Friday, March 1, 2024

Profit at world’s biggest sovereign-wealth fund comes roaring back thanks to tech and AI

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Norway’s sovereign-wealth fund earned a profit of $143 billion (1.500 billion kroner) in the first half of 2023, thanks to its investments in technology stocks, specifically the hot area of artificial intelligence.

Norges Bank Investment Management, which operates the $1.45 trillion sovereign-wealth fund, on Wednesday also reported a record loss for the fund of $164 billion in 2022 due to sharp declines seen for most equity stocks, barring energy.

Equities made up a 71.3% chunk of the fund, with fixed income at 26.4%, with unlisted real estate and renewable energy infrastructure making up the rest. The fund’s market value rose 2.87 billion kroner to 15.299 billion ($1.45 trillion), as it returned 10% in the period.

Norges Bank said equity investments saw a 13.7% return for the period, with technology stocks up 38.6%, the strongest return of the period, and the manager tied that to demand for new AI solutions from internet and software companies and chip suppliers.

The second-best performing sector was consumer discretionary, with a return of 20.7%. while industrials were third in line, with a return of 15%. In a marked shift from last year, energy companies returned just 0.4%, as prices of oil and gas products fell back from 2022 highs.

The below chart shows the fund’s largest equity holdings to date, which is led by Apple

and Nvidia


Norges Bank Investment Management

But the fund looks set to pull back on its tech investments, with signs elsewhere that investors are getting wary that recouped losses could be lost if they hang on too long.

At a press conference on Wednesday, Norges Bank Investment Management Chief Executive Nicolai Tangen, said the fund recently trimmed its overweight stance on big tech companies, according to Reuters.

Tangen was also asked if he was worried about another tech rout: “We are always conscious and worried about the biggest exposures of the fund. Now they are in the tech sector. Therefore we monitor that very thoroughly.”

In a separate statement, Tangen and other executives urged “responsible development and use of AI.

“We support the development of a comprehensive and cohesive regulatory framework for AI that facilitates safe innovation and mitigation of adverse impacts,” they said.

Those key elements of responsibility include board accountability, transparency and explainability, robust risk management processes that look past traditional business risks, addressing privacy, security, nondiscrimination, and human oversight and control. 

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