Investing in artificial intelligence (AI) has proven to be a winning strategy for T. Rowe Price’s Global Technology Fund (PRGTX), outperforming the market for the second consecutive year. Portfolio manager Dominic Rizzo attributed the fund’s success to a four-step investing framework that led them to early positions in AI stocks and semiconductor companies like Nvidia. This early bet on AI has propelled the fund to impressive returns, with a 26% jump in 2024 following a 56% surge in 2023.
Rizzo’s investing framework is centered around key principles that have guided the fund’s success. The first pillar is identifying “linchpin technologies” critical to a company’s success, such as AI for semiconductor companies like Nvidia. The fund also looks for companies innovating in fast-growing markets, showing improving fundamentals, and maintaining a reasonable valuation. Rizzo emphasized the importance of avoiding extremely expensive or cheap stocks in the tech sector, as they may not yield favorable returns.
One of the key factors contributing to PRGTX’s success has been its early investments in AI stocks, particularly Nvidia. Nvidia, a leader in AI technology, now accounts for nearly 18% of the fund’s portfolio and has seen a 166% increase in shares since the beginning of 2024. Rizzo praised Nvidia’s comprehensive approach to AI, encompassing central processing units, graphics processing units, networking technology, and software ecosystem. In addition to Nvidia, the fund has significant holdings in other semiconductor companies like Taiwan Semiconductor Manufacturing and Advanced Micro Devices.
Diversified Portfolio
Beyond semiconductor companies, PRGTX has also made substantial investments in tech giants like Apple and Microsoft. Apple, which accounts for 12% of the portfolio, is expected to benefit from growth in its services business and smartphone sales in emerging markets. Rizzo highlighted Apple’s AI vision as a potential catalyst for future growth, particularly in driving a smartphone upgrade cycle. Microsoft, representing about 10% of the portfolio, stands out for its enterprise software leadership and Azure cloud computing business, bolstered by its partnership with OpenAI.
Positioned for Success
Rizzo’s strategic investments in companies like SAP and ServiceNow reflect his belief in the next-stage beneficiaries of AI tailwinds. These companies are well positioned to leverage the data required for AI applications, aligning with Rizzo’s forward-looking investment approach. By focusing on companies with strong fundamentals, innovative technologies, and reasonable valuations, PRGTX has navigated the tech market with precision and agility.
T. Rowe Price’s Global Technology Fund exemplifies the benefits of investing in AI with a well-defined framework. By recognizing the potential of AI in transforming various industries and identifying key players in the semiconductor and tech sectors, the fund has achieved impressive returns and outperformed the market consistently. Rizzo’s approach to investing serves as a blueprint for success in navigating the ever-evolving landscape of technology and innovation.