AustralianSuper is back in the headlines as a result of its sizeable exposure to Nvidia, with its CEO insisting DeepSeek hasn’t dented US exceptionalism.
Nvidia appears to be on a recovery streak after it suffered a $1 trillion blow following the emergence of a start-up in China that caused fractures in its once-impenetrable popularity.
While the company’s stocks are gaining, their 17 per cent freefall on Monday is being considered a timely reminder of Nvidia’s volatility.
Nvidia, which is up around 100 per cent over the past year, has often found itself at the centre of discussion pertaining to the potential volatility of US tech stocks given their exaggerated value.
Overall, US tech companies are trading at premium valuations, with major AI players like Nvidia, and its peers Microsoft and Alphabet, commanding forward P/E multiples far above historical averages.
According to market analysts, one of the main takeaways from the rapid rise of DeepSeek is the true vulnerability of US tech stocks and, therefore the broader US sharemarket, which is highly concentrated on a select few mega firms.
And while DeepSeek’s cheaper and possibly more efficient version of ChatGPT doesn’t necessarily signal an apocalypse for US tech darlings, some fund managers are saying investors begin to look beyond big tech when considering US market exposure.
One such investor, with a sizeable exposure to Nvidia, is Australia’s largest superannuation fund AustralianSuper, which held some $2 billion of the tech giant’s shares at the end of June.
Speaking to Bloomberg TV on Tuesday, the fund’s CEO Paul Schroder, welcomed the birth of DeepSeek and applauded its significance to the broader evolution of technology, but denied that it has dented US exceptionalism.
Referring to the start-up’s entrance as a “mid-cycle efficiency gain”, the CEO said: “Somebody’s come along and said, ‘We can do that much more cheaply,’ and I was very interested in President Trump’s remarks that it’s a wake-up call.
“We welcome competition, we welcome efficiency, we think there’s tremendous opportunity in investing in technology.”
As for the broader impact DeepSeek has had on the US stock market, Schroder said that the US remains “an incredible place to invest”.
“We’ve got a wonderful office there with 60 people that we intend to double. The worst thing anybody could have done in the last century is bet against the US, there is no reason to bet against it now,” he said.
“We are fully and utterly committed to the US economy and its success and we will very thoughtfully invest.”
US tech stocks have been particularly fruitful for Australian super funds, driving up their returns over the past year.
In a performance update published this week, AustralianSuper reported strong member returns for the six months to 31 December 2024, driven by gains in local and global sharemarkets.
It credited a handful of major US tech stocks and a stronger US dollar for the international boost.
AustralianSuper’s balanced option returned 5.47 per cent for Super and 6.06 per cent for Choice Income, with 10-year annual returns at 8.11 per cent and 8.87 per cent, respectively.
The high growth option gained 6.31 per cent in Super and 6.99 per cent in Choice Income, driven by growth assets.
Overall, SuperRatings estimated the super sector returned 11.5 per cent last year, fuelled by strong stock market performance.
