| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 7.6% | 18.7% | 1.2% |
Sands Capital International Growth returned 18.7% net in Q2 2026, outperforming the MSCI ACWI ex USA Index by 420 basis points as geopolitical uncertainty eased and AI enthusiasm drove strong performance. The portfolio benefited from 28% exposure to AI-related businesses, an 8% overweight versus benchmark, and from underweight positioning in China. Top contributors included Taiwan Semiconductor, ASML, SK hynix, VAT Group, and Keyence, all benefiting from accelerating AI infrastructure demand and memory market tightening. TSMC's margin beat reflected strong demand for leading-edge nodes, while SK hynix reported 198% revenue growth and record profitability. The manager added Arm Holdings, Siemens Energy, and Samsung Electronics to capture emerging opportunities in agentic AI CPUs, power infrastructure for data centers, and memory inflection points. Detractors included EssilorLuxottica, Shopify, Spotify, and Nu Holdings, facing concerns around luxury multiple compression, AI investment costs, and Brazilian credit quality. The manager exited Flutter, Dino Polska, and Hexagon to consolidate into highest-conviction ideas. The portfolio trades at 23x forward earnings, a historic discount to the 14x market multiple, with high and rising earnings growth expectations creating an attractive setup for multiyear investors.
International Growth seeks to own the best growth businesses outside the United States featuring durable, above-average earnings growth underpinned by secular change in both developed and emerging markets, with concentrated exposure to AI infrastructure, semiconductor cycle strength, and businesses benefiting from structural transformation driven by technology and geopolitics.
The opportunity set for growth investors is shifting, and the manager has positioned International Growth to go where the growth will be. Technology and geopolitics are creating new business spaces and sources of durable earnings growth, but also new risks. AI infrastructure and its increasing breadth remains important, but these forces are also transforming businesses traditionally viewed as cyclical or capital intensive. The manager believes this environment rewards research depth and adaptability, and that the portfolio's high and rising earnings growth expectations combined with a historically low valuation create an attractive setup for investors with a multiyear horizon.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 30 2026 | 2026 Q2 | 000660 KS, ASML, EL.PA, ENR.DE, GALDF, KYCCF, NU, SE, SHOP.TO, SPOT, TSM, VACNY | AI, emerging markets, Energy Transition, growth, international, semiconductors, technology | - | International Growth delivered 18.7% in Q2 2026, driven by concentrated AI infrastructure exposure across semiconductors and equipment. Taiwan Semiconductor, ASML, and SK hynix led gains on accelerating memory pricing and agentic AI demand. The manager added Arm, Siemens Energy, and Samsung to capture CPU inflection, power constraints, and HBM opportunities. Portfolio trades at 23x forward earnings versus 14x market, with rising growth expectations creating compelling multiyear value. |
| Apr 25 2026 | 2026 Q1 | 000660 KS, ADYEN.AS, ASML, NU, SE, SHOP.TO, TSM | AI, geopolitics, growth, international, Japan, semiconductors, technology, valuation | - | International Growth declined 14.8% in Q1 2026 as AI disruption concerns weighed on software holdings while semiconductor names like TSMC and ASML benefited from accelerating AI infrastructure demand. The portfolio's Japan overweight and China avoidance provided relative tailwinds. Valuation compression to 22x forward earnings represents the narrowest premium since inception, setting up attractive five-year prospects. |
| Jan 22 2026 | 2025 Q4 | 6861.T, ADDTECH-B.ST, ADYEN.AS, AJINOMOTO.T, ARGX, ASML, BAJFINANCE.NS, DNP.WA, DOL.TO, EL.PA, FLUT, HDFCBANK.NS, HEXA-B.ST, III.L, MELI, NU, PME.AX, PNDORA.CO, RACE, SE, SHOP.TO, SPOT, STVG.MI, TSM, VACN.SW, WEGE3.SA | AI, defense, energy, growth, international, Robotics, Space, technology |
GALD SW 2330 TT VACN SW SHOP SE 2802 JP SPOT RACE IM MELI EL FP |
International Growth underperformed in Q4 despite strong earnings growth as style headwinds favored value over growth. The portfolio maintains disciplined exposure to AI, defense, robotics, energy transition, and space themes through quality businesses with clear economic models. Historically compressed valuations combined with above-benchmark earnings growth create compelling long-term opportunities despite near-term style challenges. |
