What next for the Scottish Mortgage share price as SMT retreats?

Scottish Mortgage stock price has surged in the past few months as technology companies have rebounded. It rose from a low of 776p in April to a high of 1,106p. Recently, it has retreated to 1,077p as some large technology companies slumped. This article explores whether SMT is a good buy today.

SMT share price is benefiting from the tech boom

Scottish Mortgage is one of the top players in the technology industry in the UK. While its name has mortgage in it, its business is not involved in the industry. 

Instead, it invests in top publicly traded and private companies, with most of its portfolio names being in the United States. Its most recent results showed that it had over £14.7 billion and a market capitalization of £12.1 billion, giving it a discount of 10.3%.

Elon Musk’s SpaceX is the biggest company in the fund, accounting of it portfolio. It is followed by Mercadolibre, Amazon, Meta Platforms, TSMC, Bytedance, NVIDIA, and Spotify.

This portfolio means that the fund is exposed to some of the biggest themes globally. For example, TSMC is a key company due to its significant presence in the semiconductor industry. 

Chip companies like NVIDIA and AMD would struggle to exist without TSMC. Scottish Mortgage also owns a stake in ASML, another equally important company that makes machines used in making chips. 

The other top parts of Scottish Mortgage’s portfolio are PDD Holdings, Wise, Tempus AI, Stripe, Roblox, Adyen, and Shopify. 

Top catalysts and risks for the Scottish Mortgage

There are potential catalysts for the Scottish Mortgage stock price are the ongoing AI boom and the ongoing initial public offering (IPO) boom in the tech space. 

There are signs that the AI boom is continuing, as evidenced by the recent Nvidia earnings. The company’s revenue jumped by 53% in Q2 to $46 billion. Analysts believe that its revenue will rise to over $200 billion this year, and over $500 billion in the next few years. 

Meanwhile, there are signs that more private companies are considering going public this year. Some notable names like Circle and CoreWeave have already launched their IPO, while Klarna’s listing will come this month. 

A strong IPO boom may push more companies, including those in its portfolio higher. Some of the top firms in its portfolio that may go public in the next few years are SpaceX, OpenAI, Stripe, Databricks, Revolut, and Canva.

The stock may also receive a boost from Federal Reserve interest rate cuts, which normally benefit companies in the tech industry. 

There is a risk to SMT though. The biggest one is the potential slowdown in the AI space, which Nvidia has warned is happening. Such a move would drag its performance over time. 

Scottish Mortgage share price technical analysis

The daily chart shows that the SMT stock price has pulled back in the past few days. Most of the weakness happened after the recent Nvidia earnings.

It has formed a double-top pattern at 1,106p and a neckline at 1,060p, its lowest level on August 14. Top oscillators like the MACD and the Relative Strength Index (RSI) have pulled back and formed a bearish divergence. 

Therefore, the stock will likely have a pullback, with the next point to watch being at 1,000p. A move above the resistance at 1,106p will invalidate the bearish outlook.

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