Grantham Mayo Van Otterloo & Company 13F Portfolio

The biggest dollar adds make it clear they’re no longer satisfied just owning the headline AI winners; they want the picks-and-shovels around the boom.

• KLA: a huge capital redeployment, with the stake up 744.3% to $1.17B (2.65% of the book) despite the position sitting about -59.7% versus their average cost. That is not averaging down for optics – that’s GMO asserting that process control and inspection gear are structurally underpriced in the AI capex cycle.
• Nvidia: the position explodes by 1,217.8%, taking it to $934.8M. Even though they’re already up 23.7% on cost, they’re treating Nvidia less as a momentum name and more as core infrastructure for accelerated computing.
• Netflix: the stake jumps 155.6%, but the position is still ~-14.9% versus their average buy. GMO is explicitly leaning into volatility here, betting that scale, pricing and content economics matter more than near-term multiple compression.
• Mastercard and Microsoft: adds of $445.8M and $238.8M respectively show they still want durable, toll-like cash flows (payments and cloud/enterprise software) anchoring the higher-risk tool and media bets.
• Meta and Thermo Fisher: both see high‑single to low‑double‑digit percentage share increases, reinforcing a belief that digital ads, social scale and scientific tools are secular growers worth topping up.
• Philip Morris: a new $140.4M starter indicates they’re willing to pay for regulated, cash-rich franchises as an income ballast against these growthier bets.

On the funding side, GMO is not “de-risking” broadly; it is rotating within winners and draining lower-conviction capital.

• Lam Research: they cut the position by 20.8%, freeing about $623.8M even though they’re up an eye‑popping 491.3% vs cost. That’s classic risk management: bank gains in a spectacular winner and recycle into areas they see as earlier in the cycle or mispriced.
• Alphabet and Texas Instruments: trims of 11.1% and 7.6% signal these are now viewed as mature core holdings, not the most asymmetric ideas left in AI or semis. GMO prefers to hold some exposure while directing fresh dollars to the more levered parts of the stack like KLA and Nvidia.
• US Bancorp and TD: cuts of 22.1% and 11.7% suggest traditional spread banking is a shrinking priority. They keep some cyclicals via names like Deutsche Bank and Bank of Nova Scotia (both increased), but the big U.S. retail/wholesale bank is clearly a funding source.
• UnitedHealth, Elevance and Hilton: reductions of 10.6%, 12.7% and 37.8% free capital from managed care and travel, two areas with policy and cycle sensitivity. GMO seems to believe they can get a better risk‑adjusted return in digital infrastructure and payments rails than in businesses tied to reimbursement regimes or late‑cycle leisure demand.

The net sector story is subtle on the surface and radical underneath. Technology edges up to 46.7% of the book, but the composition is quietly moving from diversified mega‑caps toward semis, EDA and infrastructure software.

Within that tech bucket, incremental dollars are migrating from broad platforms (Alphabet, Apple, Texas Instruments) into more narrowly critical bottlenecks: wafer inspection (KLA), GPUs (Nvidia), and design/software tooling (Synopsys, Salesforce, Microsoft). This is a bet that the scarce parts of the AI and cloud stack will capture more value than the already‑re‑rated platforms.

Health care drops from 23.25% to 21.74% as they shave large, profitable incumbents like Johnson & Johnson, Merck, UnitedHealth and Elevance while adding just modestly around the edges in names like GSK and a new Philip Morris position. That looks like a gradual migration from “bond proxies in disguise” toward more idiosyncratic cash generators.

Financials fall from 5.32% to 4.48%, driven by the US Bancorp and TD trims even as they add to Deutsche Bank and Bank of Nova Scotia. The mix tilts toward cheaper, more cyclical international banks rather than rate‑sensitive U.S. franchises.

Consumer exposure in aggregate is roughly flat, but the internal rotation is meaningful: away from steadier travel (Hilton) and staples (Darling Ingredients) toward streaming (Netflix) and global brand power (Procter & Gamble), with Uber and TJX effectively maintained. The real growth lever is still tech, but payments, media and select staples are increasingly the supporting cast.

Taken together, these moves sketch a manager who thinks the AI and digital transformation trade has years left — but that the market is mispricing which parts of the stack will win. GMO is upgrading from broad exposure to the theme toward a more concentrated bet on the choke points: extreme‑UV capital equipment, GPUs, inspection tools, and the software that orchestrates it all.

They’re willing to accept more mark‑to‑market pain (as shown by the big adds to underwater KLA and Netflix) in exchange for owning what they see as the next leg of the cycle rather than the now‑crowded early winners. Health insurers, U.S. banks and travel are being repositioned as liquidity reserves, not offensive weapons.

At the same time, the initiation in Philip Morris plus incremental adds to Procter & Gamble and TotalEnergies show an awareness that a portfolio built around semis, software and streaming needs income and defensiveness somewhere. Those names look like deliberate shock-absorbers against the volatility inherent in a 46.7% tech allocation.

If this quarter is a guide, expect GMO’s future trades to keep pushing toward second-derivative AI beneficiaries and transaction rails, funded by steady trims in mature, lower‑beta winners. The bet is that owning the scarce, mission‑critical plumbing of the digital economy will outperform the broader market — even if the ride is noticeably bumpier along the way.