Discussions regarding customs tariffs and geopolitical tensions were the main focus in the first six months of the year on the financial markets. Where are the markets headed in the second half of 2025?

In our Funds check series, fund managers from selected funds look back on the past year's performance and give their assessment of what we can expect for the rest of the year. (Please note that forecasts are no reliable indicator of future performance and that investing in securities involves risks as well as opportunities.)

Summary

  • Despite the enormous uncertainty in the economy caused by the US's opaque tariff policy, the operating business of technology companies fared largely positively.
  • Regardless of the political front, we are convinced that demand for technology solutions will remain unbroken. AI is playing to its strengths and becoming integrated into users' everyday lives. The need for cyber security applications continues to grow due to more complex threat scenarios.
  • We consider the valuation of the technology sector as a whole to be acceptable. Given the expected earnings growth of about 15% for 2025, we see further upside potential.

Fund manager Bernhard Ruttenstorfer
(c) Stephan Huger

Fund & Performance

The ERSTE STOCK TECHNO mainly invests in companies from developed technology markets. The fund's investment process is based on fundamental business analysis. The majority of companies in this area can be found in the United States. As a result, Pacific and European equities tend to play a subordinated role in the fund. When selecting stocks, the focus is on high-quality, high-growth companies. cological and social factors as well as corporate management factors are integrated into the investment process.

Note: Please note that an investment in securities entails risks in addition to the opportunities described. Past performance is not a reliable indicator of future performance.

The performance is calculated in accordance with the OeKB method. The management fee as well as any performance-related remuneration is already included. The issue premium which might be applicable on purchase and as well as any individual transaction specific costs or ongoing costs that reduce earnings (e.g. account- and deposit fees) have not been taken into account in this presentation.

Commentary by fund manager Bernhard Ruttenstorfer

How do you assess the first half of 2025 on the financial markets?

The technology sector experienced enormous volatility, stable demand for cutting-edge technology, and positive corporate developments in the first half of 2025. Ultimately, this led to little change in share prices compared with the end of 2024 in USD terms. From the perspective of a euro investor, however, the significant weakness of the USD was evident, with its exchange rate falling by about 112% (as of 2 July 2025) since the end of last year.

Despite the enormous uncertainty in the economy caused by the US's opaque tariff policy, the operating business of technology companies fared largely positively. However, it is not yet clear how production will look in the future, especially for hardware manufacturers such as Apple and Dell. Although the strategy of shifting production from China to other Asian countries, which has been in place for years, will continue, it is not yet clear whether imports from these countries will also be subject to significant tariffs. This is one of the reasons why we are generally cautious about hardware manufacturers. Semiconductor companies must also expect obstacles to imports, but to exports as well. In recent months, export restrictions on high-end AI chips to China have been tightened once again. This led to significant write-downs at companies such as Nvidia and AMD. That being said, business is booming for Nvidia, as demand for AI chips remains unabated.

Please note: the companies listed here have been selected as examples and do not constitute any form of investment recommendation.

The high sales of GPUs and ASICs (AI chips) can be explained by the enormous demand for AI applications. As AI agents are being used more and more frequently, the demand for AI usage and its infrastructure is increasing. Software companies such as ServiceNow, Crowdstrike, and Oracle took advantage of this and reported very high demand for AI-powered apps. The growth prospects for the coming years are extremely convincing in this case.

Our investments in video gaming (Nintendo, Take Two) and streaming (Spotify) were largely unaffected by trade conflicts. Semiconductor manufacturers that benefited from AI chips (Nvidia, Broadcom, Nova Limited) also contributed positively to the fund's performance. Software providers such as Oracle and ServiceNow demonstrated their strength as core holdings of ERSTE STOCK TECHNO. The hardware companies mentioned above came under pressure and are facing challenges in the coming months. As a result, we reduced our holdings in them.

 

What do you expect for the second half?

The outlook for the second half of 2025 remains positive. Although we are aware that the US trade policy will remain volatile, we can see a trend towards more reasonable deals and announcements. This is the trend that began around two months ago and, in our view, will continue. Regardless of the political front, we are convinced that demand for technology solutions will remain strong. AI is demonstrating its strengths and becoming integrated into users' everyday lives, and investments in software will continue in order to make companies more efficient and ease cost pressures. The need for cyber security applications is growing due to increasingly complex threat scenarios. This is also being driven by AI.

The use of online services is growing, whether through streaming or e-commerce. We therefore believe that the environment for digital advertising will remain positive. Companies such as Meta, Reddit, Amazon, and Applovin are direct beneficiaries.

In our view, the technology sector is attractively valued. Given the expected earnings growth of about 15% for 2025, we see further upside potential.

 

Please note: investing in securities involves risks as well as opportunities.

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