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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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Buyside Digest is not affiliated with, and does not endorse, Baillie Gifford -Emerging Markets. This analysis is provided for institutional research purposes only and is not investment advice.
"Baillie Gifford's semiconductor concentration delivered exceptional Q2 returns as AI capital expenditure drove TSMC, Samsung, and SK Hynix to represent 40 percent of the portfolio. The team is recycling profits into undervalued China opportunities, where government industrial policy has established global leadership in energy transition technologies and electric vehicles."
Baillie Gifford's Emerging Markets strategy delivered strong Q2 2026 outperformance driven by semiconductor holdings TSMC, Samsung Electronics, and SK Hynix, which now represent 30 percent of the MSCI Emerging Markets Index and 40 percent of the portfolio. These companies have seen share prices soar alongside profits and cash flows, with valuations remaining rational as AI capital expenditure drives exceptional demand for memory and advanced packaging. The team initiated these holdings in the 2000s on the belief that the world would need more silicon chips, with AI representing the latest and perhaps biggest iteration of this thesis. While acknowledging ultimate cyclicality, the team believes medium-term outlook remains strong despite deployment challenges. The team has been taking profits and recycling proceeds into less correlated opportunities, particularly in China, which has declined from 43 percent to below 20 percent of the index. China's pivot to self-sufficiency has established leadership in solar, wind, batteries, and electric vehicles. Brazilian holdings faced headwinds from high interest rates and fiscal concerns. The team views emerging markets as undervalued and lightly held, with the biggest risk being insufficient exposure.
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