure from AI investment cycles and competitive concerns. Tencent's AI investments will more than double in 2026, potentially causing profit growth to lag revenue growth, while domestic semiconductor equipment providers benefit from substitution trends. |
Technology Investment Substitution Equipment | |
| 2025 Q4 |
AIManager believes AI revolution is fundamentally different from dot-com bubble, driven by current compute demand rather than future applications. Views infrastructure buildout as most secure part of AI food chain. Expects continued volatility but remains bullish on long-term prospects. |
Artificial Intelligence Data Centers Compute Infrastructure GPUs |
Data CentersThree mega-trends driving insatiable demand for accelerated computing: transition from CPU to GPU infrastructure, replacement of recommender systems, and future robotics/digital agents. Current demand exceeds available compute capacity unlike telecom overbuild in 2000. |
GPU Infrastructure Hyperscalers Cloud Servers | |
SemiconductorsContinued investment in Nvidia and ASML reflects belief that infrastructure buildout is most secure part of AI food chain. Added Micron as new investment. Views semiconductor equipment and memory as beneficiaries of AI revolution. |
Nvidia ASML Memory Equipment Foundries | |
Enterprise SoftwareConsolidating exposure around platform companies ServiceNow and Salesforce while eliminating Adobe. Believes platforms connecting workflows across organizations are better positioned than best-of-breed apps against AI disruption threats. |
SaaS Platforms Workflow Automation CRM | |
Trade PolicyExpects tariffs to remain central investment topic in early 2026 due to potential Supreme Court ruling on Trump tariffs. Notes over $200B collected in tariffs over past year. Believes similar tariffs would be reimposed under different legal authority if current ones invalidated. |
Tariffs Trade IEEPA Supreme Court Policy | |
| 2025 Q3 |
AIArtificial intelligence is expanding growth runways and reinforcing competitive advantages across business lines. AI is improving user experience in gaming through more responsive in-game bots and accelerating design workflows. In advertising, AI enables more targeted placements, higher click-through rates, and more closed-loop transactions. The portfolio includes businesses positioned to benefit from AI infrastructure buildout and implementation. |
Infrastructure Gaming Advertising Implementation Competitive |
SemiconductorsThe portfolio maintains meaningful semiconductor exposure along the AI infrastructure value chain, including baseboard management controllers, system-on-chip solutions, and high-bandwidth memory. Taiwan Semiconductor benefits from strong AI-related demand and is expanding CoWoS capacity. SK hynix leads in high-bandwidth memory essential for AI servers and GPUs. |
Memory Infrastructure Manufacturing Equipment Foundries | |
E-commerceEcommerce platforms continue to show strong growth momentum despite competitive pressures. Sea's Brazil ecommerce business has been profitable since 2024 and is expected to grow over 25 percent annually. MercadoLibre announced new shipping policies to expand into lower-income segments by leveraging logistics infrastructure. Ecommerce penetration in Brazil remains in the mid-teens, leaving significant opportunity. |
Platforms Brazil Logistics Penetration Growth | |
FintechDigital financial services platforms show strong momentum with credit reacceleration trends. Nu Holdings' credit portfolio grew 40 percent year-over-year with strength across credit cards, unsecured loans, and secured loans. The business in Mexico continues to ramp up with loan balances expanding rapidly. Low loan-to-deposit ratios leave room for balance sheet optimization. |
Digital Credit Mexico Banking Optimization | |
ChinaChina's innovation economy is transitioning from potential to progress with clearer policy signals, fast-moving automation, and evolving consumer behavior reshaping investor sentiment. The portfolio is narrowing its China underweight. Optimism stems from signs of improved U.S. relations and domestic efforts to curb involutionary competition to reduce deflationary pricing and improve industrial margins. |
Innovation Policy Automation Relations Competition | |
IndiaIndia remains a key focus despite underperformance, with the portfolio maintaining an overweight position. Policymakers have taken steps to boost consumer spending through interest rate cuts, lower reserve requirements, and tax relief. The telecom sector benefits from expanding addressable markets, greater pricing power, and ongoing premiumization as rising smartphone penetration drives higher data consumption. |
