Investor Webinar: Your Questions Answered
Claire Shaw – Portfolio Director
- Tom Slater and Lawrence Burns discussed what accelerating AI progress means for software, where value accrues and how Scottish Mortgage is positioned
- They covered private holdings, led by SpaceX, and why a more constructive IPO backdrop could change the Trust’s private exposure
- Shareholder questions ranged from China and TSMC to competition in Meituan and MercadoLibre, autonomy and portfolio construction
Watch: At our latest Scottish Mortgage webinar, portfolio director Claire Shaw was joined by investment managers Tom Slater and Lawrence Burns to answer shareholder questions.
As with any investment, your capital is at risk.
AI Will Create a Value Shift
Software stocks have sold off as markets digest “a huge step forward in the capabilities of AI systems in writing software.” Slater said the modern economy is underpinned by software, and AI is removing the “biggest constraint for companies”: access to software developers. He expects “an explosion in the amount of software written,” creating opportunities but also shifting where value accrues as new constraints emerge.
Burns addressed concerns about the scale of AI investment. He said Scottish Mortgage is built around a “multitude of drivers.” The Trust is “not having a single bet on AI or one approach to it,” but spreading exposure across the value chain: hardware (NVIDIA, ASML and TSMC), infrastructure (Amazon Web Services and Anthropic) and applications (Aurora’s self-driving trucks).
He believes it is “genuinely plausible” for AI to be “the biggest technological revolution of our lifetime, creating a massive opportunity for value creation.” At the same time, he highlighted three risks: the build-out will be “bumpy,” disruption will force a reassessment of business models, and whether the Trust has “the right type and level of exposure across the AI stack.”
Slater captured the challenge of value capture with a music festival analogy: “Now you go to the music festival; entry is free, and drinks are free, but you have to pay to use the toilet.” He also pointed shareholders to a piece on scottishmortgage.com on AI and the world of work.
Anthropic: Investing in Software Development
Shareholders asked why Scottish Mortgage invested in Anthropic (Claude). Slater confirmed the Trust owns two large language model developers: Anthropic in the US and Minimax in China.
He highlighted Anthropic’s “very cautious approach” to model release, prioritising safety and the constraints built around these systems, which has supported enterprise adoption. Burns added that in enterprise use cases, willingness to pay can be clearer, and once AI tools are integrated with proprietary data, they can become “very, very sticky and have high switching costs.”
On the broader software sell-off, Slater stressed Scottish Mortgage is “long-only” and seeks “a small number of exceptional businesses,” rather than trying to map every winner and loser. His test is what remains distinctive if writing code becomes easier. He cited Shopify, where monetisation sits in payments: even if AI changes how people discover products, “[customers are] still going to have to use Shopify’s checkout,”.
SpaceX and Private Markets: “Update Your Expectations”
Slater said, “The scale of the opportunity that SpaceX is addressing continues to broaden dramatically. And the starting point for it all is bringing down the cost of accessing space.”
SpaceX has the potential to be “the monopolistic provider of AI to the world.” Discussing the possible combination of SpaceX and xAI, Slater argued the biggest constraint on AI is power: “Our use of AI is expanding dramatically, but the amount of power that we’re generating on Earth is not.” He suggested moving compute to space, with solar generation and constant daylight, shifts the constraint. Slater noted SpaceX has talked about deploying energy generation in space on a scale comparable to “the entire electricity grid in America every two years.”
While space-based data centres are cheaper on Earth today, he expects SpaceX launch costs to decline “80 to 90 per cent” over the coming years, noting, “It’s not about what happens today, but if these exponential technology trends continue, what happens in four or five years’ time?”
Burns added that the attraction is not a long-term bet on a single technology. SpaceX also offers exposure to global broadband, orbital transportation, microgravity manufacturing and US missile defence ambitions. “It’s the ability to have multiple wild opportunities rather than one that really attracts,” he said.
Because of SpaceX’s success, Burns noted it has become a larger holding than the Trust would usually have in a single stock, pushing private exposure above 30 per cent. This does not make Scottish Mortgage a forced seller, but it can temporarily restrict the ability to make new private investments. If SpaceX were to list “in the middle of the year or towards the end of the year,” he said, it could free up unlisted capacity quickly.
