Scottish Mortgage worries about its AI exposure – it might be too low

Source: Trustnet

Markets have spent much of early 2026 fretting about AI overinvestment and inflated valuations and yet, in an inversion of the anxiety dominating most investor conversations, the Scottish Mortgage investment trust is more concerned about missing the artificial intelligence opportunity than being burned by it.

Lawrence Burns, co-manager of the £10bn trust, said it is “genuinely plausible that AI is the biggest technological revolution of our lifetimes”.

“Do we have enough exposure, given the opportunity that exists, and do we have the right type of exposure across the AI stack?”

This comes after a bruising few months for parts of the portfolio. AI-related stocks have delivered a mixed picture in 2026, with software names in particular selling off sharply – which FE fundinfo Alpha Manager Tom Slater attributed to AI itself.

Coding, long a bottleneck for businesses across every industry, is increasingly being automated. That is good news for the economy, he argued, but it compresses the value of companies whose edge was simply writing software.

“If you have a value chain where the constraint has been software developers and that constraint is no longer the key constraint, then value will shift,” he said.

But not all software is equally exposed. Slater pointed to Shopify as a company whose revenue model could withstand the threat. The platform makes much of its money through payment processing rather than software licensing, meaning that even in an AI world, transactions would still go through Shopify's checkout. “The mechanism through which they generate value is untouched,” he said.

AI will commoditise many things but the infrastructure underpinning it – the payment rails, the compute and the frontier models – will remain relevant.

That logic underpins the trust's investment in Anthropic, the AI safety company and developer of the Claude large language models, in which Scottish Mortgage took a position in 2025.

Burns noted consumer AI users switch freely between ChatGPT, Gemini and other models. Enterprise customers, by contrast, integrate AI into proprietary data, creating switching costs that consumer products do not have.

“The willingness for enterprises to pay is clearer and larger than on consumers,” he said.

The trust also holds Minimax, a Chinese frontier model developer, alongside Anthropic, to broaden out from a single bet on one provider.

Performance of fund against index and sector over 1yr

Source: FE Analytics

Yet the trust's biggest single position is not an AI company in the conventional sense. SpaceX, the private space launch and satellite business controlled by Elon Musk, has grown to a size that is now straining the portfolio's construction.

Because of its appreciation, it has pushed the trust's allocation to private companies above 30%, which Burns acknowledged restricts the team's ability to make new investments in the near term. A SpaceX IPO, expected potentially in the middle or latter part of this year, would free up that capacity.

The concentration is justified, Burns argued, as he believes SpaceX is on a path to becoming a monopolistic provider of AI compute from orbit, exploiting the fact that satellites in permanent daylight can harvest solar power without batteries or land constraints, solving what he identified as the primary bottleneck to AI expansion on Earth.

“The biggest constraint to the build-out of AI is power,” he said. “If we move AI compute to space, you can dramatically grow the amount of power you're using.”

The Financial Times has called space-based data centres financially unviable. Burns does not dispute the economics and yet on Earth, data centre costs (land, cooling, power infrastructure) are rising, while the cost of getting mass into orbit, driven by SpaceX's own launch economics, is falling sharply.

“You can see a situation where the lines cross,” he said. “The moment they cross, it becomes a huge opportunity which only one company can access.”

That kind of single-company concentration is not without risk, as Slater admitted. If Starship fails to deliver or regulatory obstacles mount, SpaceX is the trust's biggest vulnerability.

However, “the challenge is often the thing you didn't account for,” and diversification across the rest of the portfolio should help.

On Elon Musk himself, whose political profile has become a live question for many investors, Slater had yet another contrasting view.

“This is an individual who has created an enormous amount of shareholder value, both generally and specifically for Scottish Mortgage shareholders over the past 10 to 15 years,” he said. “I do not spend much time thinking about Musk as a risk”.

However, Burns noted the trust has materially reduced its Tesla position over the past 18 months, shifting how the association to Musk is expressed in the portfolio.