| Oct 20 2025 | 2025 Q3 | 2914.T, 6758.T, ADYEN.AS, ARGX, ASML, BAJFINANCE.NS, CSU.TO, DOL.TO, FLUT, HDFCBANK.NS, HEXAB.ST, III.L, MELI, NU, PNDORA.CO, RACE, SE, SHOP.TO, SPOT, TSM | AI, Asia, E-Commerce, Europe, growth, international, semiconductors, technology | - | International Growth underperformed in Q3 2025 due to valuation pressure on growth stocks and style rotation favoring value. Strong AI-driven semiconductor demand benefited TSMC while e-commerce platforms like Shopify showed resilience. Portfolio positioning emphasizes higher-quality businesses with stronger balance sheets, trading at attractive valuations despite near-term growth style headwinds. |
| Jul 21 2025 | 2025 Q2 | 4956.T, 6273.T, 6861.T, ADYEN.AS, ASML, BAJFINANCE.NS, CSU.TO, DNP.WA, DOL.TO, EVT.DE, FLTR, GALDERMA.SW, HDFCBANK.NS, HEXAB.ST, IMCD.AS, MELI, ONON, PME.AX, PNDORA.CO, RACE, SE, SHOP.TO, SPOT, TSM, WEGE3.SA | Asia, Automation, E-Commerce, Entertainment, Europe, growth, international, semiconductors, technology |
MELI SPOT 2330 TT SE EVD GR |
International Growth delivered 18.1% quarterly returns, outperforming benchmarks through strong security selection in e-commerce leaders MercadoLibre and Sea, streaming giant Spotify, and semiconductor leader Taiwan Semiconductor. The portfolio has been upgraded with higher-quality businesses and stronger balance sheets. Despite market volatility from AI disruption and geopolitical tensions, the strategy maintains conviction in owning the best global growth businesses long-term. |
| Mar 31 2025 | 2025 Q1 | 2914.T, 6098.T, 6861.T, ADYEN.AS, ASML, BAJFINANCE.NS, CSU.TO, FLUT, HDFCBANK.NS, HEXAB.ST, LONZA.SW, MELI, PNDORA.CO, RACE, SE, SHOP.TO, SIKA.SW, SPOT, TSM, WEG.SA | Asia, emerging markets, Europe, growth, international, tariffs, trade war | - | International Growth underperformed in Q1 as growth stocks faced severe headwinds amid trade war concerns. Strong performance from Sea, Spotify, and MercadoLibre was offset by weakness in Taiwan Semiconductor and Flutter Entertainment. The manager remains cautious on escalating U.S.-China trade tensions but believes the portfolio is better positioned for uncertainty with improved diversification and fundamentals. |
| Dec 31 2024 | 2024 Q4 | 2802.T, 6098.T, 6273.T, 6861.T, ADYEN.AS, ASML, BAJFINANCE.NS, CSU.TO, DOL.TO, FERG.L, FLTR, HDFCBANK.NS, HEXAB.ST, LONN.SW, MELI, PNDORA.CO, SE, SHOP.TO, SIK.SW, SPOT, TSM, VACN.SW, WEGE3.SA, ZAL.DE | AI, E-Commerce, Energy Transition, growth, innovation, international, semiconductors, technology | - | Sands Capital's International Growth strategy delivered 8.4% returns in 2024 despite Q4 weakness, maintaining conviction in concentrated growth businesses outside the US. Strong AI demand benefited Taiwan Semiconductor while energy transition and e-commerce themes drive portfolio positioning. The firm sees opportunities in relative value anomalies as business fundamentals improve faster than stock prices, expecting broader market leadership ahead. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIAI infrastructure demand is driving strong performance across semiconductor and equipment businesses. The manager sees AI expanding beyond GPUs to CPUs as agentic AI workflows require more processing power. AI-related businesses represent 28% of the portfolio, an 8% overweight versus benchmark, and the manager views lithography capacity as a potential multi-year constraint to scaling AI infrastructure. |
Semiconductors Data Centers Cloud GPUs |
Semiconductor CycleMemory markets are experiencing sustained tightening driven by AI adoption, with accelerating pricing across DRAM and NAND. The manager raised revenue and earnings estimates materially for memory producers, citing stronger pricing, supply constraints, and improving industry fundamentals. Leading-edge logic demand is also strengthening as AI drives greater chip complexity and higher wafer requirements. |
Memory DRAM Foundries Semi Equipment | |
Energy TransitionGas turbines are emerging as the preferred technology for powering data centers and providing dispatchable baseload capacity. The manager expects power demand tied to AI to continue rising, with the United States facing constrained power capacity for the remainder of the decade. Turbine manufacturers hold roughly 90% market share and are positioned for margin expansion as AI-related orders convert from backlog to revenue. |
Power Equipment Grid Upgrade Natural Gas Data Centers | |
E-commerceThe manager maintains conviction in Shopify's long-term growth supported by enterprise adoption, international expansion, and AI-driven differentiation. Early AI traction is encouraging with Sidekick usage up fourfold and AI-driven traffic up thirteenfold year over year. The manager views near-term margin pressure from AI investment as spending on future product development rather than a structurally higher cost base. |
