Polar Capital AI Fund: riding the AI wave

The rapid development of artificial intelligence has been the key driver of US stock market performance in recent years. Momentum is now building towards a wave of high-profile AI-related IPOs, including Anthropic and OpenAI, with the May best-seller lists dominated by funds that invest in this area.

One of the main beneficiaries is Polar Capital, whose Technology investment trust and Global Technology open-ended fund both made it into their respective top tens. However, the firm’s more thematic Artificial Intelligence fund, which also featured, could be the biggest winner of all.

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Objective and approach

The Polar Capital Artificial Intelligence fund differs from traditional technology strategies as it invests in both the beneficiaries and the enablers of AI. This broader remit gives the managers access to opportunities across a wide range of global sectors.¹

Enablers are the companies that provide the infrastructure, software and tools that underpin the development and deployment of AI. Whereas the beneficiaries are businesses that use the technology to enhance products, improve productivity and unlock new revenue streams.²

Despite the rapid pace of adoption, the 12-strong management team believes that most of AI’s value creation still lies ahead. The £3 billion fund aims to capitalise by identifying companies where the technology is generating tangible economic benefits through faster revenue growth, improving margins and evolving competitive advantages.³

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Portfolio

At the end of May, the fund held 68 stocks with the ten largest positions accounting for 27.6% of the assets. These included familiar names such as NVIDIA, Samsung Electronics and Alphabet, alongside less obvious holdings like Delta Air Lines, Bank of New York Mellon and Caterpillar.⁴

Top 10 holdings

1. NVIDIA
2. Seagate Technology Holdings
3. Mitsui Kinzoku
4. Advanced Micro Devices
5. Samsung Electro-Mechanics
6. Vertiv Holdings
7. Delta Air Lines
8. Bank of New York Mellon
9. Caterpillar
10. Alphabet

Source: Polar Capital, as at 29 May 2026

The geographic allocation was dominated by North America, with the US and Canada representing 59.5% of the portfolio. However, the sector split was more surprising, with only 45.1% invested in Information Technology, and the second-largest weighting being Industrials at 23.3%.⁵

Stock selection is based on fundamental analysis and there are no benchmark or tracking error constraints. The resulting portfolio is very different to the MSCI AC World Index with a high active share of 80.7%.⁶

What are the managers’ latest views?

In a recent article, lead manager Xuesong Zhao highlighted research suggesting that the latest agentic models can now perform the equivalent of 14 to 16 hours of human work without any oversight. He believes this represents a step change in the type of activity AI can viably replace and implies an addressable market of around $44 trillion, which is the annual global wage bill for knowledge workers.⁷

“We invest in both the enablers and the beneficiaries of AI. We do not see the estimated $750bn in AI infrastructure spend by the enablers as a reckless arms race. Instead, we see it is a reallocation of capital from inefficient human-led processes to scalable, automated intelligence.”⁸

Among the beneficiaries, Zhao points to Delta Air Lines, one of the fund’s top-ten holdings, as a good example. He explains that around 20% of the company’s ticket inventory is now priced algorithmically using AI, which allows it to reduce unnecessary discounting without overcharging customers.⁹

Performance, costs and risks

It will come as little surprise that performance has been strong, with the GBP Class I Accumulation shares posting a year-to-date gain of 55.3% to the end of May. Please remember past performance is not a reliable indicator of future returns. The longer-term record is also impressive. Since launch in October 2017, the fund has generated an annualised return of 19.9%, comfortably ahead of the benchmark’s 11.6%.¹⁰

Polar Capital Artificial Intelligence has an ongoing charges figure of 0.88%, which appears reasonable for a successful, actively managed fund. Investors should, however, be mindful of the high level of portfolio turnover in this fast-moving sector, with transaction costs adding a further 0.42%.¹¹

There is little doubt that AI has enormous long-term potential. However, it remains unclear whether the technology will ultimately generate sufficient revenues to justify the substantial levels of capital expenditure. As a result, any investment should be considered high risk and should only form a small part of a well-diversified portfolio.

• More on Polar Capital Artificial Intelligence fund

Past performance is not a reliable indicator of future returns

Source: Polar Capital, total returns in GBP terms from 29.5.21 to 29.5.26. Excludes initial charge.

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Source:

^1,2,3 Polar Capital Funds plc, Artificial Intelligence Fund
^4,5,6,10 Polar Capital Artificial Intelligence Fund, factsheet 29.5.26
^7,8,9 Xuesong Zhao, 27.5.26
¹¹ Fidelity Personal Investing, 15.6.26

Important information: investors should note that the views expressed may no longer be current and may have already been acted upon. This fund invests in overseas markets and so the value of investments can be affected by changes in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Before investing, please read the relevant key information document which contains important information about the fund. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.