The investment trust reaped the rewards from the Asian AI chip supplier boom with a total return of 34.4% of net asset value (NAV) beating the 25.6% gain in the MSCI AC Asia Pacific ex-Japan index.

Fund managers Robin Parbrook and Lee King Fuei are cautious following the rally, which has pushed the trust’s share up 80% in the past three years, ahead of the benchmark 69%.

The managers revealed three changes made to the portfolio in the first half of the year to protect the trust, including trimming its positions in Taiwan technology companies, adding more defensive, higher-yielding stocks in Hong Kong and consolidating their internet holdings in China into “key names” believed to be less vulnerable to AI disruption.

They said the outlook for AI capital expenditure was the main debate colleagues at Schroders were having following South Korea surging 121% in the six months to June 30.

They said: “Recent results from US hyperscalers suggest the AI boom has not yet slowed, but warning signs are emerging. Even higher capital expenditure is no longer being rewarded with rising share prices; indeed, Meta, Microsoft and Oracle are all down materially over the past year, with only Alphabet outperforming.”

The fund managers raised concerns over the rise in cheap Chinese AI alternatives, adding:“This model was another wake-up moment with its capability being very close to leading AI models from OpenAI and Anthropic. Hot on its heels we had the latest version of Alibaba’s Qwen model which has similar or even better capabilities than Kimi K3.”

They added: “We think valuations for all LLM providers will be questioned. For most uses you don’t need a cutting-edge AI model. Given this, we believe risks are now rising that the market questions the assumed valuations for companies like OpenAI. With revenue growth slowing, competition rising is it credible that loss-making OpenAI is worth 10 times what it was in early January 2024.

“If the hyperscalers’ key customers – the LLM providers like OpenAI – struggle to generate cash flows, we are beginning to question how long the unprecedented AI data centre capital expenditure boom can continue, particularly given how much has been funded through circular and increasingly opaque financing structures.”

The managers said they remained bullish on the outlook for AI tech stocks in Asia but were continuing to trim positions if stocks rose furthere, noting they were focused on stocks with high intellectual property and genuine growth drivers and no exposure to LLMs and data centres “where we see multiple providers and currently little product or service differentiation.”

ART’s  saw its share price rise by 16% in the past three years after a 25% exit, with the planned Pacific Assets merger expected to see the trust’s assets grow to more than £1bn.

The trusts top 10 stocks were 16% in Taiwan Semiconductor Manufacturing Company, 9.4% in Samsung Electronics, followed by positions of over 4% each in Mediatek, ASE Technology, and SK Hynix and around 4% in Tencent.

The managers kept borrowing, at around 5% and moved their hedging models from neutral to more cautious because of rising valuations in Korea and Taiwan. 

The total share price was 27.8% in the six months to June 30. The discount widened from 1.1% Dec 2025 to 6% June 2026.