Telecom Consumer Smartphone Pricing Penetration | |
| 2025 Q2 |
AIAI infrastructure buildout continues with sustained momentum, particularly in semiconductor demand. Taiwan Semiconductor reaffirmed its long-term goal to grow AI-related revenue at a mid-40 percent compound annual rate through 2029. AI is accelerating a winner-takes-most dynamic, benefiting companies with scale, differentiated offerings, and the ability to productize innovation. |
Semiconductors Infrastructure Revenue Growth Competitive Advantage Scale |
E-commerceStrong performance across Latin American and Southeast Asian e-commerce platforms. MercadoLibre delivered strong results despite representing less than 5 percent of the region's total retail market. Sea's ecommerce margins expanded on lower logistics costs and rising ad revenue, with Shopee Brazil growing market share while delivering its third consecutive profitable quarter. |
Market Share Margins Logistics Advertising Profitability | |
SemiconductorsLeading-edge logic chip demand remains strong, driven by AI applications. Taiwan Semiconductor reported strong quarterly results with management reiterating 2025 revenue growth target in the mid-20 percent range. The company plans to double capacity for CoWoS packaging this year, noting that demand continues to exceed supply and capacity remains fully booked. |
Logic Chips Capacity Supply Demand Packaging Revenue Growth | |
GamingSea's gaming segment showed strong recovery with bookings up 51 percent year-over-year following Free Fire's successful Naruto Shippuden campaign. Video impressions exceeded 300 million in less than 5 months, marking the game's top-rated collaboration to date. |
Mobile Gaming Bookings Collaborations User Engagement Revenue Growth | |
FintechDigital financial services platforms continue strong growth across emerging markets. Nu Holdings reinforced its position as one of the strongest emerging market franchises, with re-acceleration in PIX financing origination and progress toward breakeven in Mexico. The company serves more than 100 million customers across Latin America. |
Digital Banking Customer Growth Financing Market Expansion Profitability | |
Electric VehiclesEV adoption faces headwinds with U.S. penetration stalled around 10 percent and Europe's pullback in incentives slowing market growth. Samsung SDI faces challenges as automakers increasingly shift away from Korean battery suppliers in favor of more affordable solutions from Chinese competitors like CATL. |
Adoption Incentives Battery Supply Competition Market Share | |
| 2025 Q1 |
ChinaSince the beginning of 2024, we have narrowed our underweight to China relative to the MSCI EM. While we remain cautious about China's long-term structural challenges and ongoing geopolitical tensions with the United States, we also see a select group of exceptional growth businesses in the country. Our views are shaped by on-the-ground research with three research trips to China and Hong Kong in the first quarter of 2025. |
Technology Innovation DeepSeek Robotics AI |
AIThe Chinese government has publicly backed the development of its domestic AI ecosystem, and we expect Tencent to be a key beneficiary. Tencent established its AI lab in 2016 and is developing a proprietary model called Hunyuan. While the rise of models like DeepSeek has raised concerns about demand, we believe greater AI accessibility will drive an increased need for advanced semiconductor manufacturing. |
DeepSeek Semiconductors Innovation Technology | |
E-commerceMercadoLibre is the largest ecommerce and fintech ecosystem in Latin America by market share. The business delivered a strong fourth quarter in 2024, with operating income exceeding consensus estimates by 37 percent. Sea operates leading platforms for video games, ecommerce, and digital financial services, with Shopee growing gross merchandise volume 24 percent year-over-year. |
Fintech Digital Marketplaces Growth | |
Electric VehiclesBYD is the world's largest manufacturer of new energy vehicles by volume. BYD reported $107 billion in 2024 revenue, up 29 percent year-over-year, surpassing Tesla and reinforcing its leadership in electric vehicles. The company unveiled key innovations, including a Level 2 advanced driver-assistance system available across all models at no cost and battery technology that enables 400 kilometers of range in five minutes. |
NEV Battery Innovation Manufacturing | |
