As with any investment, your capital is at risk. Past performance is not a guide to future returns.
It’s been a year of extraordinary disruption. From the first day of the new administration, the United States began systematically withdrawing from the international system it helped build. Sweeping tariffs on almost every trading partner. The longest government shutdown in US history. Strikes on Iran that closed the Strait of Hormuz and disrupted a fifth of global oil trade. These are serious developments, and several of our holdings bore the cost directly.
But we think the development that will matter most when this period is viewed in retrospect is not the fracturing of the old order. It is the construction of the new one. Artificial intelligence has moved from an exciting technology into a global infrastructure buildout of historic scale. The major cloud platforms have more than tripled their spending since 2023. China's DeepSeek demonstrated that advanced AI was not a US monopoly, accelerating the race further. When the tariff regime has been renegotiated and normal activity has resumed at the Strait of Hormuz, the rewiring of the global economy around AI will still be accelerating. That is the lens through which this portfolio should be understood.
The tension between dismantling and construction defined the year. The businesses at the infrastructure layer of the AI transition compounded through the turbulence. Those more exposed to trade disruption or weak Chinese demand fared very differently. And the gap between these two categories widened.
SpaceX was by far the largest contributor to returns. It now represents an unusual degree of concentration, and that brings volatility. But SpaceX is no longer a rocket company. It’s a dual monopoly in launch and global connectivity, with Starlink building highly profitable, recurring revenue that the best software businesses aspire to, except that its assets are in orbit and extraordinarily difficult to replicate. What makes the long-term potential so striking is the convergence of its capabilities with the defining constraint of the AI era: and that is energy. If Starship achieves full reusability, the economics of placing AI infrastructure in orbit become compelling. And that’s why we hold it at scale.
SpaceX is now a public company. We hold several of the world’s most valuable private companies, and some are realistic candidates for public markets in the coming years. These are not speculative, early-stage businesses. They operate at enormous scale, and in several cases generate profits that would place them among the largest listed companies in the world.
Elsewhere, silicone companies TSMC, ASML and NVIDIA continued to benefit from insatiable demand. Large companies like Meta, Amazon and Shopify are embedding AI into their operations in ways that are already measurable. But the same capabilities compressing costs for these businesses are compressing valuations across traditional software. And we are investing into that shift, not away from it.
The trade disruption hit several holdings. Chinese retailer PDD's Temu subsidiary, Adyen the payments business and the luxury businesses all felt the impact of a fracturing trade architecture. We exited Wayfair. We added to Hermès. In China, the challenge was not tariffs but a ferocious domestic price war. Meituan swung from profit to loss as competitors fought for share in a barely growing economy. This is painful, but the companies that survive emerge with capabilities that are extraordinarily difficult to match. And it looks like that pricing pressure has now abated.
Beyond AI, MercadoLibre, Stripe, Nu and Revolut are building the infrastructure of digital finance. Zipline moved from pilot to commercial-scale drone delivery. Vaccine company Moderna recovered after difficult years. The breadth of the portfolio is wider than it sometimes appears.
I want to finish with this. The majority of wealth creation in equity markets comes from a very small number of companies. If you do not own the outliers, or if you sell them too early, you will almost certainly underperform. Our approach is designed around that reality. The volatility that comes with that is real and we do not dismiss it. But the alternative, a portfolio built to minimise short-term discomfort, would mean owning less of what we believe in and more of what we do not. The world is changing faster than it has in decades. We would rather be invested in the companies driving that change than sheltering from it.
Thank you.
Scottish Mortgage
Annual past performance to 31 March each year (%)
| |
2022 |
2023 |
2024 |
2025 |
2026 |
| Share Price |
-9.5 |
-33.5 |
32.5 |
6.0 |
26.8 |
| NAV* |
-13.1 |
-17.8 |
11.5 |
11.2 |
27.4 |
| Benchmark** |
12.8 |
-0.9 |
21.0 |
5.5 |
18.0 |
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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Unlisted investments such as private companies, in which the Trust has a significant investment, can increase risk. These assets may be more difficult to sell, so changes in their prices may be greater.
If a private company's value increases significantly it may become a large part of the portfolio. This increases investment risk because of the greater the impact of a fall in its value.
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Scottish Mortgage Investment Trust PLC (the “Company”) is an alternative investment fund for the purpose of Directive 2011/61/EU (the “AIFM Directive”). Baillie Gifford & Co Limited is the alternative investment fund manager (“AIFM”) of the Company and has been authorised for marketing to Professional Investors in this jurisdiction.
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Australia
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Belgium
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Germany
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Luxembourg
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Switzerland
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