This was a challenging quarter for Baron Discovery Fund ® (the Fund), both on an absolute and relative basis. In the first quarter of 2026, the Fund declined 10.65% (Institutional Shares), trailing the Russell 2000 Growth Index (the Index) by 7.84%. We don’t take this lightly, and we have doubled our efforts to understand what is going on in the market both in the short term, and (far more importantly) as it affects the overall long-term embedded valuations of our holdings in the Fund.
Of the underperformance, five buckets accounted for 7.88% (essentially all of it):
• 2.63% came from Information Technology (IT) (software exposure was entirely responsible for the relative shortfall in the sector, but was partly offset by solid relative performance in areas benefiting from the AI secular growth narrative, such as semiconductor, semiconductor materials & equipment, and electronic equipment & instruments related companies)
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• 1.76% came from Consumer Discretionary (higher energy prices, inflation and AI induced unemployment fears, plus noise around “prediction markets” competitors to DraftKings Inc. (DKNG) )
• 1.22% came from Health Care (there were no real standout mistakes here, but the market was negative on life sciences tools and health care technology)
• 1.17% came from our lack of exposure to Energy (higher oil prices related to the Iran action moved the sector up 26%) and Materials (aluminum and chemicals prices are up, also related to Iran);
• 1.09% came from Industrials (some of which related to concerns about commercial aerospace suppliers like Loar Holdings Inc. (LOAR) due to the military action in Iran)
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Annualized performance (%) for periods ended March 31, 2026 †
Fund Retail Shares ¹,²
Fund Institutional Shares ¹,²
Russell 2000 Growth Index ¹
Russell 3000 Index ¹
QTD ³
(10.74)
(10.65)
(2.81)
(3.96)
1 Year
5.36
5.66
23.58
18.09
3 Years
8.01
8.31
12.27
17.86
5 Years
(2.46)
(2.20)
1.62
10.87
10 Years
13.11
13.41
9.79
13.72
Since Inception ((9/30/2013))
11.05
11.34
8.37
12.88
Since Inception ((9/30/2013)) (Cumulative) ³
270.68
282.76
173.18
354.60
Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares and Institutional Shares as of January 28, 2026 was 1.33% and 1.05%, respectively. The performance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate; an investor’s shares, when redeemed, may be worth more or less than their original cost. The Adviser may waive or reimburse certain Fund expenses pursuant to a contract expiring on August 29, 2036, unless renewed for another 11 year term and the Fund’s transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent month end, visit BaronCapitalGroup. com or call 1-800-99-BARON.
Of the underperformance, in IT, 3.71% of the relative deficit was attributable to software. If we include two health care companies that are software-related ( Waystar Holding Corp. (WAY) and Heartflow, Inc. (HTFL) ), the total adverse impact from software in the quarter was (4.36%) or nearly 60% of our negative relative performance. These software companies almost uniformly beat earnings, yet shares dropped considerably.
Software has been decimated by the so-called “SaaS-pocalypse” which is shorthand for how the revolution of AI is changing the industry. SaaS stands for software as a service. The market has decided that all software companies are AI losers and, as a result, every one of our software holdings saw significant declines in the quarter. Despite generally strong fourth quarter earnings, the sharp declines have pushed software valuations to levels not seen in more than 15 years. Although the short-term results have been difficult, we see this environment as a chance to invest in truly attractive opportunities across software companies that in our view have strong and sustainable competitive advantages. There are multiple potential catalysts that could quickly change the market’s thinking on these software companies, and we want to be there to reap the benefits when that happens.
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Companies like Anthropic (ANTHRO) and OpenAI (OPENAI) have created models known as “frontier, ” “foundation, ” or “large language” AI models (LLMs) that have revolutionized the way we search for and categorize information that is generally publicly available. They have extended their LLMs into software coding, in a way that has become much more accessible to the general population, thereby democratizing software development. It is true that this revolution has made it much less expensive to develop basic software (for professionals and consumers alike). Companies that have value propositions based mostly on their actual code are truly at risk of disintermediation in the world of AI. However, we have largely avoided these types of companies. Our companies should have built-in competitive advantages, which extend far beyond the actual code. Our portfolio companies have their own internally developed AI which is custom tailored to their own domains. Here are a few examples of the differentiation which exists in our investments.
1. Deterministic Data/Infrastructure Protection – LLMs take the data that is available to them and search based upon it. If there is an actual answer to the question being asked, it will be returned. Where no actual answer can be found, a probabilistic “guess” is made in order to fill in the blanks. The answer may be correct, or it may not be (in which case you have what is called a “hallucination”). Software companies that deal with private customer data, not available to LLMs, have a prized possession because software using deterministic data will have an actual answer to a question being asked that in many cases cannot be addressed by an outside LLM. In fact, it may be unsafe, illegal, or out of policy for a company to use an external model, or to allow that external model to have access to its proprietary information.
