GQG CIO points to cracks in AI sector as companies tap private credit
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More news: GQG chief investment officer Rajiv Jain has reiterated the decision to position the fund manager’s portfolio away from AI-related stocks and said, during an investor call, there are cracks appearing in the sector.
GQG’s shares rallied 4.97% to $1.69 by 12:16pm AEDT but over the past 12 months have tumbled over 28%.
He pointed to Meta’s auditor Ernst & Young, who raised a red flag on Meta keeping a USD27 billion ($38.1 billion) data-centre project off its balance sheet, noted Microsoft’s falling share price, and said that “Oracle has completely blown up”.
“It's a very narrow group of decent [companies in] tech which are working. And I think that means that you are seeing classic signs which happen at the tail end of the cycle. So, it gives us more comfort,” Jain said.
Jain also said the use of private credit within the AI-theme is a sign of cracks appearing.
“Just over 60% of data centres being built in US are non hyperscalers. So the perception that hyperscalers are doing everything, first of all is not true — it’s factually wrong,” he said.
“The second thing is that Nvidia has been the one of the single biggest investors in AI infrastructure. The question here to ask is, if things were so good, why does Nvidia have to invest another $2 billion into CoreWeave, which, by the way, has more debt service.
“This is the fourth or fifth largest new cloud and has higher debt service than its revenue. So, our view is that you are teetering at the edge. You can keep kicking the can only for so long. So we feel pretty good.”
When Barrenjoey analyst Nick McGarrigle asked about flow momentum during January given the “pronounced” outflows of $5.9 billion, GQG chair Tim Carver said performance reviews for the full year occurred in January and it was not surprising outflows were higher outflows.
“By the way, it wouldn't be surprising to me to see that continue through Q1 but you know, it may take a little bit more of a market meltdown for us to see the outflow stem,” Carver said.
“I'm not worried about a meaningful meltdown in client assets.”
When GQG was further pressed by Goldman Sachs analyst Julian Berganza on flows and “weak investment performance”, Jain said their position was a conscious decision and “we still feel very early, not wrong”.
“And we’ve been there done this before. Look, I want to perform more than what you're seeing here and this is a specific call we made. We didn't accidentally end up here, and we're looking around [saying] ‘Gee, what's happening?’ So it's actually positive. We’re quite excited, by the way,” Jain said.
“And days like today obviously makes us more excited, as you might appreciate, right? Because they're all saying, the markets go down in an elevator while you go up in an escalator. And I think, you're seeing that here.”
GQG reports lift in FY FUM despite outflows of $5.5b
The news: Fund manager GQG Partners reported a 7.1% rise in funds under management (FUM) to USD163.9 billion ($231.2 billion) for the 2025 calendar year, despite posting net outflows of USD3.9 billion.
The numbers: It also posted a rise in net profit of 7.3% to USD463.3 million and declared a dividend of 14.69 US cents, up 7.5% from the year prior.
White its net revenue increased 6.3% to USD808.3 million, it was partially offset by a 43.9% performance fee decrease to USD13.8 million.
The context: Over the year, GQG underperformed its benchmarks following its defensive positioning against AI-related stocks. Throughout the year, the investment manager said it grew increasingly cautious due to what it viewed as stretched valuations across most of the market, an uncertain macroeconomic environment, and the “formation of a speculative bubble in AI-related stocks”.
What they said: GQG chief executive Tim Carver said client feedback on the firm’s analyses on risks associated with the AI bubble had been “overwhelmingly positive, with many noting that GQG is among the few managers taking a clear and proactive stance on these risks”.
