The Liontrust GF Global Technology Fund continues to invest in global leaders and disruptors within the technology sector that are well positioned to benefit from the new AI-driven technology cycle.
- February was a volatile month, marked by heightened uncertainty as companies and investors navigated shifting trade policies, mixed economic signals, and the rapidly evolving AI landscape.
- Volatility throughout the month highlighted the need to focus on fundamentals amid market uncertainty, with earnings reports offering insights into policy shifts, trends, and growth strategies.
- While the Fund benefited from its relative underweight exposure to Nvidia and Apple during the month, the strongest positive contributors to performance were Chinese companies Tencent and Meituan
- Tesla and semiconductor capital equipment companies Onto Innovation and Ultra Clean Holdings were among the detractors.
Performance overview
The Liontrust GF Global Technology Fund returned 8.4% in February, compared with the -1.9% return from the MSCI World IT Index comparator benchmark.
Market backdrop
February proved a volatile month. Markets characterised heightened uncertainty as companies and investors navigated dynamic trade policies, mixed economic signals, and the rapidly evolving AI landscape – all against the backdrop an ongoing FY24 earnings season.
The Trump administration’s widely anticipated tariff announcements – and subsequent retaliatory responses – proved the dominant narrative throughout the month. While US tariffs will initially focused on China, Mexico, and Canda, commentary throughout the month indicated these could be implemented more broadly going forward, including against the EU, though this dynamic remains fluid and subject to further negotiation. The first of these tariffs, a 10% duty on Chinese imports, was implemented early in the month, though the majority were set to come in to effect in early March. This dominated headlines coming in to month end, and – against a backdrop of slightly hawkish Fed commentary and mixed economic data – saw the VIX volatility index spike on heightened uncertainty regarding potential secondary effects such as higher inflation, consumer weakness, and a slower pace of interest rate cuts in the year ahead.
This uncertainty spilled over to equity markets, weighing particularly heavily on US technology stocks with significant exposure to affected regions. Pressure was compounded by lingering concerns following DeepSeek’s late-January breakthrough and news that Microsoft had cancelled several long-term data centre leases, raising fears that model efficiency gains could dampen the pace of AI infrastructure buildout. This led to increased caution towards technology stocks, particularly AI-adjacent companies and those in the semiconductor space, with the NASDAQ 100 down over 5% in the final two weeks of the month.
Despite this uncertainty, we continue to see strong evidence that these fears are misdirected and overblown. Hyperscalers reaffirmed their infrastructure plans with ramping AI-related capex, while Nvidia reported outsized demand for its latest Blackwell chips – sales exceeding expectations as the company races to expand capacity to meet demand from accelerating AI workloads. We also continue to see mounting evidence of this nascent technology’s potential, a growing number of companies reporting tangible benefits to their top- and bottom-lines from AI adoption.
Conversely, Chinese stocks had a particularly strong month, the DeepSeek breakthrough is seen as a testament to the country’s AI strength. This drove a rush into Chinese technology stocks on expectations of AI-driven growth, leading the Hang Seng Index to climb over 13% in February, reaching its highest level in two years. This optimism was bolstered by a strong earnings update from tech-giant Alibaba, the company highlighting continued strong demand for AI-related products while joining western peers in ramping AI capex spend – a welcome signal given the company’s proximity to DeepSeek’s developments.
Meanwhile, AI advancements continued at pace. Having made its latest reasoning model – o3 mini – available at the end of January, OpenAI outlined its roadmap to GPT-5 and introduced its latest GPT-4.5 base model. Anthropic launched its first reasoning model, while Google signalled major upcoming upgrades to its Gemini series. Notably, xAI released its latest reasoning model ‘Grok 3’, trained on a 100,000 Nvidia H100 GPU cluster – the first model released trained on this next-level of scale. The record-speed at which this model was trained was particularly impressive, underscoring the benefits of pre-training scaling and agility in model development. xAI is already training its next model on an expanded 200,000 GPU cluster, which should further accelerate development, particularly as two new scaling laws – post-training scaling and inference-time scaling – begin to play a greater role. Post-training scaling allows models to keep improving even after their initial training, while inference-time scaling lets them use more computing power when needed to enhance reasoning in real time. These advancements are critical to making AI systems more capable, efficient, and widely useful, supporting broader adoption across industries. They also underpin why we continue to see strong investment in this space, as AI infrastructure demand continues to ramp with these new scaling laws.
