Will the Scottish Mortgage share price recover to its previous highs?

Rising global inflation, and rising interest rates to combat them, has taken its toll on many earlier-stage growth stocks in recent years. Fears over higher borrowing costs tend to hit nascent companies harder, and higher inflation reduces the value investors place on future profits. Some share prices also got ahead of themselves in the post-Covid investing frenzy in 2021.  

This contributed to poor returns from one of the UK’s most popular investment trusts, Scottish Mortgage over the course of 2022 and 2023 following its all-time high of over £15 a share seen in November 2021.  

The FTSE 100-listed company is one way to gain exposure to fast-growing companies from around the world. But the combination of ebbing investor sentiment, decelerating global growth and some stock-specific disappointments dented the trust’s admirable longer-term record.  

Yet more recently, things have started to turn around, and in the past couple of years the Trust has ridden the trend of investor enthusiasm for artificial intelligence (AI). 

Will the Scottish Mortgage share price recover? 

The performances of Nvidia, Amazon and Latin American online marketplace Mecadolibre have driven much of the Trust’s recent revival. The AI chip maker Nvidia became more valuable than the entire UK market last year, joining Apple and Microsoft in clearing the $3trn market cap hurdle. 

Once the top holding in the fund, Nvidia has now been dialled back as the managers have grown more cautious of the sustainability of the cost of chips and the profit margins the company could receive. As at the end of July 2025 the position was a much reduced 3.3%, albeit that still made it the sixth largest holding.  

The managers have instead added to companies they believe will benefit from the wider adoption of AI tools, such as Meta, which reported an increase in user time owing to AI driven content, and Taiwan Semiconductor owing to expected growth in demand across datacentres, vehicles, devices and infrastructure. 

While Scottish Mortgage has ridden the wave of AI adoption and investor enthusiasm, not all areas of the portfolio have flourished, which is why the share price remains significantly below the highs achieved a few years ago. Swedish battery maker Northvolt, previously an important unquoted position, entered bankruptcy following slowing demand for EVs and operational issues. Pharmaceutical innovator Moderna was also a big detractor, suffering from a lack of demand for vaccines. The team say they are happy with the company’s investment for pipeline drugs but have not added or reduced the position. 

Such disappointments are to be expected given the bold approach of targeting companies investing heavily to harness potentially transformational growth. The flipside is a relatively high failure rate when execution falls short or adverse market forces overwhelm the business model.  

Over the longer term the managers hope the size of the gains in the winners will handsomely outweigh the losers. This has been the experience in the past, with huge gains in a narrow set of names (e.g. Tesla, Amazon, Nvidia) creating significant value for shareholders. But it means a bumpy ride in the short term. In the financial crisis era, the Trust’s share price peaked in May 2008 and by December of the same year had fallen 63%. Investors should keep this pattern in mind when deciding how to size a position in the Trust in a portfolio.  

The most important question is whether the team can replicate their identification of eventual big winners going forward in the next waves of technological innovation. 

What is Scottish Mortgage’s investment approach?

Scottish Mortgage investment trust is a flagship product from Scottish fund manager Baillie Gifford. The underlying belief is that a narrow set of stocks drive the majority of stock market value creation, which means the managers focus on businesses capable of harnessing the power of technological change – and provide substantial share price gains. 

Importantly, the Trust invests in private companies as well as those listed on global stock markets. This offers opportunities to investors that are hard to reach any other way. Among the quarter of the portfolio currently dedicated to these unlisted investments are Elon Musk’s SpaceX, TikTok owner Bytedance, and payments provider Stripe. 

Scottish Mortgage Investment Trust private holdings as a percentage of overall portfolio

Source: Baillie Gifford, 31st March 2025

What are the prospects?

Despite the Trust’s stuttering performance in recent years, the managers point to the strong operational progress of most of the Trust’s holdings. Investee companies are typically valued more expensively on a price to earnings basis – on average almost twice as much. Yet the managers believe their premium rating is more than merited given the growth profile of the underlying businesses. 

