L1 Capital, an investment management firm, released its "L1 Capital International Fund" (unhedged) second-quarter 2026 investor letter. A copy of the letter can be downloaded here. The letter discusses the current investment environment as a 'two-speed' but resilient global economy, accompanied by an uncertain future. The letter explores the potential of an AI bubble, distinguishing between strong fundamentals and speculative momentum. Additionally, the market displays a 'narrow' character, marked by high exuberance and pronounced over-pessimism. Against this backdrop, the Fund returned +2.6% (net of fees) during the June 2026 quarter, compared to the benchmark return of +12.5% (all in A$). The underperformance was driven more by which investments were not held in the Fund. The Fund remains focused on quality, valuation and the avoidance of permanent capital loss, and believes the portfolio is positioned to deliver attractive risk-adjusted returns for patient investors. In addition, you can check the Fund's top five holdings to know its best picks in 2026.
In its Q2 2026 investor letter, L1 Capital International Fund highlighted NVIDIA Corporation (NASDAQ:NVDA). NVIDIA Corporation (NASDAQ:NVDA) is a leading data center-scale AI infrastructure company that operates through Compute & Networking and Graphics segments. On July 17, 2026, NVIDIA Corporation (NASDAQ:NVDA) stock closed at $202.81 per share. One-month return of NVIDIA Corporation (NASDAQ:NVDA) was -2.80%, and its shares gained 18.34% over the past 52 weeks. NVIDIA Corporation (NASDAQ:NVDA) has a market capitalization of $4.91 trillion.
L1 Capital International Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2026 investor update:
"During the June 2026 Quarter the Fund's investment in NVIDIA Corporation (NASDAQ:NVDA) was increased. This reflects our view that AI is rapidly becoming more capable and AI capital expenditure will be stronger for longer. Nvidia is now a top 5 holding. It is the world's largest company by market capitalisation, so is hardly unknown. We have followed Nvidia for many years, but our first investment in the company was slightly less than 12 months ago. At that time, we explained that we had materially underestimated the growth in AI, the size of the addressable market, and Nvidia's associated growth and profitability.
Since then, Nvidia's financial performance has gone from strength to strength, and our earnings and cash flow expectations for Nvidia for the next few years have almost doubled. Yet the share price has 'only' increased around 15% since our initial investment. This has been reflected in a material derating of Nvidia's near term trading multiples. Market commentators are generally not concerned about Nvidia's short term earnings prospects. Key concerns are focused on longer term loss of market share, and questions over management's allocation of Nvidia's immense free cash flow. We do expect Nvidia will lose share within the entire 'AI compute pie', but the rapid growth in the size of the pie will mean Nvidia's smaller share still corresponds to very strong growth and financial performance. While there may be some unsuccessful investments, we are comfortable with Nvidia's overall capital allocation strategy. We consider Nvidia to be trading well below fair value today – an example of value to be found amongst all this AI exuberance."
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