Perspectives on Progress #7

Claire Shaw – Portfolio Director

Key Points

SpaceX’s latest Starship launch makes history and demonstrates how an exploding rocket marks progress
Two high-profile portfolio changes with the sale of Illumina and a new position in Meta
Northvolt has a major breakthrough by producing a battery free of lithium, cobalt and nickel

As with any investment, your capital is at risk.

SpaceX

Starship continues to make rapid progress

SpaceX’s second Starship launch met its primary objective – successfully separating from the first stage Super Heavy booster without any engine failures. The flight lasted twice as long as the attempt in April – eight minutes instead of four. All 33 Raptor engines worked, whereas six failed during the previous attempt. The booster exploded post-separation. However, we believe this is what rocket development should look like. Intentionally pushing systems to their limits is where we learn the most, and other companies simply don’t have the business model or culture to support this rapid approach to innovation at scale.

SpaceX will have collected a trove of data from this second launch test and has multiple rockets ready to follow up with a third attempt rumoured to be before the end of the year. Starship will likely play a critical role in expanding the Starlink satellite constellation, given the vehicle’s enormous payload capacity.

Illumina

Divesting our long-standing holding

First bought for Scottish Mortgage in March 2011, we decided to exit our position in Illumina – the company that has been at the forefront of the gene sequencing revolution. Illumina has played a key role in advancing the understanding of human biology and disease treatment. But we feel less confident that it will retain its lead as other players increasingly challenge its dominant position. In conjunction with the problems and distractions related to the GRAIL acquisition, management, board disputes and upheavals, the growing competition led us to divest our remaining stake in the company.

Databricks

Raising fresh capital in a tough fundraising environment

Amid a lot of noise around a funding slowdown in the private markets and companies having their valuations slashed, Databricks appears to be bucking the trend. It raised circa $500m at a $43bn valuation in its Series I funding round. Databricks last raised $1.6 billion in August of 2021, at which time the estimated value after receiving the funding was $38 billion. Seeing the company add $5bn to its price tag proves that wider ‘industry’ trends do not affect everyone equally – private companies are not a ‘one size fits all’. Databricks sits at the intersection of two exciting trends – the data economy and artificial intelligence. We are estimated to generate more data in the next three years than the last 30 combined, and Databricks aims to make managing and processing data easy. Most data held in enterprises is ‘unstructured’; thus, it is hard to extract meaning unless you have a unique algorithm or expertise in managing this type of data. Given that most corporates do not have armies of artificial intelligence (AI) experts and data scientists, Databricks aims to help companies that are not ‘software first’ reap the benefits of AI by having one simple, unified data platform.

Northvolt

Breaking barriers in batteries

A sustainability aspiration: a battery with no lithium, cobalt or nickel. Northvolt has made a breakthrough in the battery technology used for energy storage. Using sodium-ion technology, it thinks this is the first battery product ever to be free of critical raw materials – “a fundamental breakthrough,” according to the company. This option could reduce dependency on scarce raw materials from Asia while also reducing exposure to the volatility in prices of these materials. Sodium-ion batteries are considered a cheaper and safer alternative to lithium-ion batteries. They work better at high and low temperatures and, crucially, are more sustainable. Peter Carlsson, CEO and co-founder of Northvolt, commented, “The world has put high hopes on sodium-ion, and I’m pleased to say that we’ve developed a technology that will enable its widespread deployment to accelerate the energy transition”.

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.

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.

Important information

This communication was produced and approved at the time stated and may not have been updated subsequently. It represents views held at the time of production and may not reflect current thinking.

This content does not constitute, and is not subject to the protections afforded to, independent research. Baillie Gifford and its staff may have dealt in the investments concerned. The views expressed are not statements of fact and should not be considered as advice or a recommendation to buy, sell or hold a particular investment.

Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed on the London Stock Exchange and are not authorised or regulated by the FCA.

A Key Information Document is available by visiting our Documents page.

Any images used in this content are for illustrative purposes only.