Allianz Technology (ATT ) has proven mega-caps aren’t the only tech story worth following, as cybersecurity and cloud computing helped power the portfolio last year.

The £1.5bn trust kept pace with its Dow Jones World Technology benchmark in the 2024 with a net asset value (NAV) total return of 35.6% against 35.8% for the index. Over the year, the shares in the trust were up 38.1%, as the discount narrowed from double figures to 8.6%.

While tech stocks have dominated returns in global markets – epecially the largest ‘magnificent seven’ names in the US – stockpicker Mike Seidenberg managed to keep up while being underweight these mega-cap stocks.

Chair of the trust Tim Scholefield said: ‘Keeping pace with the benchmark without resorting to holding index weights in the largest companies is a “win” in our view as it means we have broadly matched that performance without exposing shareholders to excessive concentration risk.’

While the likes of Nvidia dominated returns and investor interest over the year, as the AI boom showed no signs of slowing, Seidenberg benefited from growth outside of the largest names.

Cybersecurity was a ‘crucial’ sector over the year given the new threats arising from AI-powered attacks, which can be used for automated phishing, malware generation, and social engineering campaigns.

‘Security teams have met fire with fire, deploying AI-driven tools to detect anomalies and automate responses,’ he said.

The long-run theme of cloud computing continued to boost the portfolio, given its ability to help companies ‘right size’ technology infrastructure, cutting costly investment cycles.

‘The migration to cloud computing continued to grow, with 65% of technology decision-makers anticipating an increase in cloud spending over the next year,’ said Seidenberg, who has been running the trust for three years since the retirement of Walter Price. 

The semiconductor sector was an important contributor to the portfolio, as it has been for markets generally, and while Nvidia is the top holding in the trust at 10.7% and delivered strong gains, Seidenberg said it did not contribute to relative returns given his holding is below the benchmark weight of 12%.

More important for relative returns were Taiwan Semiconductor Manufacturing and Broadcom, which returned 95.4% and 114.2%, respectively.

A new purchase in August turned out to be an extremely positive decision as Palantir Technologies provided the largest relative contribution to returns.

The specialist software developer for big data analysis saw its shares rally on excitement around AI-related applications and news that it had been promoted to the S&P 500.

‘We continue to hold it, with the shift in IT spending towards AI showing few signs of weakness,’ said Seidenberg.

Recent additions to the portfolio include semiconductor tech producer Marvell Technology, which is ‘attracting interest from the hyperscalers’ in the data centre space, restaurant management software maker Toast, social networking platform Reddit, and payments giant Paypal following a revamp of its management team.

Atlassian Corp, which designs software for project management, was also added as it ‘continues to see a strong pipeline of growth, with product upgrades and migrations to its cloud business’.

One position that was exited in full was Intel Corp after the shares were hit by weak earnings and ‘lacklustre’ forecasts.

‘The company has lagged behind several of its chip-making rivals in terms of revenue and innovation,’ said Seidenberg.

‘We keep an eye on the stock, but other chip makers have better exposure to AI and other leading technologies. In our view, once a company is behind in the semiconductor industry, it is difficult to catch up.’

Software will continue to be Seidenberg’s focus this year as he believes AI spending will shift from infrastructure to software and services as ‘the use cases...emerge and expand’.

‘This expansion should drive efficiency gains, spark innovation and create new business models,’ he said.

AI will also continue to redefine cybersecurity as it is used to ‘detect anomalies, predict threats and automate responses to attacks’.

While trade wars, geopolitics and concerns about global growth all remain headwinds for technology, and stock markets more generally, Seidenberg said AI and digitalisation ‘coupled with a more favourable regulatory environment and a boost in merger and acquisition activity, should support the technology sector in the year ahead’.

Deutsche Numis analyst Gavin Trodd noted ATT had been caught up in the tech sell-off since the end of the year, with its portfolio down 12.2% in 2024, in line with the index. 

‘We believe that the market correction may be healthy, over the midterm, as market leadership shifts away from mega-cap US tech stocks,’ he said.

‘A greater dispersion of market returns favours an active approach, and we believe that the manager, Mike Seidenberg, is well-placed to capitalise on the widening opportunity set.’

The analyst added: ‘Since [Seidenberg] took over as lead manager in June 2022, ATT has produced NAV total returns of 67% compared to 69% for the index and 58% for Polar Capital Technology (PCT ), which we believe is impressive given it has been notably underweight US mega cap tech for the majority of this period.’