Fidelity Global Technology: A Contrarian Approach to Nvidia and AI’s Future

TipsForTraders | February 28, 2024

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In the fast-paced world of technology investments, one fund stands out not just for its exceptional performance but for its distinctive investment strategy—particularly its stance on Nvidia (NVDA), the current darling of the market. The Fidelity Global Technology fund, the largest tech stock fund in Europe, has deliberately chosen to bypass Nvidia’s shares despite their significant surge fueled by artificial intelligence (AI) demand for semiconductor chips. This contrarian approach has not hindered the fund’s success; under the leadership of Hyun Ho Sohn, it has consistently landed in the top decile among all technology funds over the past decade.

Despite Nvidia’s stock rally following its fourth-quarter earnings, Sohn remains unswayed, maintaining a cautious outlook on the AI infrastructure build-out’s initial stage. He believes there are other stocks more attractively valued for investing in AI’s future. This perspective is especially noteworthy given Nvidia’s impressive 60% uptick in 2024 and a 240% increase over the last four years. However, Sohn’s selective investment strategy focuses on underappreciated names in the AI theme, steering clear of companies “priced to perfection.”

The Fidelity Global Technology fund’s deviation from Nvidia is a bold move, considering the average tech stock fund holds nearly 13% of its portfolio in Nvidia. This decision has impacted the fund’s performance over the past year, placing it at the 53% percentile of its category. Yet, the fund has achieved a 31% return over the past twelve months, outperforming the broader market index and the average tech fund’s gain.

Sohn’s investment philosophy extends beyond Nvidia, with a broader skepticism towards the rapid adoption and monetization of AI technologies. He draws a distinction between the generative AI and the iPhone movement, suggesting that AI, as a business application, faces more significant hurdles in regulation, compliance, security, and data governance. This cautious approach to AI investment is reflected in the fund’s diversified portfolio, which includes long-standing positions in Apple, Alphabet, Microsoft, Amazon, Ericsson, and SAP, among others. Notably, the fund’s major contributors to its decade-long performance are Apple, Microsoft, Alphabet, KLA, and Samsung Electronics, while avoiding investments in other semiconductor companies experiencing significant rallies.

The Fidelity Global Technology fund’s strategy underscores a critical insight for investors: success in the tech sector requires more than chasing the latest trends. By focusing on a diversified portfolio and under appreciated stocks, Sohn has navigated the fund through market volatilities, securing its position as a top performer despite its contrarian views. This approach, coupled with the fund’s Silver Medalist rating from Morningstar despite its higher-than-average management fees, highlights the importance of thoughtful investment strategies in achieving long-term success. As reported by Morningstar, the fund’s discerning investment choices and commitment to a diversified tech portfolio have set a commendable standard in the technology investment sphere.