Good examples of this are regulated companies in industries such as health care and finance. The more complex the environment, the more embedded the legacy software will be in the enterprise. Now these legacy software companies can use AI from an outside LLM through a link called an MCP Server (Model Context Protocol) to help fine-tune their own deterministic data. But there is a cost for using outside AI based on the amount of information “tokens” consumed. And breaches of MCP Server software have also been reported (see below). Cybersecurity companies in particular have the advantage of seeing all of a company’s data and parsing it for particular threats to the internal network or application structure of that company.
The brands of these companies are valuable as they have built up years’ worth of trust with their customers. This is why we have invested in SentinelOne, Inc. (S), which provides endpoint protection using its own AI algorithms for cyber-breach discovery and remediation, . The same is true for observability software (which “instruments” everything that moves through a network or attaches to it, as well as the applications and data related to that movement). We own Dynatrace, Inc. (DT) which is architected on its own internal AI to predict failures in network software and hardware (whether in the cloud or on-premise) and works to automatically remediate the issues. It’s used by the largest companies in the world that operate in the most complex environments (airlines, financial giants, and defense companies for example).
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Deterministic/infrastructure oriented companies gain nearly all of their value by integrating with and servicing their clients’ needs, rather than just by selling an off-the-shelf software package. Such software provides high return on investment (ROI), auditable security compliance, and peace of mind at a reasonable cost. Even if cheaper software solutions that were coded using LLM platforms came out, they would still have to be integrated and maintained into the enterprise’s architecture, and they would have to link to outside LLM’s for AI capability (which could cost a LOT more to run in the future versus what existing vendors charge for their “tuned” and more specific AI models). We believe that these companies will become even more valuable in an “agentic AI” world, where software autonomously executes tasks based on user goals, operates with its own enterprise privileges, and must be monitored and controlled.
2. Network Effects Vertical Vendors – Some companies serve a very specific customer base and provide increased value by giving each customer the benefit of understanding (using hard to compile domain specific data) what is going on in their industry. Examples of this include ServiceTitan, Inc. (TTAN), which provides software for service trades such as plumbing and HVAC. It is an all-in-one platform for lead generation, job bookings, dispatching, estimating jobs, customer communications, and payments/financing. Each trade has its own specific characteristics and regional data on pricing, competition, service times, and contract terms that ServiceTitan understands deeply. It is not easy to switch the software out, particularly because it helps businesses automate their processes and minimize the overall personnel needed. Procore Technologies, Inc. (PCOR) provides integrated construction software, which is required by many of the major general contractors in order for subcontractors to be able to participate in a construction project. The software combines computer-aided design software blueprints with job scheduling, cost estimations, materials costs, and change order management. In this manner, the job site can be coordinated among all the different parties involved in the construction project. It is truly a community-oriented platform that is not easily replaced.
3. Atoms Plus Electrons – These are hybrids of software and hardware. They are in some ways the most protected because AI in and of itself can’t create hardware. Companies like Netskope, Inc. (NTSK) fit into this category. Netskope is a misunderstood company which provides secure access service edge (SASE) functionality for zero trust network access (ZTNA), data loss protection, and threat protection to its enterprise customers. It uses a proprietary network of worldwide data access centers as gateways for access to enterprise network resources, web resources, and applications. These physical data centers allow much faster data movement as well as for in-line scanning of network data for security purposes. The company is not earning full margins yet because it has invested in building its physical network (which is part of the reason it is down in the quarter). However, NetSkope is now starting to reap scaled revenue benefits, and its physical network gives the company an advantage over purely software-based ZTNA solutions in that it is safer and provides much faster overall network access (lower latency or delay). It cannot be replicated by software alone.
4. Regulated Industries – Some industries like health care in particular are heavily regulated, with extreme penalties for misuse or loss of patient information. And in some cases, such as with Heartflow (which uses AI software to map coronary arteries to assess blood flow and plaque buildup without an invasive procedure), clinical trials and Food and Drug Administration (FDA) approval are required before the software can be used.
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While this discussion is important, the more practical question is when the market will begin to recognize the wide dispersion in intrinsic value across the software universe. We believe several catalysts are emerging that should separate the winners from the losers.
First, it is likely that we will see increased merger activity. Private equity funds specializing in software have recently raised tens of billions of dollars and would be very sophisticated buyers of high-quality companies at historically depressed evaluations (we have had eight companies acquired in this space in the last six years). Additionally, we are seeing strategic buyers from within the technology space purchase software companies. Last year we had two software companies purchased by such buyers, including CyberArk Software Ltd. (CYBR), a high-end cybersecurity company which was bought by Palo Alto Networks (PANW) (announced in July 2025 and closed in February 2026).