Marketplaces Payments SaaS AI | |
StreamingSpotify's 2026 investor day reinforced a path to mid-teens revenue growth through 2030, supported by new AI-enabled monetization opportunities including AI music features, Audiobook+, and personal podcasts. The manager believes Spotify's scale, pricing power, and distribution advantage position it to convert AI-enabled products into higher ARPU and long-term margin expansion, despite near-term operating expense increases. |
Music Media AI SaaS | |
Consumer FinanceNu Holdings faces investor concerns about household debt and credit quality after higher-than-expected provisions in Q1 2026. The manager is less concerned, citing Brazil's low unemployment and real wage growth as more relevant to future credit losses. After detailed balance sheet inspection and management interaction, the manager feels comfortable about Nu's prospects for generating healthy risk-adjusted net interest income, though asset quality concerns may take time to resolve. |
FinTech Banks Credit Cards Latin America | |
Factory AutomationKeyence reported strong fiscal Q4 results pointing to a broadening recovery in global factory automation, with revenue growing 18% year over year, the fastest pace in more than three years. Operating margin expanded to 54% in the quarter, easing concerns about Chinese competition and AI disruption. Management also signaled a more shareholder-friendly stance with a sharply raised dividend and authorization for share buybacks. |
Industrial Sensors Automation Robotics Japan | |
LuxuryEssilorLuxottica shares declined despite thesis-confirming Q1 2026 revenue growth of 11% in constant currency. Much of the underperformance appeared tied to broader multiple compression across European luxury stocks and concerns that AI glasses could prove to be a fad. The manager believes smart glasses demand remains on track based on China checks, and that new entrants are more likely to expand the category while EssilorLuxottica's brand portfolio provides a meaningful first-mover advantage. |
Apparel Consumer Electronics AI China | |
| 2026 Q1 |
AIAI is driving accelerating demand for semiconductors and infrastructure, with TSMC reporting 55% annualized AI revenue growth through 2029. ASML saw record bookings driven by AI-related demand. However, AI disruption concerns weighed on software and consumer internet holdings early in the quarter. |
Semiconductors Infrastructure Software Disruption Demand |
SemiconductorsStrong performance from semiconductor holdings including TSMC, ASML, and new position SK hynix. TSMC raised capex to $54 billion to support AI demand, while ASML reported record bookings. SK hynix leads in high-bandwidth memory essential for AI servers. |
Memory Equipment Foundries AI Capex | |
E-commerceMixed performance with Shopify declining amid AI disruption concerns despite strong 30% GMV growth, while Sea faced pressure from TikTok competition and AI disintermediation risk. MercadoLibre remains a core holding in Latin American e-commerce. |
Software Platforms Competition Growth Disruption | |
JapanStrong performance from Japanese holdings including Ajinomoto and Keyence, supported by corporate governance reforms and political stability following the LDP's landslide victory. The portfolio's overweight to Japan created relative tailwinds. |
Governance Politics Reform Stability Outperformance | |
ChinaPortfolio has zero exposure to China after exiting entirely since 2023 due to governance risks. Major Chinese benchmark weights like Tencent and Alibaba were perceived as AI laggards, creating relative tailwinds for the portfolio. |
Governance Risk Avoidance Benchmarks Underperformance | |
| 2025 Q4 |
E-commerceCarvana was the top performer as a vertically integrated e-commerce platform for used cars. The company eliminates traditional dealerships and provides a haggle-free experience with vast nationwide inventory. With less than 2% market share, Carvana appears to have a long runway of profitable growth ahead. |
Used Cars Digital Platform Market Share |
Energy TransitionTalen Energy was a major contributor for the third consecutive year as an independent power producer owning nuclear facilities. The company expanded its relationship with Amazon Web Services to provide carbon-free energy for data centers and acquired gas-fired power plants for $3.8 billion. |
Nuclear Power Data Centers Carbon Free | |
Data CentersTalen Energy's expansion of its relationship with Amazon Web Services to provide carbon-free energy for data centers was highlighted as a key development. The manager sees potential benefits from rising electricity demand driven by data center growth. |
Electricity Demand AWS Infrastructure | |
| 2025 Q3 |