Company updates
February highlighted the importance of staying focused on company fundamentals amid ongoing market uncertainty. Helpfully, the ongoing earnings season provided direct insight from companies as to how they are navigating regulatory and policy shifts alongside structural trends and longer-term growth strategies. These insights are supplemented by our quarterly research trips, with our team in the US visiting a number of companies in key innovation hubs of New York and Silicon Valley at the time of writing. Importantly, we continue to see strong evidence that innovative global leaders remain on the right side of major emerging structural trends, with strong fundamentals that position them well to be winners in the new innovation cycle.
While the Fund benefited from its relative underweight exposure to Nvidia and Apple during the month, the strongest positive contributors to performance were unsurprisingly Chinese companies Tencent and Meituan, which rallied alongside the broader sector as investors rushed to buy Chinese technology stocks for their artificial intelligence potential following DeepSeek’s late-January announcement and a strong February update from peer Alibaba. Tencent, China’s dominant digital ecosystem spanning gaming, social media, cloud, and fintech, is increasingly monetising AI across its platform. AI-powered content recommendations are boosting engagement, while improved ad targeting is accelerating revenue growth, helping Tencent close the monetisation gap with peers. Its cloud business is also benefiting from AI infrastructure demand, with AI-related revenue now a mid-teens percentage of IaaS sales. Further, Tencent’s evergreen gaming franchises continue to perform strongly, and AI-driven automation is improving efficiency, driving profit growth at twice the rate of revenue. With multiple AI monetisation tailwinds and disciplined shareholder returns, Tencent remains a key long-term AI beneficiary. Meanwhile Meituan, China’s leading local services and on-demand commerce platform, is leveraging AI to optimise logistics and expand its ecosystem beyond food delivery. AI-powered routing and automation are lowering per-order costs, while category expansions into InstaShopping (on-demand retail) and Pin Hao Fan (group-buy meals) are unlocking new growth. Its Shen Hui Yuan membership program is also driving deeper cross-sell across services. With improved unit economics, strong profitability growth (+172% YoY last quarter), and an increasing AI-driven opportunity in local commerce, Meituan remains well positioned to capitalise on China’s digital consumption trends.
Uber was another top contributor to performance in the month. The company posted a strong earnings update early in the month, beating analyst expectations on the top line with Q4 revenues and gross bookings up 20% and 18% year-on-year respectively. The company continues to drive operating leverage as it scales, with margins expanding and free cash flow more than doubling to $7 billion for FY24. The company continues to innovate on top of its platform, strengthening its offering and reinforcing network effects. This is evident in the rapid growth of its Uber One membership programme, which expanded 60% in 2024 to 30 million members, with 5 million added in Q4 alone. Now available in every country where Uber operates, Uber One is helping to drive incremental growth through improved retention and increased customer value. Uber is also accelerating its self-driving strategy, announcing a strategic partnership with Nvidia in January to develop AI models for autonomous driving, while partnering with AV developers like Waymo to add driverless supply to its platform. Waymo’s self-driving vehicles are set to launch in Austin in March exclusively via the Uber app, before expanding to several other US cities throughout 2025 as the company moves from proof-of-concept to at-scale deployment. Uber continues to invest smartly to grow its market and reinforce its position as the platform of choice for both consumers and commercial operators in mobility and delivery. This long-term opportunity was evidently recognised by Bill Ackman’s Pershing Square Capital Management, which acquired a $2.3 billion stake in the company during the month, with shares responding positively.
