One of the UK’s most closely watched growth funds just made a loud statement about where the real money in AI sits. Hint: it’s not in the software layer.

The Blue Whale Growth Fund, a roughly £2.87 billion vehicle managed by Stephen Yiu, has been systematically rotating out of major software names and into the semiconductor companies building AI’s physical backbone. As of May 31, 2026, Nvidia constituted about 9.9% of the fund’s assets, while SK Hynix held a 5.55% position. Lam Research, another chipmaking infrastructure play, ranked as the second-largest holding at approximately 9.7%.

The exits were just as telling as the entries. Yiu dumped positions in Microsoft and Meta during 2025, citing valuation concerns.

The hardware thesis, explained

The fund has realized over £100 million in profits from Nvidia trades alone. That’s not a paper gain or a theoretical return. That’s cash extracted from one of the most consequential stock moves of the decade.

Nvidia’s weight in the portfolio grew from roughly 7% to around 10% by early 2025, and it has stayed near that level.

SK Hynix was added to the portfolio approximately 18 months before the May 2026 update, positioning the fund ahead of the current wave of demand for high-bandwidth memory, or HBM. HBM is the specialized type of memory that AI accelerators like Nvidia’s GPUs need to process massive datasets quickly. SK Hynix is widely considered the leader in that specific category.

SK Hynix has a $29 billion US ADR listing planned for around July 10, 2026. That listing would dramatically expand the company’s accessibility to American investors.

Why software got the boot

Yiu’s decision to exit Microsoft and Meta reflected a straightforward calculus about where value was stretched. Software companies, particularly the mega-caps, had absorbed enormous capital during the initial AI hype cycle, and valuations ran ahead of the fundamentals.

Lam Research’s presence as the number-two holding reinforces the hardware focus. Lam makes the equipment used to manufacture chips, making it a pick-and-shovel play on the entire semiconductor buildout.

What this means for investors

At £2.87 billion under management, Blue Whale’s moves carry weight. The concentrated bet on hardware over software suggests differentiation between AI beneficiaries and AI enablers.

The SK Hynix ADR listing in July could be a particularly important event to watch. A $29 billion listing would make it one of the largest semiconductor-related offerings in recent memory, potentially drawing capital away from other tech investments as institutional allocators rebalance.

The risk, of course, is cyclicality. Semiconductors are famously boom-and-bust. Yiu’s track record of taking profits, as evidenced by the £100 million cashed out from Nvidia, suggests he’s aware of that risk.