Scottish Mortgage Investment Trust (LSE:SMT) shares have held up well during the last few tumultuous weeks. So much so, a £10,000 investment made five weeks ago would now be worth almost £11,000.
That said, 35 days is the equivalent of a blink of an eye for this FTSE 100 growth trust. Instead, it asks shareholders to measure its returns over a decade or more. So, how has Scottish Mortgage done over this time period?
The annualised 10-year total return is just over 17%, which beats both the FTSE 100 (9.5%) and S&P 500 (14.8%).
The SpaceX factor
The reason for Scottish Mortgage’s resilience lately appears to be down to SpaceX, its largest portfolio holding. According to Bloomberg News, an IPO this summer could value Elon Musk’s rocket company at more than $2trn.
If that happens, it would top the mega-IPO of Aramco, Saudi Arabia’s state oil company, in 2019. Even if it’s a ‘meagre’ $1trn, it would still be a major coup for Scottish Mortgage, which first invested in SpaceX in 2018 when it was a wee nipper (relatively speaking) at $31bn.
Indeed, the FTSE 100 trust is struggling to keep up with the valuation adjustments. Back in November, total assets made up by SpaceX stood at 8.2%. Then in December it upped that to 15.3%.
Now? SpaceX represents a whopping 19.3% of the portfolio! The stake is worth roughly £2.9bn.
Incredible vision
Scottish Mortgage is always vulnerable to a sell-off in growth stocks, which higher interest rates could spark later this year.
Also, there’s a lot of concentration risk with SpaceX, especially if the trust doesn’t crystallise gains around the IPO. SpaceX also looks extremely highly valued.
However, even if some SpaceX profits are realised, it will still probably remain a large holding. That’s because manager Tom Slater has highlighted various things that could make it even more valuable in future.
- Starship, the largest rocket ever built, could dramatically lower the cost of accessing orbit, furthering SpaceX’s dominance.
- Starlink now has over 10m customers, but its satellite-to-mobile service will be accessible to over 1.7bn people in future.
- Space tourism.
- Space-based data centres could see the firm become “the monopolistic provider of AI to the world”.
One day, space-based data centres could help solve the AI power constraints experienced on Earth. Slater has noted that SpaceX has ambitions to deploy energy generation in space on a scale comparable to “the entire electricity grid in America every two years.”
Given this level of powerful vision, I expect SpaceX to remain a core Scottish Mortgage holding for years to come.
IPOs galore?
Another benefit of SpaceX going public would be a significant reduction in Scottish Mortgage’s exposure to private assets. That’s especially as China’s ByteDance — the trust’s third-largest holding — may also IPO at some point now that the US TikTok drama is over.
Elsewhere in the portfolio, fintechs Revolut and Stripe, AI disruptor Anthropic, and Databricks have all been linked with IPOs in late 2026 or 2027. Scottish Mortgage currently has stakes in six of the world’s 10 most valuable private companies.
Despite rising 35% over the past year, the trust still trades at a 4.3% discount to net asset value. As such, I think long-term investors should consider including its shares in a diversified portfolio.