Meanwhile, Tesla was the top detractor to fund performance in the month, with shares falling after the company posted sales data indicating a sharp slowdown in vehicle sales growth across European markets. The stock also suffered from negative sentiment surrounding potential policy headwinds, including concerns over tariffs and the removal of EV tax credits under the Trump administration, alongside increased scrutiny over CEO Elon Musk’s growing involvement in the newly created US Department of Government Efficiency. Despite these near-term overhangs, we continue to see evidence that the company remains well positioned as a long-term winner in the new innovation cycle, with competitive advantages in manufacturing efficiency (where it maintains industry-leading production costs) and artificial intelligence (where its Full Self-Driving technology continues to improve at pace). This underpins the company’s broader opportunity in the enormous emerging field of physical AI – including autonomous vehicles and humanoid robotics.
Tesla’s underlying strength was evident in its late-January earnings update: the company reached an annualised delivery rate of c2 million vehicles in 2024, with the Model Y the world’s best-selling vehicle for the year. At the same time, and in spite of pricing pressures, Tesla managed to reduce its cost per car to below $35,000, aided by lower material costs and increased automation, while also bringing inventory levels to its lowest in two years. The company also plans to expand its product portfolio with the launch of an affordable model and Semi truck in 2025. More importantly, the key focus moving forward is the execution of its ambitious robotaxi plan - Tesla plans to launch an unsupervised robotaxi fleet in Austin in June, with potential expansion to other US regions later in the year. The company continues to make significant strides in real-world AI, with Full Self-Driving (FSD) performance improving markedly, now achieving one crash per 5.9 million miles on Autopilot versus one per 700,000 miles without it. Meanwhile, its Optimus robot program is ramping up, with Tesla aiming to produce 10,000 units by year-end, initially for use in its own factories. The company remains strong financially, generating $3.6 billion in free cash flow over the course of the year, including $2 billion in Q4, despite elevated capital expenditure. Having reduced our position during the Q4 post-election euphoria, we have started to rebuild our positions on the back of recent stock price weakness induced by
Other key detractors for the month were semiconductor capital equipment companies Onto Innovation and Ultra Clean Holdings – an unsurprising development given the broader investor pullback in AI infrastructure names. Both stocks came under pressure as the market reassessed semiconductor capital equipment exposure, with concerns around DeepSeek’s low-cost capabilities and tariff uncertainty weighing on sentiment and creating a tough backdrop against which both companies reported earnings. Onto, a leader in semiconductor inspection and metrology solutions, fell despite delivering a strong update early in the month, with Q4 revenues up 21% and EPS growing 42% year-on-year. However, a sequential decline in high-bandwidth memory (HBM) advanced packaging revenues – following a record Q3 – sparked concerns about a potential slowdown in this high-growth segment. Management attributed this to delayed capacity expansions (SK Hynix and Micron awaiting allocations from Nvidia), but are now seeing expansions and orders pick up as allocations have been clarified which should underpin renewed growth in 2025.
Meanwhile, Ultra Clean, which provides critical subsystems and manufacturing solutions for wafer fab equipment (WFE) industry, missed expectations due to a sharp step-down in its direct China business. Product qualification delays, coupled with an unexpectedly weak Chinese WFE market, weighed on demand. Outside of this localised end-market weakness the fundamentals of the business remains strong, with the rest of the business stable while we continue to see strong positive demand signals from WFE sector customers such as Applied Materials and Lam Research. While both companies face near-term headwinds, we expect these to be transitory. Demand for more powerful and energy-efficient chips continues to ramp, with next-generation designs becoming larger and more complex. This, in turn, is driving the need for more advanced materials engineering, requiring additional process steps, new tooling, and more testing – strong structural growth drivers for picks-and-shovels innovators Onto and Ultra Clean. With these dynamics set to persist, both companies remain well positioned for strong earnings growth in the years ahead.
