A drawdown in the lofty valuations of US technology companies could have far-reaching consequences for some of the UK’s largest investment trusts, which have accumulated large allocations to artificial intelligence names, according to research by broker Stifel.

Concentrated positions in Magnificent 7 stocks have driven strong returns for many of these trusts, but those tailwinds may expose them to greater losses if markets turn. With fears of an AI bubble mounting, Stifel analysts Iain Scouller and William Crighton thought it wise to review how exposed the largest global and global equity income trusts are to these companies.

‘We are always wary of the consensus view and potential bubbles, and we think when the Mag 7 does move out of favour, the shift could be dramatic with clear implications for the relative performance of the global trusts,’ they said.

JPMorgan Global Growth & Income (JGGI ) is the most highly exposed, with 28.9% of its £3.3bn portfolio held in Mag 7 stocks, the largest position being Microsoft at 7.3%. This is even higher than the MSCI ACWI index’s 21.7% weighting to the companies, which no other trust on the list exceeded.

Its high allocation to tech giants has been a primary driver of returns over the past three years, with JGGI shares soaring 59.1% over the period. This strong performance made it a popular vehicle, with the trust issuing 37.3 million shares (equivalent to almost 9% of those in issue) in its last financial year to satisfy investor demand.

‘We think the Mag 7 exposure and performance over the past three years was a key factor behind this investor enthusiasm for the shares,’ Scouller and Crighton said.

‘However, more recently the shares have moved to trade on a small discount to NAV, with the board buying back shares in the market on a regular basis as investor enthusiasm for the Mag 7 has cooled a bit.’

Shares in the trust have slipped to a 2.8% discount (having started the year on a 1.6% premium) despite positive returns, signalling that some investors may be growing concerned about its high Mag 7 weightings.

This has not perturbed JGGI, which continued to up its exposure to these stocks by 2.6 percentage points since the beginning of the year. The same can be said for Brunner (BUT ), Monks (MNKS ) and Bankers (BNKR ), which each increased their positions by 1.7, 1.6 and 0.8 percentage points respectively (since end of December 2024 or January 2025). 

Other large global trusts, on the other hand, decided to bank some of their gains in the Mag 7, with Scottish Mortgage (SMT ) dropping its allocation by five percentage points to 13.7%. This mostly came from reductions in its Tesla and Amazon positions.

Alliance Witan (ALW ) took a similar tactic, lowering its exposure as Mag 7 share prices rose by a lesser 2.5 percentage points.

Scottish Mortgage and stablemate Monks narrowly outperformed JPMorgan Global Growth & Income despite having less exposure to the Mag 7 stocks over the past three years, with returns of 59.3% and 59.8% respectively.

Some might assume that having little exposure to these market-leading stocks would markedly affect performance, but Murray International (MYI ) trailed not far behind with a share price total return of 53.4% despite being the only trust not to invest in the Mag 7 at all.

North American equities made up a third (33.4%) of the £1.8bn portfolio but the Mag 7 are not among its US holdings. This underweight may have led it to trail slightly behind some of its peers who were more bullish on US tech, but could leave Murray International better positioned now valuations are potentially nearing bubble territory.