The Scottish Mortgage Investment Trust share price extended its rebound, reaching its highest level since October 29. The stock has gained 7.50% from its November 5 low. Still, it faces significant challenges, as some of its top holdings, including SpaceX and Anthropic, remain under pressure.
Scottish Mortgage Trust has an Anthropic problem
SMT share price has been under pressure as some of its companies have faced some major challenges. One of these challenges is Anthropic, which accounts for 4.2% of its portfolio.
Anthropic plans to go ahead with its initial public offering (IPO) as soon as this month. Initially, the company plans to launch its IPO at a $2 trillion valuation. Now, however, with the jitters surrounding the artificial intelligence (AI) industry, the company has slashed the valuation.
According to the Wall Street Journal (WSJ), the company now plans to go public at a $1.3 trillion valuation. Its bankers are also pushing for the valuation to be over $1.5 trillion.
Scottish Mortgage has a large stake in Anthropic, and an IPO of $1.3 trillion will represent a good return for the company. However, that figure will be much lower than what analysts were expecting.
Most notably, recent history shows that companies tend to jump shortly after the IPO and then plunge. That has happened among other companies, including popular names like Bullish, Gemini Space Station, and SpaceX.
SpaceX stock is stuck in a bear market
Scottish Mortgage Investment Trust stock has also dropped because of the ongoing developments with SpaceX, its biggest holding. SpaceX stock initially soared after the company went public and then plunged. It remains in a bear market after plunging by over 36% from the highest point this year.
SpaceX’s shares have deteriorated because of the ongoing AI jitters that have affected other companies, including Nebius and CoreWeave. The company has also continued to borrow heavily to finance its AI ambitions. It recently raised $40 billion to buy Nvidia chips.
Other portfolio companies have retreated
Scottish Mortgage stock has also plunged because of the developments in other companies. Taiwan Semiconductor stock has dropped by nearly 20% from its peak this year, even as its revenue growth has accelerated. TSMC accounts for 6.4% of Taiwan Semiconductor’s business.
Most notably, Nvidia has dropped by over 30% from the highest point this year. The stock’s sell-off continued this week after Jensen Huang admitted to infidelity with Alice Huang, an alleged Chinese spy. Investors are concerned that the crisis could lead to Huang being pushed away from the company.
Like other Brazilian companies, MercadoLibre has dropped sharply after the recent presidential election where President Lula won against Flavio Bolsonaro. MELI shares dropped to $1,490, down sharply from the year-to-date high of $2,340.
Other companies in the Scottish Mortgage Trust that have struggled recently are large names like Shopify, Amazon, ASML, and PDD Holdings.
What next for Scottish Mortgage shares?
Scottish Mortgage stock chart | Source: TradingView
Technicals explain why the SMT stock price has rebounded. It bounced back after dropping to a low of 1,420p, which coincided with the lowest swings in March and July this year. The level also coincided with the 200-day Exponential Moving Average (EMA). It is common for a stock or any other asset to rebound after hitting such a crucial support level.
The risk, however, is that the rebound is happening after the stock dropped sharply between October 12 and November 5. As such, this could be a mere pullback.
Therefore, the stock may continue rising as bulls target the psychological level of 1,600p. On the other hand, there is also a risk that the stock may drop and move below the ascending trendline.
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