AIAI-driven demand continues to support semiconductor and technology sectors, particularly in Taiwan and South Korea. TSMC benefits from strong AI-related demand and is expanding CoWoS capacity. However, AI concerns are growing around certain businesses like Constellation Software, with markets conflating AI disruption risks with operational performance. |
Semiconductors Technology Disruption Infrastructure Demand |
E-commerceE-commerce platforms showed strong performance with Shopify delivering its largest beat in five quarters and Sea reporting strong GMV growth. MercadoLibre faces competitive pressure in Brazil but benefits from low ecommerce penetration. The sector demonstrates resilience with continued growth momentum and international expansion opportunities. |
Platforms GMV Brazil Penetration Competition | |
SemiconductorsSemiconductor sector led by AI infrastructure buildout with TSMC raising full-year guidance and expanding capacity. The company expects 20% annualized earnings growth through 2029 driven by AI, smartphones, PCs, servers, and automotive chips. Supply-demand gaps in advanced packaging remain a key constraint. |
TSMC Capacity CoWoS Foundries Growth | |
BiotechnologyGalderma's Nemluvio drug for atopic dermatitis generated $131 million in sales, well ahead of consensus estimates. The drug is positioned to capture about 10% of the $20 billion AD market with potential expansion into additional indications. Argenx's Vyvgart is demonstrating pipeline-in-a-product potential across multiple therapeutic areas. |
Nemluvio Vyvgart Dermatitis Pipeline Therapeutics | |
PaymentsAdyen's payment platform showed resilience with 18% revenue growth despite FX headwinds and tariff impacts. EBITDA margins expanded 340 basis points to 50% supported by strong cost discipline. The embedded finance business is gaining traction with issuing volumes more than doubling in the first half. |
Adyen Margins Embedded Finance Growth | |
| 2025 Q2 |
E-commerceThe strategy holds significant positions in leading e-commerce platforms including MercadoLibre in Latin America and Sea in Southeast Asia. MercadoLibre delivered strong quarterly results driven by Argentina's higher contribution margins, while Sea posted strong results with gaming bookings up 51% year-over-year and expanding ecommerce margins. |
Marketplaces Fintech Digital Platforms Latin America Southeast Asia |
StreamingSpotify, the world's largest subscription streaming audio service, contributed positively with premium subscriber net additions of five million and premium revenue growing sixteen percent year over year. The company demonstrated strong momentum in paid subscriber growth and operating margin expansion. |
Music Subscription Audio Premium Margin Expansion | |
SemiconductorsTaiwan Semiconductor reported strong quarterly results supported by ongoing AI-related semiconductor demand. Management reiterated mid-20% revenue growth targets and plans to double CoWoS packaging capacity, with AI-related revenue expected to grow at mid-40% compound annual rate through 2029. |
AI Chip Manufacturing CoWoS Foundries Technology | |
EntertainmentCTS Eventim, the leading European event ticketing business, delivered solid results with revenue up 22% year over year. The company highlighted ongoing international expansion with 68% of ticket sales occurring outside Germany, up from 56% in 2023. |
Event Ticketing International Expansion Europe Live Events Growth | |
AutomationSMC Corporation, the global leader in pneumatic motion control equipment crucial for robotics and factory automation, faced tariff concerns but showed improving orders and notable strength in China where the company is no longer losing market share. |
Robotics Factory Automation Pneumatic Motion Control Industrial | |
| 2025 Q1 |
E-commercePortfolio includes leading e-commerce platforms like Sea's Shopee which grew gross merchandise volume 24% year-over-year while delivering positive EBITDA margin, and MercadoLibre which serves 100 million annual unique customers. Shopify continues to execute well with accelerating growth across gross merchandise value, revenue, and margins. |
Marketplaces Digital Commerce GMV Growth Platform Economics Cross-border |
AITaiwan Semiconductor is positioned as a key beneficiary of AI chip demand, with revenue from AI accelerators more than tripling in 2024 to account for 15% of total revenue. Management expects this figure to double again in 2025 and grow at a mid-40% annual rate over the next five years. |
Semiconductors AI Accelerators Chip Demand Infrastructure Computing | |
StreamingSpotify delivered strong fourth-quarter results with robust revenue and monthly active user growth, along with gross and operating margin expansion. Management is calling 2025 the year of accelerated execution following 2024's year of monetization, signaling continued operating expense discipline and product innovation. |
