Scottish Mortgage has endured a sharp ride.

After its 2022 slump, Scottish Mortgage Investment Trust has recovered and may still have room to rise. Is it worth buying?

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Scottish Mortgage Investment Trust shareholders (LSE: SMT) have seen dramatic swings. Between November 2016 and November 2021, the share price almost quintupled, then lost nearly 60% over the following 18 months. Since that low, it has climbed 150% to a new all-time high, placing the trust comfortably above every other global fund over the three-year period.

SpaceX has drawn much of the recent attention. Scottish Mortgage first invested in 2018, when the company was valued at £31 billion. After its initial public offering (IPO) in June, SpaceX's market value climbed above £2 trillion; Scottish Mortgage has since reduced its holding from more than 25% of the portfolio to 15%. Even so, "we have no intention of selling out and expect to hold the shares for ten years," says Lawrence Burns, who manages the trust with Tom Slater.

Anthropic, the AI firm, is also preparing for an IPO. It represented 3.9% of the portfolio on 22 September, though that share would probably exceed 5% at the target valuation. ByteDance, TikTok's owner, makes up 4.4% and is expected to remain private. Stripe, the payments company, has no plans to float either and accounts for 2.9%. Scottish Mortgage's 2012 decision to invest in private companies has clearly paid off. The unlisted-asset limit was later raised to 30% of the portfolio, while the actual share now stands at 22%.

Investors rushed to sell, yet Slater and Burns stayed put. The stock began climbing again as Moderna advanced its respiratory-vaccine work. In August this year, a phase III trial pairing its late-stage skin-cancer vaccine with Merck's Keytruda delivered very promising results, although experts urged caution. Moderna's shares doubled after the announcement and now account for nearly 4% of the portfolio.

Scottish Mortgage Trust embraces AI

The managers remain upbeat about AI. Burns says companies that commit to the technology are generating increasing value. Demand should keep rising, he adds, because hyper-scalers - builders of data centres - cannot afford to miss out. Some businesses are even considering redesigning their entire operations around AI. Hardware returns are fantastic, while the technology continues to improve. If its potential keeps expanding, far more compute will be needed.

The trust also has a small stake in PsiQuantum, though Burns says, "we invest in growth, not pure technology so will have a small holding till our conviction in quantum computing increases." He adds that "there are lots of natural phenomena that are very hard to model with conventional computing," giving quantum computing significant potential.

Scottish Mortgage Trust has had a strong run, yet shareholders may be tempted to take some profits before the shares climb further.