When you think of technology stocks, you probably think ‘Magnificent Seven’, Nasdaq and innovative Asian companies.
The FTSE 100 probably isn’t the first thing that springs to mind.
Of course, you’d be right that many markets have a lot more technology companies than the UK. Just 1.0% of the FTSE 100 is currently made up of companies classed as ‘Technology’.
Scratch a little deeper though, and you might be surprised at just how much tech exposure the UK market has.
This article isn’t personal advice. All investments, and any income from them, can fall as well as rise in value, so you could get back less than you invest. If you're not sure if an investment is right for you, ask for financial advice.
Does the FTSE 100 have more tech than investors think?
Sector classifications rely on pre-set criteria and, while they serve a useful purpose, can sometimes be a little misleading, particularly as companies evolve.
Take the example of Experian.
Most people know the company as the provider of credit scores. Necessary, but perhaps a little boring. Officially it’s classed as an industrial support services company. This, however, hides a potentially more exciting side of the company.
It handles massive amounts of data on a daily basis, and is now one of the world's leading information services companies, providing data and software solutions. Perhaps not quite as exciting as some traditional technology stocks, but in its own way pretty techy.
Then there’s a company like Rightmove.
We all know the website where we can browse the houses of our dreams (and lose large parts of our day if we’re not careful). It’s classed as a real estate investment and services company, but it’s a digital platform that has transformed the way the housing market works. Not strictly a technology stock, but not far off.
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Are FTSE 100 companies using artificial intelligence?
There are also UK companies adopting artificial intelligence (AI) in novel ways to revolutionise their businesses.
Take AstraZeneca.
This is a well-known biopharmaceutical company which has started to use AI data analytics to help generate new drug candidates. The technology is in its early stages, and a lot has still to be proven.
WPP is another.
This is a media company which has used NVIDIA technology to create an AI-enabled production application which streamlines and automates the creation of text, images and video, transforming content creation for advertisers and marketeers.
UK tech is being noticed by the experts
UK fund managers are well aware of this, and many are increasingly focused on the companies using technology to great effect – here are two UK fund examples that feature on our Wealth Shortlist.
Investing in these funds isn't right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.
Let’s take the example of the Liontrust UK Growth fund, managed by Anthony Cross and Julian Fosh. The fund aims to grow your capital by investing in a portfolio of companies with unique advantages over the competition and the ability to grow earnings and profits over the long term.
The fund had 9.2% invested in AstraZeneca as at the end of July 2024, and 4.2% invested in RELX Group.
RELX is officially in the media sector, but is a global provider of information-based analytics, and another company using AI to great effect.
The fund has a concentrated portfolio and the flexibility to invest in smaller companies and derivatives, all of which add risk. This fund also currently holds shares in Hargreaves Lansdown plc.
Artemis Income is another example and managed using a disciplined investment approach, tried and tested over several decades.
The fund focuses on companies that the managers think can pay a sustainable income through the market cycle, regardless of the economic backdrop.
It’s mainly made up of large UK-listed businesses, though there are some holdings in medium-sized and overseas companies too.
The managers of the Artemis Income fund, Adrian Frost, Nick Shenton and Andy Marsh, are also fans of RELX, with 4.2% of their fund invested in the company at the end of June.
They also see the merits of owning the London Stock Exchange Group. It’s technically a finance and credit services provider, but behind the scenes it’s a company which is using AI to improve data-driven decisions.
The fund takes charges from capital, which can increase the yield but reduce the potential for capital growth.
What does this mean for investors?
Investors looking for some exposure to technology, while diversifying away from the Magnificent Seven and the US stock market, shouldn’t automatically discount the UK.
It might be hiding more technology exposure than you thought.
If you’re looking to invest in UK tech, it could be worth thinking about investing in UK funds.
Our Wealth Shortlist has a number of UK funds, like Liontrust UK Growth and Artemis Income, that give you an opportunity to invest in AI and tech.