IndiaIndia and Taiwan were the strategy's top relative contributors from a country perspective. Bajaj Finance reported strong quarterly results, with loan growth exceeding its long-term target of 25 percent. Apollo Hospitals operates one of the largest private hospital networks in Asia and the largest pharmacy chain in India by store count. Phoenix Mills benefits from the ongoing formalization of India's retail sector. |
Digitalization Healthcare Finance Retail | |
SemiconductorsTaiwan Semiconductor is the world's largest producer of leading-edge logic chips by market share. Revenue from AI accelerators more than tripled in 2024, accounting for 15 percent of total revenue. Management expects this figure to double again in 2025 and to grow at a mid-40 percent annual rate over the next five years. ASPEED Technology is the world's largest designer of BMC chips by market share. |
AI Manufacturing Technology Growth | |
| 2024 Q4 |
AIAI has rapidly evolved from a conceptual novelty to a transformative tool since ChatGPT's launch in late 2022. Portfolio companies like AppLovin and ServiceNow are leveraging AI to enhance their core offerings, with AppLovin building an AI advertising placement platform and ServiceNow using AI to automate repetitive tasks and improve decision making. |
Artificial Intelligence Automation Advertising Enterprise Software Machine Learning |
Electric VehiclesThe shift from internal combustion engines to new energy vehicles is accelerating in China, with NEVs surpassing 50 percent of monthly new car sales for the first time in July 2024. BYD is positioned as the clearest beneficiary of this transition, expected to grow market share from 15 percent in 2024 to 25 percent by decade end. |
NEV Battery China Automotive Clean Transportation | |
E-commerceDigital economy expansion continues globally with businesses finding new ways to seize opportunities. Companies like Grab Holdings have emerged as leading super apps in Southeast Asia, while Full Truck Alliance has become the Uber for trucks in China, streamlining freight logistics through two-sided marketplaces. |
Digital Platforms Marketplaces Logistics Southeast Asia China | |
Energy TransitionPortfolio companies are pioneering clean transportation and renewable energy solutions globally. BYD and Contemporary Amperex Technology are leading in electric vehicles and lithium batteries, while companies like WEG create greener solutions in manufacturing and power generation. |
Clean Energy Renewable Sustainability Battery Technology Green Infrastructure | |
SemiconductorsTaiwan Semiconductor continues to showcase strong demand for AI chips with revenue increasing 29 percent and earnings rising 54 percent year-over-year. The company's competitive position in leading-edge chip fabrication has improved, with higher demand for next-generation 2nm nodes and potential market share gains from Intel and Samsung struggles. |
AI Chips Foundry Leading Edge Manufacturing Technology |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| No Elevator Pitches found | ||||||||||
| TICKER | COMMENTARY |
|---|---|
| 000660.KS | SK hynix contributed positively during the quarter as the memory shortage broadened beyond high-bandwidth memory (HBM) into conventional DRAM and NAND. AI inference and agentic workloads are increasing demand across the memory stack, while the industry faces physical limits on how quickly it can add supply. SK hynix described the shortage as structural, multiyear, and across products, with meaningful capacity additions difficult before the second half of 2027. SK hynix reported DRAM prices up in the mid-60 percent range sequentially and NAND prices up in the mid-70 percent range. HBM remains strategically important, but conventional DRAM and NAND are now driving a larger share of near-term earnings revisions. Tight conventional memory pricing should also strengthen future HBM negotiations, as customers compete for scarce capacity across product categories. The company ended the quarter trading at less than 10 times forward earnings, given that its investment results were driven by earnings revisions. |
| 402340.KS | SK Square contributed positively during the quarter as the memory shortage broadened beyond high-bandwidth memory (HBM) into conventional DRAM and NAND. SK Square is a Korean holding company with a significant stake in SK hynix, the world's largest producer of high-bandwidth memory chips. SK hynix accounts for the bulk of SK Square's net asset value (NAV), with revenue almost entirely comprised of SK hynix dividends. In addition to the economic interest in SK hynix, which we view as a primary beneficiary of AI-driven demand for computational power and data storage, we expect value to be created by narrowing SK Square's valuation discount to NAV. SK Square is explicitly targeting to narrow its NAV discount to 30 percent by 2028, from a historical high of over 70 percent in 2024. We expect compression to be driven by non-core asset divestment and buybacks. In our view, SK Square is an attractive way to gain economic exposure to SK hynix, with additional return potential from ongoing buybacks, asset simplification, and a narrowing holding company discount. |
