Norway’s sovereign wealth fund, the world’s largest single stock market investor, posted a profit of 1.5 trillion Norwegian kroner ($143 billion) in the first half of the year, driven by strong equity markets and a weak crown currency. The fund attributed its impressive performance to the A.I. gold rush that boosted its tech holdings, which make up a large portion of its portfolio.
The fund’s return beats the market average
The fund, which manages the wealth derived from Norway’s oil and gas resources, announced on Wednesday that it had achieved a 10% return for the first half of the year, amounting to 1.5 trillion Norwegian kroner ($143 billion). In comparison, the S&P 500 logged a return of around 16% in the first half of 2023.
The fund gained almost 14% from its stock holdings in the six months to June 30, with its fixed income assets returning just over 2%. The fund’s return was stunted, however, by a 4.6% loss on unlisted real estate investments and a 6.5% loss on unlisted renewable energy investments.
By the end of the first half of the year, the fund was valued at 15.3 trillion kroner ($1.4 trillion), with 71% of that value coming from equities. According to news agency Reuters, the fund, which is almost three times the size of Norway’s economy, owns around 1.5% of the world’s stocks.
Between 1998 and June 2023, the fund generated an annualized return of just under 6%. However, last year—which saw stocks take their worst battering since the financial crisis—Norway’s wealth fund suffered a 14% loss, the second-worst return in its history after a 23% loss at the height of the 2008 crash.
The A.I. gold rush fuels tech stocks growth
The fund cited a strong equity market for its boosted returns for the first six months of the year, noting that the A.I. gold rush had driven a boom in tech stocks—which make up a sizable proportion of its portfolio.
Apple was the fund’s biggest equity holding by June 30, while Microsoft, Google parent firm Alphabet, Amazon, and Nvidia—all of which have seen their market caps boosted by their focus on generative A.I.—rounded out the fund’s top five stock investments. It also held large stakes in Facebook parent Meta, Elon Musk’s Tesla, and U.S. banking giant JPMorgan.
“Technology stocks especially have seen significant growth, largely driven by the increased demand for new solutions in artificial intelligence,” Nicolai Tangen, CEO of Norges Bank Investment Management—which manages the fund—said in a statement on Wednesday.
Tech stocks returned 38.6% for the fund in the first half, with consumer discretionary stocks coming in as the fund’s second-strongest holdings with a return of more than 20%.
The fund reduces its exposure to top tech companies
Despite its stellar performance from tech stocks, the fund said it had recently reduced its overweight position in top tech companies. Tech holdings were about 12% of the fund’s total value at the end of 2022, representing the largest sector of its equity investments.
“We are always conscious and worried about the biggest exposures of the fund,” Tangen told Reuters separately. “Now they are in the tech sector. Therefore we monitor that very thoroughly.”
The fund also said it was ramping up engagement with companies in its portfolio on artificial intelligence to ensure accountability on each board of directors.
“Boards are absolutely not on top of this,” Tangen told the Financial Times. He also said that any companies lacking in AI expertise on the director level wouldn’t get the fund’s support.
He added that regulating AI will be difficult because the US-China rivalry has made the technology critical to various sectors and industries.
“If you don’t think there are opportunities with AI, then in my mind you are a complete moron,” he said.