Baillie Cools Out on Tech in Favor of ‘Boring’ Infrastructure Stocks

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(Bloomberg) — Baillie Gifford & Co., known for investing in hyper-growth tech stocks, now likes “boring” US infrastructure companies as it sees a building boom after many years of under-investment.

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“We think there’s going to be a massive building boom certainly in the US, the UK and in some other places,” Stuart Dunbar, a partner at the Edinburgh-based firm, told Bloomberg in Tokyo. Baillie Gifford still likes some US big tech stocks but is underweight on many of them now because of high valuations, he said.

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“In parts of Europe and the US, the infrastructure is crumbling. “It’s been underdeveloped for 50 years and it’s getting to the point where it can no longer be ignored, and the bridges are literally crumbling,” said Dunbar. “It’s an unexpected source of growth, like integrated building providers, drainage system providers,” he said, citing companies like Advanced Drainage Systems Inc. and Stella-Jones Inc. as some of its favorites.

Baillie Gifford is known for its big bets on big tech companies like Tesla Inc., Meta Platforms Inc. and Amazon.com Inc. But it now has the lowest weighting on such a US stock – an unusual situation for the company – despite its long-term upside. the view of the time about them, said Dunbar.

Investments in plumbing and utility pole providers are by no means a departure from the stock’s growth strategy, however. “We’re going to look wherever we need to look to try to find companies that we think have the potential to not only grow quickly, but to make that profitable,” Dunbar said.

In technology stocks, Nvidia Corp.’s top rating. depends on continued growth, according to the investment manager. Nvidia, which makes chips used for AI data centers, trades at 34 times forward earnings, more than 23 times the S&P 500 index.

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“That growth is not going to be sustainable in the long run unless we start to see the emerging value of AI systems, so we’ve been cutting back a lot,” Dunbar said, adding that Baillie Gifford still owns Nvidia and doesn’t. I have a bad idea.

Baillie Gifford is very wary of Google parent Alphabet Inc., worried that “AI could be the killer of Google,” Dunbar said. On the other hand, it is still a follower of Amazon because the strong use of research and development allows it to maintain a strong competitive position.

Meta also has a strong data set from which the firm can build AI capabilities, while Tesla has an “amazing robotics and energy business” though rival BYD Co. “make better cars for half the price,” he added.

BYD is among the China tech stocks Baillie Gifford sees coming back, despite headwinds from tariff threats from the US, and Europe in the case of EV makers. Elsewhere, the investment manager thinks digital banking is an important trend, betting on fintech firms like Nu Holdings Ltd. in Brazil and Adyen NV of the Netherlands.

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