| 005930.KS | Samsung Electronics contributed positively during the quarter as the memory shortage broadened beyond high-bandwidth memory (HBM) into conventional DRAM and NAND. AI inference and agentic workloads are increasing demand across the memory stack, while the industry faces physical limits on how quickly it can add supply. Samsung said pre-booked demand points to a wider supply-demand gap in 2027 than in 2026, even as capital spending rises. Samsung reported DRAM prices up in the low-90 percent range and NAND prices up in the high-80 percent range. Industry checks suggest prices could continue rising in the second half of 2026, as AI data center demand continues to absorb available supply. HBM remains strategically important, but conventional DRAM and NAND are now driving a larger share of near-term earnings revisions. Tight conventional memory pricing should also strengthen future HBM negotiations, as customers compete for scarce capacity across product categories. The company ended the quarter trading at less than 10 times forward earnings, given that its investment results were driven by earnings revisions. |
| TSM | TSMC benefited from strong AI demand, supported by its position as the world's largest manufacturer of leading-edge chips by market share. The biggest takeaway from first-quarter 2026 results, in our view, was a gross margin beat that came in well ahead of consensus and our expectations. We believe the margin improvement reflects strong demand for leading-edge nodes and advanced packaging, rather than unsustainable pricing. Demand for TSMC's N2 to N5 nodes reinforces our view that the company will play a central role in the agentic AI hardware cycle, supported by emerging demand for AI CPUs and broad demand for accelerator chips. TSMC's competitive position also remains differentiated despite recent attention on competitors' packaging advances. Our research indicates Broadcom will continue scaling with TSMC, even after evaluating Intel's EMIB-T packaging technology. We believe that major customers' continued reliance on TSMC, even after testing alternatives, underscores the company's technological advantage and ecosystem depth. |
| 2454.TW | MediaTek is one of the world's largest fabless semiconductor designers and the largest in Asia by market share. It benefited in the second quarter from optimism about its custom AI chip opportunity with Google. The company is helping develop Google's seventh- and eighth-generation tensor processing units (TPUs) and will reportedly expand the scope of its work in future generations. As a result, management expects MediaTek's contribution per chip to rise meaningfully as designs become more complex, with larger dies, a move from 3 nanometers to 2 nanometers, and more advanced packaging requirements. We believe this opportunity will become a more important growth driver, especially as investor debate has shifted from whether Google's TPU project might be delayed or canceled to how much of the economics MediaTek could capture. That said, the opportunity also carries execution risk. Custom chip development represents a major strategic shift for MediaTek, and the pace of change is unusually fast. Engineering talent appears to be a relevant constraint, and the company must add resources without weakening other divisions. We believe our 3 percent weight in MediaTek appropriately balances MediaTek's opportunity and operational risk. |
| 002594.SZ | BYD is a leading electric vehicle and battery manufacturer. Shares traded lower alongside Chinese equities, with company-specific pressure tied to domestic competition and the U.S. Department of Defense's June decision to add BYD to its Section 1260H list of 'Chinese military companies,' which weighed on sentiment. We see early signs of improvement across three drivers that could support a rerating: faster international volume growth, better profit per vehicle, and domestic volume recovery. Retail sales reported by foreign jurisdictions appear to be outpacing BYD's reported wholesale volumes, suggesting some international shipments may not yet have reached local dealers due to maritime delays. Profit per vehicle also exceeded consensus expectations in the first quarter, supported by export mix and premiumization, while domestic sales recovery remains moderate. BYD's May ADAS Technology Day reinforced its technology-driven positioning. The company introduced its in-house Xuanji A3 ADAS chip and announced one year of insurance coverage for city-level ADAS-related accidents. We view these steps as incremental improvements to BYD's product competitiveness and as further evidence that the company should be viewed as an innovative, technology-driven automaker, rather than a traditional manufacturer competing primarily on price. |
