Savana Asset Management’s February letter reveals a challenging month marked by a tech sector sell-off amid AI disruption fears, a surge in AI capital expenditure, and a continuing rotation towards value-driven small caps.
- SVNP fund declined -2.02% net, mainly due to USD depreciation
- Technology stocks faced sharp sell-offs amid AI disruption concerns
- AI infrastructure spending surged 66% year-on-year in 2025
- Market rotation from tech-heavy large caps to value-oriented small caps continues
- Savana emphasizes diversified, fundamentals-driven portfolio approach
February’s Market Setback
February 2026 proved a humbling month for Savana Asset Management’s US Small Caps Active ETF (SVNP), which posted a net decline of 2.02%. While stock-level performance across the portfolio was largely flat, currency headwinds played a significant role, with the US dollar depreciating by 1.8% over the month, weighing on returns for Australian investors.
The ‘SaaSpocalypse’ and Tech Turbulence
The technology sector endured a sharp correction, with what some have dubbed the “SaaSpocalypse” rattling software stocks globally. The release of Anthropic’s Claude Code intensified fears of AI-driven disruption, triggering steep declines in prominent Australian tech names such as WiseTech (-18%), Xero (-11.3%), and Life360 (-10.4%). Over the past six months, the S&P/ASX All Technology Index has fallen approximately 33%, reflecting widespread investor uncertainty.
Interestingly, even AI leaders like NVIDIA, despite reporting stellar revenue growth of 73% year-on-year and beating earnings estimates, saw their share prices fall, underscoring the market’s cautious stance on the sector’s long-term economics amid heavy capital demands and fierce competition.
AI Investment: A Capital-Intensive Growth Story
Despite the volatility, AI-related capital expenditure is booming. In 2025 alone, tech giants Amazon, Microsoft, Alphabet, and Meta invested a combined A$329 billion in AI infrastructure, a 66% increase from the previous year. This surge contributed an estimated 1.1% to GDP growth in the first half of 2025, according to JP Morgan. Notably, much of the economic benefit is expected to flow to industrial and manufacturing sectors that supply the physical infrastructure underpinning AI technologies, highlighting opportunities beyond the headline tech stocks.
The Great Rotation to Small Caps
February’s developments reinforce a broader market rotation away from tech-heavy large caps towards value-oriented small caps. Since August 2025, the S&P 600 small-cap index has outperformed the S&P 500 by over 3%. This trend is mirrored within the S&P 500 itself, where sectors such as utilities, energy, and materials have led year-to-date returns, while technology and consumer discretionary sectors lag. This rotation is supported by resilient corporate fundamentals, with the S&P 500 reporting six consecutive quarters of double-digit earnings growth.
Savana’s Diversified Approach
Amid the turbulence, Savana underscores the importance of diversification. The fund’s portfolio, typically comprising 30–50 high-conviction holdings across various industries, avoids concentration in ‘hot’ themes or stocks. This disciplined, fundamentals-driven strategy aims to deliver steady, long-term compounding rather than chasing rapid gains, a philosophy echoed by Warren Buffett’s famous admonition that “nobody wants to get rich slow.”
As the market navigates the uncertainties of AI disruption and sector rotations, Savana’s approach seeks to balance opportunity with risk, positioning investors for the evolving economic landscape.
Bottom Line?
As AI reshapes markets and tech stocks stumble, Savana’s steady diversification may prove a prudent compass through uncertainty.
Questions in the middle?
- Will AI infrastructure spending continue to accelerate, and which sectors will benefit most?
- How will the ‘SaaSpocalypse’ reshape valuations and leadership within the technology sector?
- Can small caps sustain their outperformance amid shifting economic conditions and rising capital investment?