Baillie Gifford is an Edinburgh investment partnership founded in 1908, famous for ultra-long-horizon, high-conviction growth investing — its early stakes in Amazon, Tesla and NIO are classics. Its "actual investors" philosophy holds world-changing companies on 5-10 year views; AUM is around $120bn. The Insights column carries its managers' investment views and thematic research.
This is about how Monks Investment Trust views the AI boom. The fund says four big tech firms (Amazon, Alphabet, Microsoft, Meta) may spend $1 trillion on AI infrastructure next year, but it refuses to bet only on AI. Instead, it invests in winners of the next five years and adds banks, energy, and software for balance. Key holdings: Amazon (cloud revenue up 43%), NVIDIA (core AI bet), and Disco (newly added semiconductor equipment maker, dominant in wafer grinding). The fund's returns lagged the market, but it says its portfolio has faster profit growth and lower valuation.
One-sentence summary: Monks Investment Trust believes that AI infrastructure spending is staggering (the four major tech giants are expected to spend approximately $1 trillion in total next year), but the fund refuses to become a captive of a single theme. Instead, it positions around winners over the next five years while achieving balance through non-AI growth drivers such as banks, energy, and software. [Cautiously optimistic]
Monks Investment Trust believes that the scale of AI infrastructure spending is staggering, but the fund should not become a captive of the AI theme. The report notes that four US tech giants in the portfolio—Amazon, Alphabet, Microsoft, and Meta—are expected to spend a combined approximately $1 trillion next year, with the bulk allocated to building AI infrastructure. The author's original words: "One trillion dollars is an incredible incentive." This spending scale is projected to become the second-largest investment boom in US history (measured as a share of GDP) and has already begun to dominate and distort the market.
Over the past 12 months, Monks' share price return was 11.9%, and its net asset value return was 10.3%, both lagging the FTSE World benchmark's 20.9%. The report acknowledges that part of the reason lies in differences in AI exposure. This quarter, the fund team revisited its thinking to answer a core question: How to benefit from growth of this magnitude without being held hostage by a single theme?
Demand-side data is robust, with the four giants both willing and able to continue investing. Azure and other cloud service revenue grew 43% year-over-year, with a customer order backlog large enough to cover the entire three-year budget of the UK's NHS (National Health Service). Amazon expects cash capital expenditure of $220 billion this year, yet even so, it cannot meet demand over the next two years. CEO Andy Jassy described the demand already visible for 2028 as "striking" during the July 2026 earnings call.
Usage of AI agents has already surpassed that of humans and is expanding rapidly—though Cisco President Jeetu Patel notes that fewer than 2% of humans currently use agents. The debt ratios of the four major tech companies are far lower than those of global market peers, and their funding sources are diversifying. The report concludes: Demand exists, and the capacity for sustained investment exists.
Monks' core AI holdings are built around "durable system foundations," with new additions to alleviate capacity bottlenecks. Core holdings include NVIDIA, TSMC, and Amazon. The author's original words: "We’re positioning Monks around the winners of the next five years, not the past few."
This quarter, four semiconductor equipment companies were added, including Disco (whose equipment is used for wafer grinding and polishing) and Kokusai (whose machines handle thin-film deposition for memory chips), both of which dominate critical manufacturing steps. As technology evolves, new bottlenecks emerge: newly added Astera Labs provides connectivity chips to prevent expensive AI chips from sitting idle; SoftBank, through its investment in Arm (a logic chip design company) and other AI ecosystem investments, offers the fund undervalued related exposure.
Monks ensures growth is not dominated by AI, adding banks, energy, and software companies this quarter. New additions include Cullen/Frost, a Texas bank benefiting from high interest rates and regulatory easing, and Cheniere Energy, an energy company benefiting from supply tightness. The fund also participated in the IPO of Italian software company Bending Spoons, which acquires mature software businesses and significantly boosts their efficiency and profitability.
On the sell side, the fund exited modular workspace and storage container supplier WillScot and utility pole manufacturer Stella-Jones, citing a lack of evidence that either has pricing power.
Quarterly performance contributors have already diversified, including The Schiehallion Fund (an investment trust focused on late-stage private companies), Petrobras (Brazilian oil giant), and Thermo Fisher (medical equipment). Detractors include CATL (batteries), SpaceX (rockets), and AppLovin (in-game advertising).
Monks' strategy is to maintain selective exposure amid ongoing AI investment while balancing with non-AI growth drivers such as banks, energy, and software. Over the past year, portfolio profit growth exceeded 30% (vs. 25% for the index), with higher margins and returns on capital, yet the portfolio's valuation relative to the index remains near a decade low. The author considers this "the best long-term growth path," but readers should note: This is a holder's perspective, and the recent relative underperformance (11.9% vs. 20.9%) represents objective pressure.
| Ticker | Direction | Author's One-Sentence View | Key Data |
|---|---|---|---|
| Amazon | Hold & Observe | Core AI holding, benefiting from cloud service growth and capital expenditure expansion | Expected cash capital expenditure of $220 billion this year; Azure and other cloud services revenue up 43% year-over-year |
| NVIDIA | Hold & Observe | Core AI holding, serving as a "durable system foundation" | No specific data provided |
| TSMC | Hold & Observe | Core AI holding, serving as a "durable system foundation" | No specific data provided |
| Disco | New Position | Newly added semiconductor equipment company, dominant in key wafer grinding and polishing processes | No specific data provided |
| Kokusai | New Position | Newly added semiconductor equipment company, its machines used for thin-film deposition in memory chips | No specific data provided |
| Astera Labs | New Position | Provides connectivity chips to prevent costly AI chips from sitting idle | No specific data provided |
| SoftBank | New Position | Offers undervalued exposure to the AI ecosystem through investments in Arm and others | No specific data provided |
| Cullen/Frost | New Position | Texas bank benefiting from high interest rates and regulatory easing | No specific data provided |
| Cheniere Energy | New Position | Energy company benefiting from supply tightness | No specific data provided |
| Bending Spoons | New Position | Participating in its IPO; the company acquires mature software businesses and improves efficiency and profitability | No specific data provided |
| WillScot | Closed Position | No evidence of ability to raise prices | No specific data provided |
| Stella-Jones | Closed Position | No evidence of ability to raise prices | No specific data provided |
| The Schiehallion Fund | Hold & Observe | One of the quarter's performance contributors; an investment trust focused on late-stage private companies | No specific data provided |
| Petrobras | Hold & Observe | One of the quarter's performance contributors; Brazilian oil giant | No specific data provided |
| Thermo Fisher | Hold & Observe | One of the quarter's performance contributors; medical equipment company | No specific data provided |
| CATL | Hold & Observe | Quarter's performance drag; battery company | No specific data provided |
| SpaceX | Hold & Observe | Quarter's performance drag; rocket company | No specific data provided |
| AppLovin | Hold & Observe | Quarter's performance drag; in-game advertising company | No specific data provided |