Market Commentary - May 2024

After a few months of higher-than-expected inflation figures in the US, the April figures came in slightly lower than expected at the end of May. The PCE figures showed a price increase of 0.2%, which is the lowest increase for a month so far in 2024. However, the rhetoric from Fed representatives is still quite cautious, stating that “greater confidence” in the decline in inflation is needed before starting to cut interest rates. The market is currently pricing in two cuts from the Fed this year. As I noted earlier, incoming data on growth, inflation and jobs will be crucial for when we will see interest rate cuts. We have already started in Sweden, but the entire world market is waiting for the Fed to cut rates, which will set the tone for the global interest rate market.

Augmented Reality Fund

Among the top performers, two holdings stood out: Immersion (+39.1%) and Himax Technologies (+30.1%). Immersion, a US-based leader in haptics or sensory technology, has a solid patent portfolio that it licenses to major companies like Nintendo, Samsung, and Meta. In May, Samsung renewed its licensing agreement with Immersion, while Meta’s agreement remains fairly new. If AR/VR continues to grow, Immersion is well-positioned to benefit. Asian-based Himax Technologies, a leader in various display technologies, delivered an impressive report in May, surpassing expectations. After recent struggles, Himax appears to be returning to a growth phase, driven largely by its automotive industry connections.

On the downside, Unity was the fund’s worst performer with -25.6% for the month. At the beginning of May, Unity announced Matthew Bromberg as the new CEO, with former interim CEO Jim Whitehurst moving to Chairman. While we view this transition as positive and planned, leadership changes often generate short-term uncertainty. Additionally, Unity’s report was mixed, which added pressure to the share price. The company has now completed its cost reduction phase and can refocus on development.

Magic Leap, once a highly anticipated player in augmented reality, made headlines for its $2.6 billion in investments to develop AR glasses, which ultimately saw only about 6,000 units sold after needing further capital. In May, news broke of a collaboration between Magic Leap and Google to develop AR glasses. Although Google’s previous attempt with Google Glass was unsuccessful, its partnership with Magic Leap could leverage Magic Leap’s extensive AR patent portfolio, potentially positioning Google to compete with Apple and Meta in AR.

eSports Fund

Logitech was the best performer, up +26.6% for the month. Known primarily for computer accessories like keyboards and mice, Logitech’s recent report showed growth in its gaming segment, with keyboards as a standout. The company is also well-positioned in AI, with plans to incorporate AI-specific functions into its products.

Conversely, last month’s best-performing holding, Tobii, was among the worst this month. Tobii’s May report disappointed, showing a decline in sales and growing losses. However, CEO Anand Srivatsa expressed optimism, stating that cost-saving measures are expected to improve year-end results.

Esports remains an essential tool for major game developers to build community and loyalty around their games. An interesting example is Geoguessr, a Swedish game that has gained international popularity, evolving into a new eSport where players compete in global geography challenges. This year, the World Championship will be held in Stockholm. This eSports element has been a valuable surprise for Geoguessr, generating publicity and new users; today, the game has approximately 70 million registered users.

Space Fund

AST Spacemobile had an exceptional month, rising +266.1%. Although high-risk due to its lack of revenue, AST Spacemobile now represents 5.28% of the fund, and we intend to reduce the holding slightly due to its risk profile. AST Spacemobile aims to provide global broadband coverage using its BlueBird satellites, uniquely designed to offer internet access directly to mobile phones. In May, AST Spacemobile announced partnerships with major US telecom companies AT&T and Verizon, aimed at providing connectivity in remote areas, reducing the need for costly cell towers by utilizing AST Spacemobile’s services.

On the downside, Velo3D, a space-focused 3D printing company, dropped -42.3% after reporting a mixed month. The company’s cost-reduction strategy is starting to show results, and it aims for profitability by year-end. However, low cash reserves mean that new funding is likely needed, creating uncertainty and affecting the stock price. Velo3D currently represents 1.6% of the fund.

China also made strides in space exploration. Through its Chang’e-6 mission, China completed a lunar landing in May, collecting and returning lunar material to Earth. This mission involved four spacecraft, furthering understanding of the Moon’s origin and evolution, and providing valuable experience for future Mars missions. Mars materials could offer insights into fundamental questions about the origin of life and the potential for human habitation on Mars. While NASA and the European Space Agency are also working on Mars exploration projects, delays have positioned China as a leader in this mission.