As with any investment, your capital is at risk. Past performance is not a guide to future returns.
Chloé Darling-Stewart: Hello and welcome to this Scottish Mortgage portfolio update. I’m Chloé Darling-Stewart, an investment specialist with the Trust.
The portfolio has evolved meaningfully since our last update. One long-held investment reached a historic milestone. Another came to the end of a 13-year journey. And new ideas entered the portfolio as the consequences of artificial intelligence spread beyond chips and software, into power and physical infrastructure.
But the standout event was SpaceX’s public listing – the largest IPO in history. For Scottish Mortgage shareholders, it marked a major milestone in a seven-year journey that began in 2018, when Starlink had barely begun and Starship had yet to fly. Since then, SpaceX has made extraordinary progress through a consistent pattern: identify a bottleneck, solve it, then use that capability to unlock the next opportunity.
Launch was the first. Historically, rockets were largely disposable. Imagine flying across the Atlantic and throwing away the aircraft after every journey. That was effectively the economics of reaching space. By landing and reusing its boosters, SpaceX cut the cost of reaching orbit by around 85 precent and made launch far more frequent and repeatable.
That change in economics made Starlink possible. Using its own rockets, SpaceX could build a satellite broadband network at a scale and cost that would be extremely difficult to replicate. Today, Starlink serves around 11 million customers worldwide and has become the cash flywheel funding what comes next. Reusable rockets enabled Starlink. Starlink generates the recurring revenue needed to fund Starship. And Starship could unlock a much broader infrastructure opportunity. This is capability creation in action: each breakthrough gives SpaceX the tools to build the next business.
Remarkably, it built all of this having raised only around $9bn dollars of fresh equity capital before the IPO. For a company now valued at nearly $1.8tn dollars, that is exceptional capital efficiency. Scottish Mortgage initially committed around $200mn dollars. Today, that stake is worth approximately $5bn dollars – a 25-times return on the capital invested.
Seven years of private ownership gave us something an IPO roadshow can’t: the chance to see how SpaceX behaves through both success and setback. And that experience matters as we assess what comes next. And we believe the opportunity ahead could be larger still. SpaceX is no longer best understood simply as a rocket company. Rockets are the entry ticket.
To understand the scale of what SpaceX is building, start at the destination and work backwards. That destination is a self-sustaining city on Mars. Mars is not simply a distant ambition. It is a forcing function – attracting exceptional engineers and pushing SpaceX to solve commercially valuable problems along the way.
The Moon is the nearer proving ground, where those capabilities can be tested at a much faster pace. But the commercial path starts closer to Earth. Orbital data centres could become a major opportunity as artificial intelligence runs into growing power constraints. Space-based solar could offer more abundant energy without the same land and grid limitations. None of this works without moving enormous amounts of mass into orbit at dramatically lower cost. And that is what Starship is designed to unlock.
SpaceX is targeting around $100 dollars per kilogram to low Earth orbit. If achieved, that would not only expand the launch market. It could open the door to an entirely new space economy. For now, the opportunity spans launch, connectivity and AI – markets with the potential to become far larger than they are today.
But for all its scale, SpaceX still resembles an early-stage investment in one important respect: enormous opportunity, but also substantial uncertainty and execution risk. There is no established playbook. Tests will fail. Timelines will slip. Not every opportunity will develop as expected. But SpaceX is built for that process: move quickly, test in the real world, learn and iterate.
At the end of June, SpaceX represented just over 25 percent of the portfolio – a highly unusual degree of concentration for Scottish Mortgage. Lock-up restrictions mean the position has not changed materially through the IPO. As they expire, the managers will regain flexibility, and we expect its weight to moderate while remaining significant. The IPO changes the venue, not the thesis. And we remain extremely excited about what comes next.
Now while SpaceX may dominate the headlines, it doesn’t define our private-company portfolio. Even after its listing, 20 percent of Scottish Mortgage remained invested in private companies at the end of June – giving shareholders access to businesses that most public-market investors still cannot own. And we’re continuing to invest behind that opportunity. During the quarter, we participated in Anthropic’s latest funding round, increasing our investment in one of the world’s leading AI companies.
The breadth of opportunity is striking. Some names here may you may already know. Revolut is working to ‘simplify all things money’ by rebuilding financial services around the customer. Others may be less familiar. Zipline is reinventing how essential goods move with autonomous drones. Enveda is turning billions of years of evolution into its drug-discovery engine.
