Software companies have recently suffered steep share price declines as investors have started to question whether businesses can substitute their products with in-house, AI-developed solutions (a trend commonly referred to as “vibe coding”). Many providers were under fire last year, but the AI race has seemingly accelerated in 2026 with greater agentic capabilities – such as those demonstrated by Anthropic’s Claude CoWork – triggering the ‘AI scare trade’ that has seen the S&P 500 Application Software Index fall 27% year-to-date[1].
The negative sentiment has been fuelled by fears that these new AI tools are capable of handling an increasing number of tasks undertaken by white-collar professionals. This has put pressure on knowledge intensive, capital-light businesses across a range of unrelated sectors, such as real estate services and logistics, triggering steep share price falls among companies traditionally considered stoic and resilient.
Solid fundamentals
SKAGEN Global, which holds several companies across the impacted sectors, has not escaped the market panic, despite the underlying financial performance of our portfolio remaining strong. The robust earnings growth that most holdings delivered last year has not been rewarded with a proportional share price gain, compressing their earnings multiples. However, multiples are like springs and typically rebound when compressed, which we expect to happen if our holdings continue to grow earnings as guided by their management teams.
We also believe that some of the perceived risks which triggered the recent drawdown are overstated, while opportunities are emerging:
1. Proprietary data remains a strategic asset
Several holdings, such as TMX, MSCI and Intercontinental Exchange, own specialized datasets built over decades. Third‑party AI providers cannot use this data without licensing it, which is a potential revenue stream.
2. Critical tasks still require human accountability
AI lacks transparency, can hallucinate, and often communicates with unwarranted confidence. For high‑stakes decisions, companies will continue to rely on human judgment and trust.
3. Knowledge‑based firms can enhance productivity with AI
There will undoubtedly be productivity gains which will result in fewer jobs. A specialist equipped with AI tools is far more cost‑efficient than one backed by a large support team. This lowers cost bases, which translates into higher earnings margins and/or improved client value.
4. Many of our holdings are integrating AI directly
Several companies we own, for example RELX and Visa, have already developed or acquired AI tools and embedded them into existing platforms, enhancing customer value and strengthening competitive moats.
5. Regulatory constraints limit AI adoption
Generic third‑party AI tools are not protected by copyright, privacy rules, or attorney-client privilege. As a result, many professionals are not permitted to use them, which offers a structural advantage for companies offering compliant, domain‑specific solutions.
Buying opportunity
Historically, similar market dislocations have created attractive entry points for investors who can separate signal from noise. It is notable that some portfolio companies, including Brown & Brown, RELX and Abbott Laboratories, have recently announced insider share purchases and expanded or accelerated buybacks, signalling strong internal confidence in their outlook and potential for value creation.
We have also used the recent turmoil to increase exposure to select names in our portfolio. Exchange operators, ICE and TMX, which both own large, proprietary datasets and critical financial‑market infrastructure, have been affected by recent sentiment despite strong fundamentals. We have also increased our position in RELX (now our second largest holding) and Thomson Reuters, both of which provide specialized tools for legal professionals. Their AI‑enhanced platforms, such as Reuters’ CoCounsel and RELX’s LexisNexis, integrate seamlessly into existing workflows and are trained on domain‑specific legal data. The integrity of output from these models is higher than those from generic third-party AI ones, which require boilerplate disclaimers regarding their use.
Positive US outlook
As well as adding to high conviction positions, we are also actively evaluating new opportunities across global markets. Currently, around two-thirds of our holdings are listed in the US, although most operate globally. Examples include Abbott Laboratories, which sells pharmaceuticals and medical devices, payment platforms Visa and Mastercard, and rating agency Moody’s.
Last year saw US market conditions shift meaningfully following “Liberation Day” when the Trump administration’s “America First” policies prompted a global reallocation of capital. Flows into Europe and emerging markets strengthened, while those into the US moderated. What had been a supportive backdrop until April, quickly turned into a more challenging environment for a number of companies that we own. These dynamics, combined with a weaker dollar, also weighed on SKAGEN Global’s 2025 returns.
We believe, however, there are positive factors that are more supportive for US equities in the year ahead:
- Expansionary fiscal policy is expected to boost economic growth.
- A weaker dollar benefits US companies with significant international revenue.
- World Cup–related tourism should provide an uplift to some parts of the economy.
- The November mid-term elections may result in a change in the congressional balance which is expected to reduce policy volatility.
Historically, capital flows return quickly once uncertainty fades, and we believe the US still offers the world’s deepest and most varied capital markets.
Upside potential
Based on our analysis, the estimated weighted average upside potential across our ten largest holdings, which account for well over half of the portfolio’s assets, is now above 60%. This provides a compelling foundation for strong performance as fears fade and companies continue to deliver on their guided strategies and targets.
We remain stock pickers – first and foremost – with a primary focus on the quality and valuation of the companies we invest in to deliver the best possible outcomes for our unitholders. Both portfolio managers are aligned with clients and have our own capital invested in the fund – we feel the pain of underperformance acutely but are excited by the opportunities ahead that we expect to deliver improved absolute and relative returns.
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[1] Source: Bloomberg, in USD as at 17/02/2026.