Australia’s top technology investors have bounced back from a tough start to the year as booming demand for chips that power artificial intelligence unleashes an explosive rally in semiconductor stocks, fuelling bumper returns in April for growth-focused funds.
Investors have piled into technology stocks amid signs that the giant AI providers are continuing to ramp up spending. The four biggest spenders – Amazon, Microsoft, Alphabet and Meta – are expected to plough nearly $US700 billion ($982 billion) into capital expenses this year.
That has triggered a surge in earnings expectations for semiconductor stocks, which are, in the first quarter, on track to jump 84 per cent from a year ago. The Philadelphia semiconductor index has rallied about 60 per cent this year as investors tussle for a slice of the booming profits.
Munro Partners’ $1.7 billion Global Growth Fund was among the biggest beneficiaries of last month’s rally, returning 10 per cent in April thanks to its positions in Taiwan Semiconductor Manufacturing Company (TSMC), Broadcom and Amazon.
“What you’re seeing right now is the equity market realising what’s been happening for two years now, which is that hyperscale capex just keeps going up because they keep planning new projects,” said Munro chief investment officer Nick Griffin.
“For some unknown reason, the equity market has consistently tried to take the opposite view, but now you’re seeing everyone cross the aisle very quickly because it has become dramatically apparent that the AI capex build-out is only just getting started.”
Software stocks were battered earlier this year amid fears that their business models would be disrupted by more powerful AI tools. While that hurt the returns of many growth funds, the recent rally in semiconductor stocks has triggered a resurgence.
Griffin believes the shift in market sentiment has been fuelled by the surge in AI provider Anthropic’s average revenue run rate from $US9 billion at the end of last year to $US30 billion ($42 billion). The annual run rate – a popular benchmark among tech start-ups – extrapolates the current sales level over a full year.
Anthropic’s windfall has been driven by growing demand for tokens, which are the fundamental units of text that AI models use to understand and process language.
“People around the world are finding great uses for agentic AI,” Griffin said. “Rather than asking AI a question, and it gives you an answer, people are sending computers off to do tasks that take days, and those tasks are using between 150,000 and over 1 million times more compute than just asking ChatGPT a question.
“So Anthropic is giving us a real-time update of the explosion of token growth, which is reflected in its revenue going parabolic.”
Loftus Peak chief investment officer Alex Pollak said Wall Street’s quarterly reporting season revealed that the rollout of AI infrastructure is on track and heading towards an even larger magnitude than previously expected.
Loftus’ $751 million Global Disruption Fund returned 10.6 per cent as holdings in Alphabet, Amazon, and Nvidia rallied alongside semiconductor stocks Advanced Micro Devices, TSMC and Broadcom.
“Despite the sudden upward movements in many of these chip stocks, the sheer demand for AI chips is still increasing,” Pollak said.
One of the best-performing funds last month was the Frazis Fund, helmed by tech investor Michael Frazis, which returned a whopping 25 per cent and is now up more than 70 per cent over the past 12 months.
While Frazis started April with one of its highest cash balances, he bought aggressively throughout the month amid signs there would be an imminent wave of buying from quantitative investors.
“We knew the buying was coming, but we didn’t expect it so soon,” he said.
While the firm’s exposure to the semiconductor sector was weighted heavily towards mega-cap stocks such as Nvidia and Broadcom, it also had small positions in so-called bottleneck companies, which provide the infrastructure, power, or components needed to build and operate AI.
