By Gwladys Fouche
ARENDAL, Norway (Reuters) -Norway's sovereign wealth fund made a profit of 1,501 billion crowns ($143 billion) for the first half of the year, partly due to the growth of U.S tech companies and their development of artificial intelligence.
The $1.4 trillion fund's holdings in tech companies jumped by nearly 39% in the period, with Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Nvidia as the stocks contributing the most, helping to drive the fund's 10% overall return.
CEO Nicolai Tangen told Reuters the strong return came as a surprise for such a large fund given "a pretty worrisome backdrop", with high inflation and geopolitical tensions.
It was partly due to AI becoming mainstream from previously being seen as "something with potential", said deputy CEO Trond Grande.
"Now we are seeing that potential being realised and that is being priced in the stock markets of these companies," Grande told Reuters.
That has also led the fund, the world's single largest stock market investor, to recently reduce its overweight investment position in major tech companies.
Asked whether he was concerned about a possible crash in tech stocks, Tangen said: "We are always conscious and worried about the biggest exposures of the fund. Now they are in the tech sector. Therefore we monitor that very thoroughly."
Tech is the largest sector among the fund's equity investments, representing 11.9% of the its total value at end-2022, its data showed. The fund is also urging companies it invests in to develop and use AI responsibly.
Looking ahead, Tangen said the fund expects it will be difficult to reduce inflation worldwide, not least due to a new phenomenon - inflation fuelled by climate change.
Global warming is lowering food harvests, and thus increasing food prices, and reducing productivity since some workers are unable to work in the middle of the day in some countries.
"The new thing here is the link between climate (change) and inflation and therefore between climate and financial markets," Tangen said.
The fund, which invests the Norwegian state's revenues from oil and gas production, owns on average 1.5% of all listed stocks worldwide. It also invests in bonds, unlisted real estate and renewable energy projects.
($1 = 10.5224 Norwegian crowns)