Burns also said the IPO environment depends on the state of capital markets. If conditions are supportive, several private holdings are “cash generating” and “IPO ready.” He highlighted ByteDance, noting “significant progress on resolving this year what happens to TikTok US,” which has been seen as a block to listing, and suggested the Trust’s private percentage “can potentially look very different in just a few months from now.”
China, TSMC and Competition
On the portfolio’s exposure to China, Burns said the team is finding opportunities selectively, with recent investments including RedNote and Minimax. On Minimax, he highlighted the appeal of “90 per cent performance of the leading US models at a fraction of the cost.” China exposure is “around 12 per cent,” down from “20-plus” five years ago.
On TSMC, Burns said successive US administrations have tried to reduce dependence on Taiwan “but not necessarily on TSMC.” With TSMC producing “90 per cent of the world’s most advanced chips,” he argued, encouraging US manufacturing would improve resilience. He also noted customers have said they would “pay a premium” for chips made in the US and would do more business with TSMC.
Slater cautioned against chasing short-term market reactions to geopolitics. The more durable shift, he argued, is how wars are being fought – with cheap drones and disposable hardware, where “the edge comes in software.” He linked this to the importance of space-based communications, including Starshield within SpaceX.
Holding Updates and Portfolio Construction
Burns described Meituan as “the infrastructure for daily local life” in China. Profitability is under pressure as rivals use heavy subsidies in quick commerce, but he argued management are the “best operators in the industry,” with scale, network effects and $15bn in net cash – “you can’t bully them.” He believes the current valuation could look very different as unproductive competition normalises.
Slater updated shareholders on Ant Financial. After regulatory concerns forced a reshaping of its model and a period of slower growth, he said Ant now has “a clear licence to operate” and is growing again. While the opportunity is smaller than first imagined, he still sees it as “a really important layer in China’s financial infrastructure, with very valuable irreplaceable assets.”
In Latin America, Burns said MercadoLibre’s near-term profitability has been pressured by deliberate reinvestment, including lowering the free-shipping threshold in Brazil to accelerate market share. He highlighted the company’s growing financial services and advertising businesses, alongside top-line growth of around “45 per cent year-over-year” in US dollars.
Slater discussed autonomy through Aurora Innovation, which is “operating commercially today and scaling very rapidly, with a really clear value proposition” in autonomous trucking, and Nuro, which remains pre-revenue. The Trust also retains a holding in Tesla; he indicated there is a risk that Scottish Mortgage may not have sufficient Musk exposure if Tesla continues to improve its autonomous capabilities.
For Joby Aviation, Slater reiterated the long-term opportunity in electric vertical take-off and landing (eVOTL) aircraft: quieter and free from helicopters’ “single point of failure.” He expects a commercial launch this year, and said the story has evolved with a “dual use” angle in the “silent safe troop transport” that adversaries do not have. Volatility, he noted, “goes with the territory.”
Asked about resilience versus 2022, Burns said many portfolio companies have improved efficiency and pivoted toward profitability, making them less dependent on external capital. Slater added that the team tries to invest “in companies not themes,” backing businesses that are “developing products and services that are hugely valuable to their customers and capture a proportion of that value.” This enables the Trust to invest in companies that are ostensibly rivals, if it is “a pie that is growing for everybody.”
Burns made a similar point on geography: the Trust is not trying to “bet on individual economies.” He cited Wise and Revolut as two standout UK companies but stressed that the focus is on the best business models globally.
Closing Thoughts
Slater said he is most excited by “how many different opportunities there are,” and highlighted a new small holding, Loyal, which has developed a drug that adds “about a year of healthy life to pet dogs.”
Burns returned to AI as a general-purpose technology that is “consistently getting better… acting as an agent for change in the economy.” He singled out Anthropic, noting that its latest agent product has been one of the forces driving the recent software sell-off. It is a product that will “keep getting better,” and “we do not know where the limits of its impact will be.”
Shareholders can subscribe to the next season of Invest in Progress on the Scottish Mortgage website, launching soon.
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About the author - Claire Shaw
Portfolio Director
Claire Shaw is a portfolio director and plays a prominent role in servicing Scottish Mortgage’s UK shareholder base. Before joining in 2019, she spent over a decade as a fund manager with a focus on managing European equity portfolios for a global client base. With a background in analysing companies and communicating investment ideas, Claire is also responsible for creating engaging content that makes the Scottish Mortgage portfolio accessible to all its shareholders. Beyond that, she works closely with the managers, meeting with portfolio companies and conducting in-depth portfolio discussions with shareholders.
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