Former Scottish Mortgage Trust (SMT) fund manager James Anderson has expressed concern about a bubble in artificial intelligence (AI) following Nvidia’s plan to invest $100bn in OpenAI.
Anderson, who now runs a fund at Lingotto Investment Management, a firm backed by Italy’s billionaire Agnelli family, told the Financial Times that the surge in valuations in OpenAI from $157bn to $500bn in less than a year and the near tripling in rival Anthropic to $170bn in six months were also reminiscent of the dotcom excesses at the start of the century.
“I think one needs to be honest that those sudden increases [in valuation] that people were willing to place on OpenAI, Anthropic and the like were disconcerting,” he told the FT. “That scale of jump and the pace with which it happened did bother me.”
Anderson, who retired from Edinburgh-based Baillie Gifford in April 2022 after nearly 40 years, was renowned for steering Scottish Mortgage’s global portfolio into large stakes in disruptive technology companies like Amazon and Tesla. This pushed Scottish Mortgage briefly to a £20bn valuation after its shares soared in the online boom spurred by the lockdowns in the 2020 Covid pandemic. The trust’s shares peaked at £15.28 five months before his departure, then plunged as inflation and interest rates rose following Russia’s invasion of Ukraine. Despite a recovery in the past two years, the Baillie Gifford flagship remains 25% below its high and has a market value of £12.8bn.
Anderson remains an active investor in technology stocks as co-manager of the $1.1bn Lingotto Innovation Strategy with New York-based Morgan Samet. The fund trimmed its position in AI chip-maker Nvidia earlier this year and its biggest holding is now Chinese battery maker CATL after its stock surged.
Anderson told the FT he was a “huge admirer” of Nvidia which has soared to a $4tn valuation but said its planned $100bn investment in OpenAI, one of the biggest buyers of its AI systems, made him uncomfortable.
“I have to say the words ‘vendor financing’ do not carry nice reflections to somebody of my age,” he told the paper in reference to telecoms equipment makers borrowing to help their telco customers finance the buildout of the Internet at the turn of the last century.
“It’s not quite like what many of the telecom suppliers were up to in 1999-2000 but it has certain rhymes to it,” he said.
