Baron Fifth Avenue Growth Fund: Latest Insights and Commentary

The Review and Outlook for period ending June 30, 2025, is not yet available.

CONTRIBUTORS

• NVIDIA Corporation is a fabless semiconductor company specializing in compute and networking platforms for accelerated computing. The company's dominant position in AI infrastructure—with a comprehensive portfolio spanning GPUs, systems, software, and high-performance networking solutions—continues to drive strong performance. Shares rose during the quarter as signs emerged that the AI cluster buildout is likely to extend into 2026, with NVIDIA maintaining its leadership. The company also removed all AI-related revenue contributions from China, effectively de-risking that part of the business. We maintain a long-term constructive view, as leading AI labs show growing confidence in their ability to achieve human-level intelligence and deploy AI products in enterprise settings. Many top labs are significantly expanding their compute budgets, particularly to advance reinforcement learning for AI agents operating in real-world environments. We believe these labs will begin capturing meaningful value as large-scale use cases are identified and monetized. This, in turn, should further support investment in AI infrastructure as confidence in long-term returns grows.
• Cloudflare, Inc. is a leading cloud software infrastructure vendor. Shares contributed to performance after the company reported solid quarterly results, with revenue rising 27% year over year and slightly exceeding expectations. Results were boosted by a $135 million deal—the largest in the company’s history—driven by demand for its Workers platform, which allows developers to build and deploy applications at the edge for faster performance. The deal represented a competitive win, with the customer choosing Cloudflare over a major hyperscaler due to faster development time and better total cost of ownership. Cloudflare also continued to improve its go-to-market execution, including stronger sales productivity, improved pipeline attainment, and solid customer growth. Management noted record additions of customers spending over $1 million and $5 million annually, while churn remained stable and dollar-based net retention held steady at 111%. We continue to have high conviction in Cloudflare, given its differentiated platform, capable management team, and significant long-term growth opportunity.
• Shares of Meta Platforms, Inc., the world’s largest social network, rose this quarter on impressive top-line growth and solid forward guidance. Meta is already seeing returns on its AI investments across its core business, with improved content recommendations driving increased time spent on the platform, and enhanced ad targeting and ranking delivering higher conversion rates and stronger return on ad spend. Our industry checks also suggest strong advertiser adoption and satisfaction, including in newer areas such as AI-powered creative tools and business messaging. Meta continues to manage costs effectively and remains focused on profitable growth. We believe the company is well positioned to drive long-term growth by leveraging its leadership in mobile advertising, massive global user base, innovative culture, strength in generative AI research, broad distribution reach, and unmatched technological scale.

 

DETRACTORS

• Argenx SE is a biotechnology company best known for developing Vyvgart, the leading FcRn inhibitor for the treatment of autoimmune conditions. Shares declined after Q1 Vyvgart sales came in below elevated investor expectations due to a combination of seasonal factors (such as insurance reverification) and higher Medicare Part D utilization and associated discounts. Our conversations with management and neurologists continue to reinforce Vyvgart’s value as an important treatment option with strong long-term growth potential. The drug continues to launch well in both generalized myasthenia gravis and chronic inflammatory demyelinating polyneuropathy. Over time, we expect Vyvgart to demonstrate efficacy across an expanding range of autoantibody-driven autoimmune conditions, supported by encouraging Phase 2 myositis data recently presented by argenx at a major medical conference.
• Eli Lilly and Company is a global pharmaceutical company currently best known for its GLP-1 treatments for diabetes and obesity. Shares detracted from performance after competitor Novo Nordisk signed a formulary deal with CVS, prompting investor concerns about a potential price war. Based on our discussions with both management teams and our review of historical formulary agreements, we believe neither company has an incentive to start a price war. Regulatory uncertainty, including potential sector tariffs and “Most Favored Nation” drug pricing risks, also weighed on investor sentiment. We believe these risks are manageable and view Lilly as one of the least exposed pharmaceutical companies to such policy changes. We continue to think Mounjaro and Zepbound are important treatments and expect Lilly to remain a leader in next-generation therapies that are more effective and convenient, including oral orforglipron, which demonstrated strong Phase 3 results in diabetes. Additional obesity-related data is expected later this year. In our view, GLP-1 adoption is still in its early innings, and we believe continued uptake will drive a doubling of Lilly’s revenues by 2030.
• Atlassian Corporation is a market-leading provider of planning and team collaboration software. Shares fell following softer-than-expected cloud revenue growth of approximately 25% year over year, down from nearly 30% in the prior quarter. Management attributed the slowdown to delayed deal timing in the enterprise segment, while expansion among small and mid-sized business customers remained stable. We retain conviction in the stock. Paid seat expansions and customer migrations exceeded expectations, and metrics like product cross-sell, customer retention, premium plan adoption, and new customer interest were broadly in line with estimates. We believe cloud growth can improve over the next year as remaining migration blockers are resolved. To date, over 85% of customers transitioning from data center deployments to the cloud have upgraded to higher-priced product tiers, resulting in pricing uplifts of 40% to 80%. Feedback from partners and customers at Atlassian’s 2025 conference suggests these uplifts could be even greater among the largest accounts. We continue to view Atlassian favorably given its strong product positioning and significant long-term growth opportunity in cloud.