Top-Performing Fund Manager Bets on AI, Cloud Tech; Shuns Apple – Financial Post

(Bloomberg) If you want to catch the brisk recovery rally in tech stocks this year, youd better buy shares exposed to artificial intelligence, such as Nvidia Corp., or cloud computing and avoid the popular behemoths like Apple Inc., Google-parent Alphabet Inc. and Meta Platforms Inc.

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Thats the view of Zehrid Osmani, manager of Franklin Templetons $158 million FTGF Martin Currie Global Long-Term Unconstrained Fund, which is beating 96% of peers in 2023 with returns of about 15% versus an 8% gain in the MSCI All-Country World Index, according to data compiled by Bloomberg. Nvidia, one of the biggest beneficiaries of AI-related demand, Dutch semiconductor firm ASML Holding NV and Microsoft Corp. rank among the funds biggest holdings.

While Osmani is overweight the tech sector as a whole, hes notably staying away from Apple, Alphabet, Facebook-owner Meta and Netflix Inc. as theyre more directly exposed to the consumer, the fund manager said in an interview in London. They also score poorly on the funds fundamental metrics scale, which includes themes such as infrastructure, green and alternative energy and electric transportation.

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Tech is still attractive as we think the Federal Reserve is done hiking rates, although we dont expect rate cuts, Osmani said. But you have to look at it through different segments rather than invest across Big Tech.

The fund manager is among a chorus of market participants bullish on AI-related stocks. An analysis by Societe Generale SA strategists found that, without the hype around AI, the S&P 500 index would be lower this year instead of having gained 8%. The team at Goldman Sachs Group Inc. said AI-related shares now offer the biggest potential long-term support for US profit margins.

Banks Unattractive

Osmani is also staying away from banks globally, despite cheaper valuations. The sudden collapse of a slate of US regional banks since March has roiled the sector and prompted investors to slash allocation to financials at a pace not seen since before the global financial crisis, according to Bank of America Corp.s latest global fund manager survey.

Banking is an industry that has high competitive pressures, diminishing barriers to entry, low pricing power and is facing a higher risk of disruption, Osmani said. All of which leads us to believe that the industry dynamics arent attractive.

With assistance from Ksenia Galouchko.

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Top-Performing Fund Manager Bets on AI, Cloud Tech; Shuns Apple - Financial Post