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Another volatile month for the market as tariffs and trade war threats persisted (and have clearly had a further significant impact on the market and tech so far in April). Tech stocks continued to fall further in March and we saw a significant pullback in Nvidia in particular, the largest holding in the portfolio. This contrasted with what we saw as an extremely strong showing at Nvidia's annual developer conference, GTC, which highlighted its technology leadership and software advantages.
March is a quieter month for corporate earnings, but the supply chain data points we've seen - including AI chip utilization, data center vacancy rates, and memory pricing - are still strong and suggest that demand continues to outpace supply.
OpenAI’s GPT-powered images were perhaps the most viral launch since ChatGPT itself in November 2022, and demand was so high that the company limited the new model to paid users and even restricted their usage. OpenAI CEO Sam Altman went on to comment that the company was suffering from a GPU shortage. From a technical/portfolio perspective, we continue to believe that applications and use cases for AI will evolve. The launch of GPT-powered images shows that models are constantly evolving and becoming more accurate – opening up many more real-world use cases. It’s important to remember that while the models we see right now are far from being human-replacement models, the models we see now are also the worst they will ever be.
The portfolio continues to be weighted towards companies that we believe can strengthen the highest returns through the cycle – growing cash flows and reinvesting at high returns. Fundamentally, we still believe that the companies we own will do so over time – despite tariffs.