Saudi Arabia’s US$730 billion sovereign wealth fund, the Public Investment Fund (PIF), threw its weight behind green energy, gaming and the internet in the first quarter, while slashing exposure to payments processor Visa and Chinese e-commerce company Pinduoduo.
The Saudi goliath bought more than one million shares in Bloom Energy worth US$21 million by end-March, while it boosted its position in gaming company EA by 55% to 24.8 million shares worth nearly US$3 billon – an additional US$1 billion. It also more than tripled its holdings in Sea, which were worth US$72 million at the end of the quarter, and raised its stake in e-payments firm PayPal by 6.2% totalling US$569 million. Other stakes remained the same, although their weight changed due to the market performance of the 52 stocks in the portfolio.
PIF retains confidence in electric vehicle manufacturer Lucid, despite its volatile performance as it faces commercial challenges exacerbated by its own manufacturing issues. The value of PIF’s investment in Lucid grew by nearly 18% q-o-q to US$8.92 billion, but far from returning to its peak of US$38.6 billion in Q4 2021. By the end of March 2023, Lucid represented 25% of PIF’s US public equity portfolio, down from 69% at end-December 2021. Non-Lucid holdings grew 14% q-o-q to US$26.6 billion, bringing the total portfolio to US$35.5 billion – up 15% q-o-q. If Lucid is stripped out, the portfolio grew 49% y-o-y by end-March due to a mixture of increased investment and improved performance of its holdings.
In terms of sectoral weight, retail & consumer (including gaming) and tech stocks increased in their share of the portfolio with growth in value of 21% and 20%, respectively. Listed infrastructure fell from 11% to 9% of the total share due to a 5% fall in the value of its exposure, while poor performance in banking stocks saw the value of its financial services exposures falling from 6% to 5% of the total.
The recovery in Lucid’s price is driven by rumors that the Saudi fund is set to take electric vehicle maker private by buying a 34.5% stake, following a troubled year for PIF’s investment in Lucid. If Lucid was taken private today, PIF’s total US public equities portfolio would total US$25.1 billion – 57% higher than end-June 2021, before Lucid’s IPO.
PIF began its involvement in Lucid in 2018 when it invested US$1 billion in the Tesla rival. In February 2021, PIF, BlackRock and others invested another US$2.5 billion in Lucid as part of its merger with special purpose acquisition company Churchill Capital Corporation IV.
In 2022, Lucid built a total of 7,180 vehicles at its only plant in Arizona. Lucid Group already has ambitions in Saudi Arabia with plans launched last February to produce EVs with a targeted production capacity of 150,000 cars per year, initially using knocked-down kits manufactured in the US. The government plans to order up to 100,000 EVs from Lucid of a 10-year period. Production could start as early as this year, albeit at a fraction of its target.
The development of EVs is part of Saudi Arabia’s Vision 2030, which aims for 30% of vehicle sales to be electric by the end of the decade, supported by locally manufactured cars. PIF also aims to reach net zero by 2060 and is deploying various efforts in the development of renewable energy and sustainable communities. The automotive industry is one of the main targets for carbon emissions reductions, but also it sees the sector as an opportunity for economic diversification with plans to export over 150,000 EVs in 2026 and by 2030. By bringing Lucid back into its full ownership, PIF could better align the carmaker with its vision.