| BABA | Alibaba shares declined amid broader weakness in China internet stocks. Investors have increasingly used this market segment as a funding source for businesses more directly tied to China's semiconductor ecosystem, while Alibaba also faced company-specific concerns about weak consumption and rising AI capital expenditures. Despite recent share price pressure, our thesis remains intact. Alibaba's most recently reported quarterly results were solid, supported by strong cloud demand, more focused AI investment, and improving unit economics in quick commerce. Management noted that 'no single chip was idle,' and said the company has reached an inflection point in AI and cloud commercialization. Cloud revenue growth accelerated to 38 percent year over year, up from 35 percent in the prior quarter. We believe cloud margins can continue to improve as demand grows and utilization rises. We continue to view Alibaba as having an AI opportunity similar to Alphabet's, with the capability to serve enterprise demand through its cloud platform, AI models, and in-house chips. We believe Alibaba is well positioned to benefit from China's rapid AI adoption, power supply advantages, and deep technical talent pool. |
| 0700.HK | Tencent is China's largest technology company by market capitalization, operating leading platforms across gaming, advertising, and fintech, anchored by the WeChat super-app. Shares declined during the second quarter, amid broad weakness in Chinese internet stocks and ongoing debate about the company's position in AI. First-quarter 2026 results were solid at the core, with advertising revenue up 20 percent year over year and margins expanding once AI investment is excluded. The central question is whether Tencent can emerge as a credible winner in the next phase of AI. Tencent's latest AI model (HY3 Preview) has held a top-five position on OpenRouter's public leaderboard since launch, though it remains early. In our view, core strength provides downside support, while a durable re-rating likely depends on clearer evidence of AI leadership. Tencent appears well positioned if AI is embedded within existing ecosystems, but more exposed if standalone models dominate. |
| 1299.HK | AIA is the largest pan-Asian life insurance business by market share. Shares fell in the second quarter, as tighter cross-border regulation affecting its mainland Chinese visitor business weighed on sentiment. We believe the multiple compression is overstated. The mainland Chinese visitor business accounts for only about one-fifth of AIA's overall new business value, while the rest of the franchise remains on track. The key debate is no longer whether mainland Chinese visitor risk exists, but whether the market is over-discounting AIA's broader growth and cash generation profile. We expect the business outside the mainland Chinese visitor channel to sustain healthy growth, supported by diversified market exposure and resilient demand across key Asian life insurance markets. Greater regulatory clarity, as well as a solid first-half 2026 report, expected in August 2026, could help improve sentiment. |
| 2308.TW | Delta Electronics helps customers use electricity more efficiently across data centers, factories, transportation systems, commercial buildings, and telecommunications networks. At NVIDIA GTC 2025, Delta introduced power and liquid cooling solutions designed to help NVIDIA-enabled AI and high-performance computing data centers manage rising power density, improve energy efficiency, and support reliable performance. The solutions included Power Capacitance Shelves, high-voltage direct current server power systems, and 1.5MW liquid-to-liquid coolant distribution units. Delta's high-efficiency products shipped from 2010 to 2023 saved customers an estimated 46 billion kWh of electricity and reduced carbon emissions by nearly 24 million metric tons of CO2e. |
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