Performance, Commentary & Portfolio

Fund Manager’s Review

Portfolio overview

Allianz Technology Trust’s Net Asset Value (NAV) total return was 10.50% in October, compared to the Dow Jones World Technology Index return of 9.05% in GBP

Global equities closed October higher, with Japanese stocks among the strongest performers, after fiscally dovish (i.e. favouring lower interest rates and being more willing to use government spending to stimulate the economy) Sanae Takaichi was appointed to serve as the country’s Prime Minister, while an extended U.S. government shutdown clouded the outlook. In late October, U.S. President Donald Trump and Chinese President Xi Jinping agreed to postpone export controls on rare earths and semiconductors as part of a one year trade deal, although sentiment was knocked by cautious U.S. Federal Reserve comments about future rate cuts.

Monthly relative performance versus the benchmark was driven by positive bottom-up stock selection, which was offset partially by shortterm industry allocation impacts. Favourable stockpicking in electronic equipment as well as below-benchmark weight and bottom-up stock picks in software led relative outperformance. Our exposure to broadline retail and an above-benchmark allocation to entertainment stocks offset results in October.

Contributors

Our active position in Micron Technology, Inc., a leading memory and storage semiconductor company, led relative results for the second month in a row as investors drove the stock price up on continued pricing strength in high-bandwidth memory (HBM) tied to artificial intelligence (AI) demand and better-than-expected margin recovery as the memory cycle tightened.

Similarly, shares of Celestica Inc., an electronics manufacturing services company that builds hardware for data centres, networking, and industrial customers, rose on strong AI-related hardware orders and increased visibility in hyperscale infrastructure builds, driving raised full-year guidance.

Snowflake Inc., a provider of cloud-based data platform that lets enterprises manage, store, and analyse data across cloud providers, advanced thanks to optimism around accelerating adoption of the company’s AI and application platform features, along with improving consumption trends and expanding enterprise deals.

Our underweight allocation to enterprise software and security giant Microsoft Corp. aided results given the company’s large Index weight and flat monthly performance, while our active position in semiconductor manufacturing equipment maker Lam Research Corp. contributed to performance as chip-equipment orders accelerated with the next wave of AI-driven foundry investments and improving wafer-fab equipment spending.

Detractors

Our relative underweight allocation to internet search, digital advertising, cloud services, and AI infrastructure Alphabet Inc. offset results as the stock advanced thanks to better-than-expected earnings driven by accelerating AI-related cloud revenue, stronger-than-forecast advertising growth and expanding operating margins. We incrementally added to our position during the month given the stock’s attractive alpha profile (excess return versus the benchmark).

Our avoidance of two South Korean stocks: chipmaker SK hynix Inc. and semiconductor and consumer conglomerate Samsung Electronics Co., Ltd. offset results as both stocks rallied thanks to favourable country tailwinds, demand for AI-related applications, and expectations of margin improvement.

Our positioning in TSMC offset performance given the short-term performance differential between the ADR (American Depository Receipt) which we own, relative to the greater advance in the company’s local market shares, as the stock notched higher following upside earnings results.

An off-benchmark position in , a Chinese technology giant operating e-commerce, cloud, logistics, and digital media businesses, offset results amid concerns about regulatory and macroeconomic headwinds in the country’s technology sector.

New buys and sells 

Turnover in October was undertaken at a higher-than-typical level to improve the risk versus reward of the portfolio. We newly purchased shares of Bloom Energy Corp., an electrical power provider, as the company’s growth investment thesis centres on capturing explosive demand from AI data centres that require immediate, grid-independent power solutions. We bought cyber security pureplay Palo Alto Networks, Inc. due to increased confidence following solid earnings results and potential for incremental growth related to their CyberArk acquisition. We also added two technology hardware companies: Sandisk Corp. given the company’s memory solutions which is well-positioned for secular growth in AI-driven storage demand, and IONQ Inc., a trapped‑ion quantum computing hardware provider (a type of quantum computer that uses ions (electrically charged atoms) as its qubits, which are trapped and suspended in free space using electromagnetic fields), which has accelerating commercialisation momentum, strong cloud distribution, and marquee ecosystem collaborations, providing high-risk, and potentially high-upside potential. Lastly, we added Rocket Lab Corp. given the compelling growth potential in the rapidly expanding space economy, offering investors exposure to a vertically integrated launch and space systems provider with multiple catalysts ahead. We funded these new buys in part via the exit of three software companies: Atlassian Corp., Intuit Inc., and monday.com Ltd., due to moderating near-term conviction. We sold our position in Amazon.com Inc. given our expectation that there are other stocks with a better growth versus valuation mix. We exited our stake in chipmaker NXP Semiconductors amid expectations of more muted risk versus reward compared to other companies in the industry as well as restaurant point of sale and management system Toast, Inc. due to moderating growth expectations and higher levels of competition.

Market Outlook 

Our outlook for technology stocks remains constructive against a backdrop of secular growth, largely in AI and related applications. We anticipate macroeconomic sentiment will continue to notch higher in light of fewer global conflicts and expectations of central bank interest rate cuts, which may help further improve industry prospects. Corporate earnings remain broadly positive and many companies are increasing their forward guidance. Although near-term uncertainty may preside, we maintain a positive mid-to-long-term outlook for equity markets and we continue to believe market leaders who execute well are likely to be rewarded regardless of the macroeconomic landscape.

Our focus remains on building the portfolio from a bottom-up perspective with a macro-overview. Technology remains a key enabler across almost every vertical industry and we will continue to seek stocks which solve difficult problems and can be long-term outperformers. Despite shortterm periods of higher volatility, earnings growth ultimately drives stock prices over the long term, and in our view, we are still early in the spending trend supporting this dynamic segment.

Awards & Ratings

A ranking, a rating or an award provides no indicator of future performance and is not constant over time.