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October marked the start of the third quarter earnings season, with many of our portfolio companies reporting. We saw positive earnings updates from many of our portfolio companies, which contributed to the fund’s positive performance. Perhaps more importantly, positive comments from cloud companies on AI demand, and we saw significant increases/upgrades in capex relative to estimates from across Google, Meta, Microsoft and Amazon. All hyperscalers still have limited supply of AI chips and are unable to meet the still very high demand. We expect to see even higher capex in 2026, countering market concerns that 2026 would present a vacuum for capex growth.
The other big indicator – and a big portfolio position – to report was TSMC. Reflecting the strong momentum in AI, they raised their 2025 revenue forecast again – to the mid-30s (they have continued to upgrade their revenue expectations throughout the year, having started in January with a growth forecast of mid-20s). To give some context to the scale of TSMC’s business, it is now over $100 billion in annual revenue and will add over $30 billion in revenue this year. The guidance increase is a strong data point for our semiconductors exposed to “AI compute” – we own large positions in all of Nvidia, AMD and Broadcom, all of which are TSMC customers. October also saw a number of large-scale AI deals – including OpenAI and Broadcom, as well as OpenAI and AMD – again reflecting the strong demand for AI chip capacity.
On the short side, we saw more potential headwinds for IT services companies (which we are still short) from US government policy. On the analog semiconductor side, we still see no significant signs of a recovery and remain short several companies in this sector. The fund gained 3.5% in September and is up 10.6% so far this year.