Audio Streaming Subscription Growth Monetization User Engagement Premium Tiers | |
GamingSea operates leading platforms for video games alongside ecommerce and digital financial services. The company reported its fifth consecutive beat-and-raise quarter with 2025 guidance pointing to inflections across all three business units including gaming expected to generate approximately $1 billion in EBITDA. |
Video Games Digital Entertainment Southeast Asia Platform Business EBITDA Growth | |
Sports BettingFlutter Entertainment faced volatility in Q4 with unusually customer-friendly sports outcomes affecting margins, but structural U.S. margins still expanded 100 basis points year-over-year to a record 14.5%. The company remains a leading global operator with strong long-term fundamentals despite inherent business volatility. |
Online Betting Sports Outcomes Margin Expansion Parlay Bets Regulatory Environment | |
| 2024 Q4 |
AIAI has rapidly evolved from a conceptual novelty to a transformative tool, reshaping industries and redefining how businesses create value. Many portfolio businesses are finding specific use cases to leverage AI, including AppLovin's AI advertising placement platform and ServiceNow's automation capabilities. The firm owns businesses that enable AI at the infrastructure layer, such as NVIDIA. |
Infrastructure Automation Advertising Platforms Transformation |
E-commerceBusinesses around the world are finding new ways to seize the promise of an ever-expanding digital economy. Examples include Grab Holdings emerging as a leading super app in Southeast Asia and Full Truck Alliance becoming the 'Uber for trucks' in China, streamlining freight logistics through two-sided marketplaces. |
Digital Marketplaces Platforms Logistics Apps | |
Energy TransitionThe firm has found criteria-meeting businesses leveraged to secular trends of electrification, sustainable energy and infrastructure. Chinese electric vehicle manufacturer BYD and lithium battery maker CATL are pioneering clean transportation and renewable energy solutions. Companies like Tetra Tech, Sika, and WEG work to create greener and more sustainable solutions. |
Electrification Batteries Sustainable Clean Infrastructure | |
SemiconductorsTaiwan Semiconductor showcased strong continued demand for AI chips with revenue increasing 29% and earnings rising 54% year-over-year. The company's competitive position within leading-edge chip fabrication has improved, with higher demand for next-generation nodes and capacity advantages over competitors like Intel and Samsung. |
Foundries Manufacturing Technology Capacity Leadership |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jan 22, 2026 | Fund Letters | David E. Levanson | GALD SW | Galderma Group AG | Health Care | Pharmaceuticals | Bull | Swiss Exchange | Aesthetics, biologics, dermatology, Prescriptions, Pricing | Login |
| Jan 22, 2026 | Fund Letters | David E. Levanson | 2330 TT | Taiwan Semiconductor Manufacturing Co Ltd | Information Technology | Semiconductors | Bull | New York Stock Exchange | AI, CapEx, Foundry, Pricing, semiconductors | Login |
| Jan 22, 2026 | Fund Letters | David E. Levanson | VACN SW | VAT Group AG | Industrials | Machinery | Bull | Swiss Exchange | AI, Cyclicality, Margins, semiconductor equipment, Valves | Login |
| Jan 22, 2026 | Fund Letters | David E. Levanson | SHOP | Shopify Inc | Information Technology | IT Services | Bull | New York Stock Exchange | AI, ecommerce, GMV, Payments, platform | Login |
| Jan 22, 2026 | Fund Letters | David E. Levanson | SE | Sea Ltd | Consumer Discretionary | Broadline Retail | Bull | New York Stock Exchange | ecommerce, Fintech, Margins, Reinvestment, Southeast Asia | Login |
| Jan 22, 2026 | Fund Letters | David E. Levanson | 2802 JP | Ajinomoto Co Inc | Consumer Staples | Food Products | Bull | New York Stock Exchange | Amino-Acids, cashflow, healthcare, turnaround | Login |
| Jan 22, 2026 | Fund Letters | David E. Levanson | SPOT | Spotify Technology SA | Communication Services | Entertainment | Bull | New York Stock Exchange | AI, Margins, Pricing, Streaming | Login |
| Jan 22, 2026 | Fund Letters | David E. Levanson | RACE IM | Ferrari NV | Consumer Discretionary | Automobiles | Bull | Borsa Istanbul | Brand, Electrification, Luxury, Pricing | Login |
| Jan 22, 2026 | Fund Letters | David E. Levanson | MELI | MercadoLibre Inc | Consumer Discretionary | Broadline Retail | Bull | NASDAQ | ecommerce, Fintech, Logistics, valuation | Login |
| Jan 22, 2026 | Fund Letters | David E. Levanson | EL FP | EssilorLuxottica SA | Health Care | Health Care Equipment & Supplies | Bull | Euronext Stock Exchange | AI, Eyewear, Integration, Pricing, Wearables | Login |