Different industries. Different stages. But each with the potential to reshape its market. And that access is central to how Scottish Mortgage invests: owning exceptional private companies early and remaining alongside them as ambition becomes scale. SpaceX shows what that combination can achieve. We see the same potential across the portfolio in the private companies space.
Long-term investing also means knowing when to move on. In April, after 13 years, we sold Tesla from the portfolio. When we first invested in 2013, Tesla was taking on one of the world’s largest and most entrenched industries – dominated by companies with almost a century of manufacturing experience, global supply chains and enormous balance sheets. The prevailing view was that electric vehicles would remain niche and that Tesla would never make enough cars to matter.
Our view was different. We saw a superior product, an engineering-led culture and a founder prepared to rethink how an entire industry worked. That led us to write at the time: “If the automotive world goes electric, then Tesla will become the icon of the revolution.”
But the outcome was far from certain. Manufacturing, capital requirements and competition all presented serious risks. At times, our view looked deeply at odds with the market. During what Elon Musk called “production hell”, execution faltered, capital was stretched and Tesla’s survival was openly questioned.
We remained invested as Tesla turned ambition into proof: first demand, then manufacturing, then global scale. In doing so, it accelerated the transition to electric vehicles and forced the global automotive industry to respond.
For a time, Baillie Gifford was Tesla’s largest outside shareholder. But an investment case is always forward-looking. What matters is the return available from here. Tesla’s next phase depends increasingly on autonomy and robotics. Both could become substantial businesses, but they remain nascent, while competition in its core car business has intensified, particularly in China. Today, we believe investors are being asked to pay too much for that potential.
Scottish Mortgage invested around $470mn dollars. Over 13 years, Tesla generated approximately $6.2bn dollars of realised profit for our shareholders – around 13 times the capital invested. Tesla is a powerful example of uncomfortable compounding in action. The potential returns can be exceptional. The path to get there rarely is.
But patience does not mean holding forever. Competition for capital is fierce. Every holding must justify its place based on the returns we believe it can deliver from today.
After 13 years, we believe that capital can now work harder elsewhere. And we have already begun deploying it.
We invested in SK Hynix, whose high-bandwidth memory has become a key bottleneck in AI infrastructure. Another emerging constraint is power. So far, much of the AI story has focused on chips, models and data centres.
But that buildout is power-hungry. Artificial intelligence, electrification and industrial reshoring – bringing manufacturing back to the US – are all increasing demand at the same time. Supply can’t keep up.
New power stations, grid connections and pipelines can take years to build and approve. Power is becoming a critical constraint. The energy sector is not an area where Scottish Mortgage has spent much time in recent years. But the investment logic is familiar. When technological progress creates demand for a scarce input, we look beyond the most visible winners to those supplying it.
That has led to two new holdings. Vistra is America’s largest competitive power generator, with nuclear, gas, solar, wind and battery assets, capable of supplying reliable electricity as demand rises. EQT controls one of North America’s largest low-cost natural-gas resources – fuel that could become increasingly important as power demand and LNG exports grow.
These investments demonstrate our process in action: looking beyond the most visible winners to where the next constraint may emerge and where value may shift as a result. The winners may include not only the AI companies to the owners of the scarce infrastructure powering their growth.
Artificial intelligence has dominated the headlines. But it is far from the only source of progress across the portfolio.
We own companies underpinning global commerce, driving the evolution of transport, advancing healthcare innovation and helping shape the future of energy.
Across public and private markets, and across the world, Scottish Mortgage is concentrated by design but diversified by opportunity.
Together, SpaceX and Tesla are powerful examples of why Scottish Mortgage exists.
The Trust gives shareholders liquid, low-cost access to exceptional public and private growth companies. Its closed-end structure allows us to be genuinely long-term view, remain patient through uncertainty and hold companies through different stages of their development.
The world is changing faster than it has in decades. And we’re investing in the companies driving that change.
Thanks for watching.
Scottish Mortgage
Annual past performance to 30 June each year (%)
|
|
2022
|
2023
|
2024
|
2025
|
2026
|
|
Share Price
|
-46.1 |
-6.3 |
33.4 |
17.5
|
42.7 |
|
NAV*
|
-38.8 |
1.9 |
15.1 |
19.3 |
40.4 |
|
Benchmark**
|
-3.6 |
11.7 |
20.4 |
7.8 |
28.1 |
Performance figures appear in GBP, total return. NAV is calculated with borrowings deducted at fair value. *NAV = Net Asset Value. **FTSE All World Index (GBP) TR. Performance source: Morningstar and FTSE.
Past performance is not a guide to future returns.
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