Carmignac Portfolio Tech Solutions: Letter from the Fund Manager - Q2 2026

During the second quarter of 2026, Carmignac Portfolio Tech Solutions (F EUR Acc) delivered a performance of +43.45%, underperforming its reference indicator, which posted a gain of +48.98%.

After a volatile first quarter, global equity markets rallied sharply in the second quarter of 2026. The rebound was driven primarily by the de-escalation of the conflict in the Middle East, which triggered a significant decline in oil prices, and by a very strong first-quarter earnings season, particularly among companies exposed to artificial intelligence (AI). Together, these developments encouraged markets to look beyond persistent inflation and monetary-policy concerns.

For much of the quarter, however, market leadership remained highly concentrated within the AI supply chain, particularly in semiconductors. Beneath the surface, the rally became increasingly erratic. While companies such as Micron, Intel, Arm and Marvell rose by several hundred percent in the period, Nvidia performed broadly in line with the major indices. This divergence illustrated both the strength and the fragility of the market environment: enthusiasm around AI remained powerful, but leadership rotated rapidly and valuations became increasingly stretched in certain parts of the sector.

Towards the end of the quarter, early signs of a reversal began to emerge, as market participation broadened beyond the most crowded technology stocks.

From a geographic perspective, emerging markets were the strongest performers, led by exceptional gains in Korea and Taiwan on the back of their semiconductor exposure. US, European and Japanese equities also delivered robust returns, supported by resilient corporate earnings, improving economic confidence and easing geopolitical risks.

Another major event was the SpaceX IPO, the largest in history, followed shortly afterwards by the launch of a $25 billion bond offering. These transactions provided a further illustration of the substantial financing and investment requirements associated with the development of AI infrastructure.

Central banks maintained a hawkish stance during the quarter. The European Central Bank resumed its tightening cycle with a rate increase, while the Bank of Japan continued its gradual policy normalisation. June also marked Kevin Warsh’s first meeting as Federal Reserve (Fed) Chair. His more hawkish-than-expected tone surprised equity markets. Looking ahead, reduced forward guidance from the Fed could contribute to greater interest-rate volatility, with potential spillover effects across equity markets.

The fund underperformed its reference indicator during the second quarter of 2026, with performance primarily impacted by our underweight and stock selection in semiconductors as the market rally broadened within the sub sector, particularly within the U.S. semiconductor complex.

Our strongest contributors came from our exposure to Asian technology hardware and semiconductor supply chains. South Korean holdings such as SK Hynix delivered exceptional returns, supported by continued strength in AI memory demand and improving investor sentiment. Taiwanese names, including TSMC, Yageo and Asia Vital Components, together with Japanese holdings such as Nitto Boseki and Ibiden, also contributed positively as demand for high-performance computing infrastructure remained robust. Our off-benchmark convictions continued to generate alpha, with several niche semiconductor and electronic component companies posting particularly strong gains over the period.

Performance was also supported by our selective exposure to AI infrastructure beneficiaries across the semiconductor ecosystem. Holdings such as Broadcom, Nvidia, ASML and Arista Networks benefited from sustained AI-related capital expenditure and continued demand for networking and compute infrastructure.

Our largest detractors were concentrated in software, most notably Microsoft. While our software exposure remains selective, the market continued to favour higher-beta semiconductor names over more diversified technology companies during the quarter. In addition, our more cautious positioning in hyperscalers and certain areas of the AI value chain modestly weighed on relative performance.

Markets remain highly momentum-driven, with narrow leadership and signs of excess in parts of the AI trade. In both the U.S. and Asia, equity indices have been carried by one dominant theme: semiconductors. What began as enthusiasm for the leading AI beneficiaries has increasingly spread to smaller and lower-quality semiconductor names, some of which have doubled or tripled in recent months. In several cases, valuations now appear to discount years of aggressive growth, despite limited visibility on fundamentals.

In the coming months, we expect the AI debate to enter a new phase. Investors are increasingly questioning whether hardware companies are capturing too much of the value created by AI. Semiconductor and hardware suppliers are benefiting from bottlenecks and pricing power, but rising infrastructure costs could eventually weigh on demand. Efficiency is also becoming a more important theme, with growing focus on cheaper models, open-source alternatives, and better routing of AI workloads to reduce token usage and infrastructure costs.

Tactically, this has led us to reduce exposure to hyperscalers and move away from the most speculative semiconductor names. Instead, we are focusing on higher-quality leaders where valuations remain more attractive, such as Nvidia.

In software, we continue to favour companies that are well positioned to benefit from the industrialisation of AI rather than from AI enthusiasm alone. As enterprises move from experimentation to large-scale deployment, we expect demand to increase for software that enables governance, security and the efficient management of AI applications. This supports our exposure to developer software companies such as Atlassian and GitLab, whose platforms are deeply embedded in enterprise development workflows and should benefit from broader adoption of AI-assisted coding.

Despite our more selective positioning, our medium-term outlook for AI infrastructure remains constructive. We retain our focus on a well-balanced portfolio of higher quality tech names that should prove more resilient as markets may broaden.