| Jul 21, 2025 | Fund Letters | David E. Levanson | MELI | MercadoLibre, Inc. | Consumer Discretionary | Broadline Retail | Bull | NASDAQ | ecommerce, Ecosystem, Fintech, Logistics, Penetration | Login |
| Jul 21, 2025 | Fund Letters | David E. Levanson | SPOT | Spotify Technology S.A. | Communication Services | Entertainment | Bull | New York Stock Exchange | advertising, Margins, monetization, Streaming, Subscriptions | Login |
| Jul 21, 2025 | Fund Letters | David E. Levanson | 2330 TT | Taiwan Semiconductor Manufacturing Co., Ltd. | Information Technology | Semiconductors & Semiconductor Equipment | Bull | Taiwan Stock Exchange | Advancedpackaging, AI, Capacity, Foundry, semiconductors | Login |
| Jul 21, 2025 | Fund Letters | David E. Levanson | SE | Sea Limited | Communication Services | Entertainment | Bull | New York Stock Exchange | ecommerce, Fintech, Gaming, growth, Margins | Login |
| Jul 21, 2025 | Fund Letters | David E. Levanson | EVD GR | CTS Eventim AG & Co. KGaA | Communication Services | Entertainment | Bull | XETRA | Demand, entertainment, expansion, Margins, Ticketing | Login |
| TICKER | COMMENTARY |
|---|---|
| TSM | TSMC benefited from strong AI demand, supported by its position as the world's largest scaled 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. |
| ASML | ASML is a Dutch semiconductor equipment company specializing in lithography systems, which chipmakers use to print patterns on silicon wafers. ASML's investment results primarily reflected rising long-term expectations for memory systems sales, as AI demand increases the need for advanced DRAM and logic chips. We believe lithography capacity could become one of the hardest constraints to scaling AI infrastructure, potentially creating tight supply conditions for years. Our bottom-up analysis suggests both Chinese and non-Chinese fabs may need to materially increase lithography capacity to meet AI chip demand. Agentic AI could also increase CPU intensity in data centers, with some observers expecting the CPU-to-GPU ratio to move from one CPU per four to eight GPUs toward one-to-one or higher. For ASML, more advanced CPUs and broader AI infrastructure buildout should support additional leading-edge logic demand. We believe ASML remains well positioned as AI drives greater chip complexity, higher wafer requirements, and increased lithography intensity. |
| 000660.KS | SK hynix is one of the world's largest dedicated producers of memory chips, including dynamic random-access memory (DRAM), NAND flash memory, and high-bandwidth memory (HBM) used in AI servers and other computing applications. Shares rose as investors gained confidence that accelerating AI adoption is driving a sustained tightening in memory markets, supporting stronger pricing across both DRAM and NAND. First-quarter 2026 results reinforced this view. Revenue increased 198 percent year over year, while operating profit rose 405 percent, driving record profitability and industry-leading margins. While HBM remains an important growth driver, strength extended across the broader memory portfolio. Conventional DRAM pricing accelerated significantly during the quarter, while NAND pricing increased even faster, reflecting robust demand for memory and storage as AI workloads become increasingly data intensive. We raised our revenue and earnings estimates materially to reflect stronger pricing, continued supply constraints, and improving industry fundamentals. We believe SK hynix's technology leadership, deep customer relationships, and focused memory strategy position the business as a key beneficiary of growing AI infrastructure investment. |
| VACNY | VAT Group is the leading global manufacturer of high-precision vacuum valves for semiconductor manufacturing equipment, holding roughly 70 percent share in its core application. Shares rose sharply during the second quarter to near record highs, extending a rally fueled by accelerating wafer fab equipment demand tied to the AI buildout. A first-quarter trading update reinforced the momentum, with order intake reaching the second-highest level in company history, up 47 percent year over year, lifting book-to-bill to 1.6 times and order backlog 42 percent above year-end. The principal investor debate is valuation, as the stock trades near 64 times forward earnings after roughly doubling over the past year. We believe VAT remains a differentiated beneficiary of rising chip complexity, as additional deposition and etch steps, leading-edge logic, and high-bandwidth memory increase vacuum-valve content per tool, while a growing installed base and recurring service revenue add durability. |
