Baron Technology Fund: Latest Insights and Commentary

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

CONTRIBUTORS

• Broadcom Inc. is a leading fabless semiconductor and enterprise software company, generating approximately 60% of revenue from semiconductors and 40% from software. The company is strategically positioned at the intersection of high-performance AI compute and networking infrastructure, while also demonstrating disciplined execution in software. Shares rose during the quarter on continued momentum in Broadcom’s AI-related revenue and growing investor confidence in its capabilities in AI application-specific integrated circuits and networking. Improved visibility into 2026 revenue further supports our view. VMware, Broadcom’s recently acquired cloud infrastructure software business, is performing in line with expectations, while the non-AI semiconductor segment appears to have bottomed and is poised for a recovery over the next 12 months. We retain strong conviction in Broadcom's long-term outlook, as the company is well positioned to capture a majority share of the $60 to $90 billion serviceable addressable market by 2027, driven by demand from key customers such as Google, Meta, and ByteDance.
• Spotify Technology S.A. is a leading global digital music service, offering on-demand audio streaming through paid premium subscriptions and an ad-supported model. Shares of Spotify were up, largely due to solid underlying results and the company's durability amid an unpredictable macroeconomic environment. Spotify has been on a path to structurally increase gross margins, aided by its high-margin artist promotions marketplace, growing contribution from podcasts, and structural investments in advertising. Users continued to grow at a double-digit pace despite recent price hikes. Spotify remains a sticky subscription product with relative resilience in times of consumer uncertainty. Spotify also continued to innovate on the product side, calling 2025 the "year of accelerated execution," with priorities in improving advertising, expanding into video, developing a Super Premium tier, and taking more market share. We continue to view Spotify as a long-term winner in music streaming with potential to reach 1 billion-plus monthly active users.

 

DETRACTORS

• Apple Inc. is a leading manufacturer of consumer electronics, computer software, and online services. Shares declined amid mounting headwinds, including new U.S. tariffs on Apple’s China-centric supply chain, which are pressuring gross margins, and increased regulatory scrutiny of the App Store model in both the U.S. and Europe. These developments have introduced greater uncertainty around the growth and profitability of Apple’s high-margin Services business. While we continue to admire Apple’s brand, ecosystem, and long-term innovation capabilities, the ongoing regulatory overhang and heightened risk to margins and growth prospects led us to exit the position and reallocate capital to holdings with more compelling return potential relative to risk.