- Norway's sovereign wealth fund posted a record H1 return of $185 billion (9.4%), driven by Asian tech and booming AI chip demand.
- Gains concentrated in a shrinking number of companies raise bubble risk, while the fund now finances about a quarter of Norway's state budget.
- Chipmakers and tech giants like Nvidia, Apple, Alphabet, Microsoft and TSMC drove 1.065 trillion kroner of first half gains.
Norway’s sovereign wealth fund, the world’s largest, reported Wednesday a record return on investments of $185 billion in the first half, recovering from heavy losses seen in the first three months of the year.
The 9.4 percent return was due largely to its holdings in Asian technology firms, which have powered ahead on massive demand for artificial intelligence gear.
It marked a sharp rebound from the $58 billion loss reported in the first quarter, when the fund was weighed down by declines in US tech companies.
At the end of June, the fund, which is fuelled by the Norwegian state’s oil revenues and invested in assets worldwide, was valued at 22.6 trillion kroner ($2.38 trillion).
Nicolai Tangen, chief executive of Norges Bank Investment Management, which manages the fund, attributed the increase to “chips, chips, chips” at a press conference, referring to demand to develop and power AI models.
The technology sector alone accounted for 1.065 trillion kroner ($112 billion) of the gains in the first half of the year.
The main individual contributors were chip makers including South Korea’s Samsung and SK Hynix, Taiwan’s TSMC, US-based Micron Technology and the Netherlands’ ASML, a key maker of machines that produce the microchips.
– Increased risk –
But with the growth driven by a specific sector, the fund’s value is dependent on “an ever smaller number of companies”, Tangen noted.
The fund, which currently finances a quarter of the Norwegian state’s budget, is therefore increasingly exposed to a potential tech bubble.
At the end of the first half, around 72.1 percent of the fund’s assets were invested in equities, 25.8 percent in bonds, 1.6 percent in real estate and 0.5 percent in unlisted renewable energy projects.
Despite its size, Tangen said in a speech Tuesday that it was possible the fund — intended to be a long-term undertaking to benefit future generations — could go up in smoke in the event of a major catastrophe like a nuclear war or a deep economic depression similar to that of 1929.
“No country in history has managed to maintain such a vast fortune over the long term. Fortunes always end up disappearing,” he said, citing historical examples such as Spain and Britain.
The return on the fund’s equity holdings was 13 percent in the first half.
The fund is invested in around 7,100 companies spanning the globe, and in aggregate owns around 1.5 percent of all listed companies worldwide.
Its biggest stockholdings are the AI chip giant Nvidia (612 billion kroner), Apple (522 billion kroner), Google parent Alphabet (499 billion kroner), Microsoft (347 billion kroner) and the Taiwanese chip maker TSMC (332 billion kroner).
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