| KYCCF | Keyence is a leading designer of high-end factory automation sensors and sensor systems. Shares advanced sharply during the second quarter after the company reported strong fiscal fourth-quarter results in April, pointing to a broadening recovery in global factory automation. Revenue grew 18 percent year over year, its fastest quarterly pace in more than three years, with acceleration across Japan and every overseas region in local currency, suggesting genuine demand strength rather than a currency tailwind. Operating margin expanded to 54 percent in the quarter, helping ease concerns about Chinese competition, AI disruption, and margin dilution. Management also signaled a more shareholder-friendly stance, sharply raising the final dividend and amending its articles to permit board-authorized share buybacks. In our view, accelerating fundamentals alongside improving capital allocation can drive a re-rating, and we believe the strength of this recovery remains underappreciated. |
| EL.PA | EssilorLuxottica shares declined despite a first-quarter 2026 revenue update that we viewed as thesis-confirming. Revenue grew 11 percent in constant currency, in line with expectations, with strength across segments and geographies despite weaker consumer conditions, conflict in the Middle East, and poor results from luxury peers. Much of the underperformance appeared tied to broader multiple compression across European luxury and European medtech stocks, alongside concerns that AI glasses could prove to be a fad rather than a durable new category. We believe the results suggest otherwise. Recent China checks indicate smart glasses demand remains on track, and management said April trends were similar to the first quarter. The market also appears concerned about near-term margin pressure as the category scales and potential share loss as technology companies enter the market. We believe new entrants are more likely to expand the category, while EssilorLuxottica's Ray-Ban, Oakley, and broader brand portfolio provide a meaningful first-mover advantage. |
| SHOP.TO | Shopify is a leading commerce platform providing software and financial services that merchants use to start, run, and scale their businesses. Shares declined during the second quarter as concerns over AI-related costs and decelerating revenue guidance overshadowed strong first-quarter 2026 results. Revenue grew 34 percent year over year, the fastest pace since 2021, gross merchandise volume rose 35 percent, and payments penetration climbed to 66 percent of volume. Investors focused on second-quarter guidance implying sequential deceleration against tougher comparisons, and on rising large language model costs tied to Sidekick, Shopify's AI assistant, which the company does not directly monetize. We view these concerns as overdone. Shopify is embedding AI to improve merchant productivity, discovery, and conversion, reinforcing competitive differentiation and latent pricing power. Early traction is encouraging, with Sidekick usage up fourfold and AI-driven traffic up thirteenfold year over year. We maintain conviction in Shopify's long-term growth, supported by enterprise adoption, international expansion, and AI-driven differentiation. |
| SPOT | Spotify shares declined following first-quarter results after management guided margins lower due to a near-term increase in operating expenses. In our view, this spending reflects investment in future product development rather than a structurally higher cost base, and likely signals the early stages of a new AI-enabled product cycle. Spotify's 2026 investor day helped address concerns around AI by reinforcing that AI could expand, rather than impair, the business model. Management highlighted a path to mid-teens revenue growth through 2030, supported by new monetization opportunities, including AI music features, Audiobook+, and personal podcasts. The UMG partnership also provides a potential path to turn AI music into a paid feature. We believe Spotify's scale, pricing power, and distribution advantage position it to convert AI-enabled products into higher ARPU and long-term margin expansion. |
| NU | Nu Holdings operates Nubank, a digital financial services platform serving more than 100 million customers in Latin America. First-quarter 2026 revenue growth was in line with expectations, but higher-than-expected provisions weighed on gross profit and raised investor concerns about household debt and credit quality. We are less concerned, as Brazil's low unemployment and real wage growth are more relevant, in our view, to future credit losses than household debt service ratios. We also believe Brazilian Central Bank data may overstate loan delinquencies because of an accounting change that affects how long banks can keep nonperforming loans on their books before recognizing a write-off. Importantly, after a detailed inspection of the bank's balance sheet and interaction with the management, we feel comfortable about Nu's prospects of generating healthy risk-adjusted net interest income in the coming quarters. Asset quality concerns may take time to resolve, but Nu continues to execute against a large and expanding addressable market. Its measured entry into the United States also appears unlikely to alter its long-term efficiency goals. With the business trading at its lowest forward earnings multiple as a public company, we believe investor concerns may be overstated. |