Trading activity
Amidst these company updates and broader market developments, we maintain our strict valuation discipline – trimming or exiting positions as they approach our target price and redeploying capital into companies where we see attractive upside. In February, we took the opportunity to top up a number of stocks where prices had disconnected from fundamentals, adding to our positions in Klaviyo, Shopify, Tesla (as mentioned earlier), and Broadcom. Conversely, we trimmed our weights across several holdings that had benefited from recent strong runs, including the likes of Uber, Tencent, Apple, and Spotify. We also opted to exit our position in Halma, having reached our target price early in the month, and Texas Instruments, where ongoing consolidation in the global automotive sector poses risks to its long-term end-market growth opportunity. We took the opportunity to redeploy this capital into companies from our watchlist with compelling upside opportunities, including re-initiating a position in leading all-in-one enterprise software leader ServiceNow, and building a new position in Confluent, a leader in data streaming infrastructure that enables enterprises to process and react to real-time data – an increasingly critical capability in AI-driven environments. We also added a new position in Doximity, which operates a cloud-based professional network and telehealth platform for medical professionals, with over 80% of U.S. doctors engaged on its platform. Both companies are well positioned to capitalise on structural trends in their respective markets, supporting strong growth potential in the years ahead.
Looking forward
March looks set to remain dynamic, with markets digesting the impact of newly implemented U.S. tariffs and the likelihood of retaliatory measures from affected trading partners. Given ongoing geopolitical dynamics, we also expect further policy announcements from various global bodies, particularly the US given we remain within the first 100 days of the new Trump presidency.
Meanwhile, China’s National People’s Congress (NPC) meeting early in the month will provide insight into key economic priorities for the year ahead, including the potential for further stimulus measures. Policymakers are expected to focus on bolstering domestic consumption, addressing structural challenges in the property sector, and supporting high-tech industries—including AI, which remains a core strategic priority.
More broadly we expect to see ongoing developments in the AI space, with competitive advantages continuing to accrue to leading early adopters across sectors.
Despite this dynamic backdrop, we remain optimistic about the opportunities for innovative global companies as we enter this new innovation cycle. As always, we will maintain our valuation discipline, focusing on companies that can deliver strong earnings growth by capitalising on structural trends and growing their markets while trading at attractive valuations.
Key Features of the Liontrust GF Global Technology Fund
The Fund aims to achieve income with the potential for capital growth over the long-term (five years or more). The Fund aims to deliver a net target yield in excess of the net yield of the MSCI World Index each year.
There can be no guarantee that the Fund will achieve its investment objective.
The Investment Adviser will seek to achieve the investment objective of the Fund by investing at least 80% of the Fund’s Net Asset Value in shares of companies across the world. The Fund may also invest up to 20% of its Net Asset Value in other eligible asset classes. Other eligible asset classes include collective investment schemes (which may include funds managed by the Investment Adviser), cash or near cash, deposits and Money Market Instruments.
In addition the Fund may invest in exchange traded funds (“ETFs”) (which are classified as collective investment schemes) and other open-ended collective investment schemes. Investment in open-ended collective investment schemes will not exceed 10% of the Fund’s Net Asset Value. The Fund may invest in closed-ended funds domiciled in the United Kingdom and/or the EU that qualify as transferable securities. Investment in closed-ended funds will be used where the closed-ended fund aligns to the objectives and policies of the Fund. Investment in closed-ended funds will further be confined to schemes which are considered by the Investment Adviser to be liquid in nature and such an investment shall constitute an investment in a transferable security in accordance with the requirements of the Central Bank. Investment in closed-ended funds is not expected to comprise a significant portion of the Fund’s Net Asset Value and will not typically exceed 10% of the Fund’s Net Asset Value.KEY RISKS
Past performance does not predict future returns. You may get back less than you originally invested.
We recommend this fund is held long term (minimum period of 5 years). We recommend that you hold this fund as part of a diversified portfolio of investments.
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