The market value fluctuations of the seven giants in the US stock market have led to a reduction in sovereign fund investments in early-stage companies

On the other hand, the investment of sovereign wealth funds in early-stage companies seems to be on a downward trend.

Further Reading

Temasek's Early Investment Scale Significantly Reduced, First Round Investment Count Sharply Decreased

In April of this year, the market capitalization of the seven tech giants shrank by 17% in a single month, equivalent to a paper loss of 0.9% for sovereign institutions. The platform estimates that Temasek's exposure to the seven giants is 2%, corresponding to a paper loss of 0.3% in April.

KPMG data shows that global venture capital financing peaked at $213.3 billion in the fourth quarter of 2021 and has been declining ever since, dropping to $81.4 billion in the fourth quarter of 2023. Driven by investments in artificial intelligence, it returned to over $100 billion in the fourth quarter of last year and the first quarter of this year. However, KPMG pointed out that the number of transactions in all regions has declined as investors remain cautious about the macro environment.

According to the Global SWF, based on the latest annual reports released by global sovereign wealth institutions, local sovereign funds have an investment exposure of about 5% to the "seven tech giants" in the U.S. Among them, the Norwegian Sovereign Wealth Fund, managed by Norges Bank Investment Management (NBIM), has the highest exposure at 13%.

Currently, Temasek's early-stage investments account for less than 6% of its total investment portfolio, with about half being direct investments and the rest allocated through venture capital funds.

Temasek states on its website: "We reserve a portion of our investment funds to support innovative technologies and disruptive technologies that are in the pre-commercialization stage. We fully recognize the risks and challenges faced by these startups and accept the binary risk that comes with investing in them."

After global interest rates soared in 2022, the venture capital industry fell into a winter.

According to the startup data platform Tracxn, Temasek's investment in early-stage companies decreased from $4.4 billion (SGD 5.7 billion) in 2021 to $590 million last year, with $70 million invested this year; during the same period, Temasek's first-round investment count in non-listed companies dropped from 82 to 11.

However, since May, the stock prices of the seven giants, except for Apple, have rebounded.

In the initial investment phase, smaller amounts are typically injected, and if the company successfully reduces risks, consideration is given to increasing holdings. At the same time, as part of its risk management framework, Temasek also controls the upper limit of such investments.

The seven U.S. stocks are Apple, Microsoft, Amazon, Google's parent company Alphabet, NVIDIA, Tesla, and Facebook's parent company Meta, spanning sectors such as artificial intelligence, cloud computing, e-commerce, and electric vehicles, significantly impacting the Nasdaq and S&P 500 indices.

Through Tracxn, other funds, such as the Canada Pension Plan Investment Board (CDPQ) and venture capital firms like Sequoia Capital, have also shown a downward trend in the number of first-round investments in startups over the past four years Temasek also stated that it manages early investment risks through reasonable investment scale and diversified allocation.

Due to significant investment exposure of sovereign wealth funds in the "seven giants of the U.S. stock market," their investment portfolios have also fluctuated accordingly. Meanwhile, the investment of sovereign wealth funds in early-stage companies seems to be weakening