| ARM | Arm Holdings is a leading designer of leading-edge semiconductors. The crux of our investment case is that Arm stands to benefit from rising central processing unit (CPU) demand driven by agentic AI. While graphics processing units (GPUs) are optimized for token generation through model inference and training, CPUs are better suited for agentic workflows such as scheduling, memory management, and tool execution. CPUs effectively function as the operating system for agentic AI workflows. We expect agentic AI adoption to drive an inflection in CPU demand, increasing Arm's CPU royalties from approximately 10 percent of revenue in 2026 to more than 30 percent by 2031. Arm's energy-efficient architecture provides what we view as a competitive advantage in selling AI CPUs to cloud hyperscaler customers while also helping preserve its more than 90 percent share within smartphones. SoftBank's majority ownership of Arm could provide additional upside potential, as SoftBank seeks to expand AI adoption across its broader investment ecosystem using Arm-based chips. |
| ENR.DE | Siemens Energy is a leading global supplier of gas turbines and grid equipment. Gas turbines are emerging as the preferred technology for powering data centers and providing dispatchable baseload capacity to grid systems undergoing energy transition. Their combination of reliability, competitive cost, and relatively lower emissions supports their role in stabilizing power systems. We believe power demand tied to AI will continue to rise as countries beyond the United States build AI infrastructure and as new generative AI applications, including video and agentic systems, require more compute-intensive workloads. Against this backdrop, we expect the United States to face constrained power capacity for the remainder of the decade and likely beyond. Lengthy grid interconnection queues and political sensitivity around electricity costs are pushing data centers and large industrial users toward onsite generation, where turbines offer footprint efficiency and dispatchability. We believe leading turbine manufacturers, which together hold roughly 90 percent share in this concentrated market, will manage supply and pricing carefully. As AI-related orders convert from backlog to revenue, we see potential for meaningful margin expansion. Over the next several years, we expect Siemens Energy to also benefit from large U.S. high-voltage direct current transmission projects, higher-margin gas aftermarket activity, and progress in restructuring its wind business. |
| 005930.KS | Samsung Electronics is one of the world's largest diversified technology businesses. We believe Samsung is approaching an inflection point in its earnings trajectory. As one of the world's leading producers of memory chips, the company is positioned to become a critical supplier of high-bandwidth memory (HBM) for artificial intelligence applications. We expect customer announcements from notable customers such as Tesla and Apple to eventually help Samsung's foundry business reach breakeven after years of losses. In mobile, Samsung's yearslong decline in global market share may slow and potentially reverse. In the premium market segment, the company has an opportunity to gain share from Apple, which faces its own AI challenges. In the mass market segment, Samsung has strengthened its position through its operating system ecosystem, while geopolitical considerations may discourage emerging-market consumers from purchasing Chinese devices. Additional drivers include edge AI use cases and adoption of new form factors such as foldable phones. Samsung's national importance further reinforces its long-term opportunity. As South Korea develops sovereign AI capabilities, Samsung is likely to be favored over foreign competitors to partner with local AI companies. Over time, we believe the company could evolve from being primarily a memory supplier to becoming a platform partner for startups building foundational models and a leading logic supplier for South Korea's sovereign AI ecosystem. |
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