Shareholders in the Trust may need to be patient. There could be further volatility if there are disappointments around the extent to which inflation and interest rates subside. Higher interest rates for longer would likely further dampen enthusiasm for growth stocks and private assets in particular. 

Yet what is likely to matter more in the longer term is the stock selection generated by the managers. It’s worth recalling the case of Amazon whose shares fell 90% in the aftermath of the dotcom bubble but eventually went onto produce excellent returns, even for those that invested just before the bubble burst at the turn of the millennium. An unshakeable, long-term view can therefore have benefits, provided enough eventual ‘big’ winners can be identified. Therefore, it is the process of identifying these businesses that is most crucial to the longer-term returns of the Trust, and the key criterion by which we should assess prospects.  

With this sort of investment approach, it must be accepted that the risks are high. Amazon was something of an exception among the many early internet companies that failed to grow significantly or, even worse, went bust. Investing in companies at an early stage of development, and more mature ones where lots of market or product growth is priced in, tends to involve a broad range of possible outcomes compared with backing more established, predictable businesses. 

Some of these businesses will fall short of expectations, some will surpass them, but either way the magnitude of changes in perceived valuation and share price is likely to be considerable. Scottish Mortgage contains dozens of underlying businesses for diversification. However, they are all selected for their rapid potential growth and are concentrated in sectors where innovation is most prevalent such as technology and healthcare. Even among the ‘blue chip’ companies in the current portfolio such as Amazon, Meta and Nvidia there is risk growth aspirations won’t be met. 

Other key characteristics of the Trust 

Acknowledging these key risks, what are the attributes that makes Scottish Mortgage worth considering? 

Firstly, the culture and philosophy at Baillie Gifford is distinctive. Their managers think over the very long term (at least a decade) and act as patient providers of capital to disruptive growth companies. They believe a very narrow set of stocks drive most equity market returns and embrace this in their portfolios by concentrating on what they see as the defining growth engines ahead. 

Secondly, Ballie Gifford’s reputation for being supportive long-term shareholders has led to superior access to company management and entrepreneurs. They are one of the few investors that can speak directly, one-on-one with the likes of Elon Musk. They believe their access to great thinkers gives them an important advantage in identifying the areas in which the next wave of innovation will occur, how industries might develop, and the companies well placed to capitalise. 

Thirdly, the Trust can invest where others can’t. Private investments have contributed significantly to returns and represent, perhaps, the biggest ‘edge’ the managers possess. Just over a third of the current portfolio started off in the unquoted arena and increasingly the managers see non-listed investments as offering some of the best potential. That’s because some of the most innovative companies in the world today are private, often because they are technology-based and can grow quickly without the need to access capital from a stock market listing. 

Finally, and very importantly, the Trust has exceptionally competitive charges for such a differentiated actively managed investment.  

Read more: How to build a growth portfolio 

Is Scottish Mortgage a good investment? 

Scottish Mortgage has a clearly defined identity of backing fast-growing and potentially world-changing businesses. It is capable of outsized returns but is also susceptible to very poor periods where market sentiment is at odds with the managers’ strategy and characteristically extreme growth bias. The concentrated nature of the portfolio, as well as the significant stakes in immature businesses whose success or otherwise can be binary in nature, adds to the risk. 

The Trust also employs some gearing (borrowing to invest), which exacerbates the movements in the underlying portfolio and leads to greater gains in rising markets and larger losses in falling ones. The fact that the share price can trade at either a discount or premium to the value implied by the price of the underlying investments also adds to the short-term volatility. In fact, this is one of the reasons for the size of the fall from the 2021 peak as shares went from a premium to a discount when investor sentiment changed course. 

It should therefore be considered a particularly adventurous global equity option within a diversified portfolio. It will most appeal to those who share the managers’ long-term perspective – as well as their assertion that a small band of companies will dominate market returns – and are happy to ride out significant short-term volatility. In this context, it remains part of our Preferred List, which is designed to provide a helpful shortlist of options for those who wish to make new investments. 

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