Second, it is almost inevitable that there will be cyber-attacks based upon usage of LLM based AI within enterprises if the technology is not properly secured and controlled. We have already seen such an attack. In March 2026 LiteLLM, an LLM gateway tool (which allows developers to link their applications to over 100 different LLMs) was used as an attack vector. Poorly secured coding in this widely used tool led to widespread malware infiltration. The attack was so sophisticated that it allowed the attackers to rapidly spread the malware across on-premise and cloud resources and exfiltrate sensitive data to an external server. SentinelOne recently released a technical paper which showed how its own AI-driven software automatically and rapidly protected its users by finding and shutting down this attack and provided an audited trail of the attack vector itself.
Third, we are likely to see partnerships between legacy software companies and LLM providers, which will highlight the “last mile” deterministic data value of legacy software companies. Recent examples include partnerships with OpenAI and transaction processors such as Instacart (CART), as well as a partnership with SentinelOne and Google (GOOGL) (to provide autonomous, AI-based cloud security for Google Cloud customers).
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Finally, we expect continued solid financial performance from companies with the protected characteristics described above. During the past quarter, our holdings generally delivered results ahead of expectations and raised guidance. We believe this trend will persist, and that growing free cash flow will ultimately capture investors’ attention. Yet valuations are lower than they have been in over a decade. As we have noted in past letters, software companies have incredible financial characteristics, including outsized margins, strong balance sheets, and the ability to actually generate more free cash flow as they grow (due to the upfront payment of subscription fees). For all these reasons, we have maintained our overweight in the software space, and we believe that we will see significant outperformance for years ahead of us.
Advanced Energy Industries, Inc. is a designer and manufacturer of products used to transform, refine, and modify electrical power for use in semiconductor, industrial, medical, data center, and telecommunications end markets. Advanced Energy’s stock rose during the quarter as earnings and guidance were better than expected and as the market began to appreciate the strength that the company would see in both its data center and semiconductor end markets. The company is enjoying the fruits of having repositioned its data center segment to focus on sole-source, differentiated, higher margin business. AI’s increasing power requirements play to Advanced Energy’s strengths in power density and efficiency. The company also recently launched new products into the semiconductor market which are expected to drive strong growth through this year. Combined with the early stages of a recovery in its industrial and medical end markets, Advanced Energy is poised for several years of continued strong growth and margin expansion. The company also remains focused on acquisitions to bolster its product offerings, particularly in the large fragmented industrial and medical spaces.
Masimo Corporation is a medical device company that manufactures and sells a variety of non-invasive patient monitoring technologies, including its well-known pulse oximeters used to measure blood oxygen levels. Shares outperformed for the quarter after Danaher Corporation (DHR) announced that it would acquire Masimo at a 38% premium. This was a special situation driven by an activist investor that worked out very well for the Fund.
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Arcellx, Inc. is a biotechnology company which uses CAR-T technology (modifies a patient’s own immune cells to recognize and destroy cancer cells) to treat multiple myeloma. It is due to be acquired by Gilead Sciences Inc. (GILD) in June (around which time we expect that Arcellx will receive FDA approval for its drug called Antio-cel).
Intapp, Inc., a vertical software platform serving private equity, legal, and consulting firms, detracted from performance this quarter. The drawdown was driven by a sector-wide AI disruption narrative that hit legal-adjacent software stocks particularly hard, with Intapp declining sharply through mid-February after Anthropic announced new legal tools. We sold our investment in the quarter as we believe that our other software holdings have better overall competitive advantages.
DraftKings Inc. is the leading U.S. digital sports betting and iCasino operator. The stock declined as investors grappled with a guidance range that implied handle (amount bet) deceleration, elevated prediction markets investments to compete with firms like Kalshi (KALSHI) and Polymarkets, and lingering debate around structural hold (the percentage of overage profit per bet) sustainability. The headline concerns obscure what we believe are strong fundamentals in the core sports betting business customer cohorts. Management built 2026 guidance on flat actual hold, a figure that has expanded every year in the industry’s history. Parlay mix, the primary mechanical driver of hold, increased 500 basis points during NFL season and 200 basis points year to date. The $800 million EBITDA midpoint also embeds a $200 million headwind from prediction markets investment, which currently carries no associated revenue. Excluding that impact, implied core business EBITDA exceeds $1 billion. We believe the stock is trading at attractive multiples relative to the company’s long-term earnings potential and think the total addressable market for prediction markets, while nascent, has the potential to accelerate growth.
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Shares of Netskope, Inc., a cloud security and networking platform for enterprises, were down due to a combination of sector-wide and technical factors rather than fundamental weakness. The entire application software sub-sector experienced a sharp drawdown as investors weighed AI disruption risks, and recent IPOs like Netskope bore the heaviest losses. Adding to the pressure, Netskope’s lock-up expiration in mid-March made roughly 390 million shares eligible for sale, creating a supply overhang that coincided with the worst of the sub-sector selloff. The business itself performed very well— fiscal fourth quarter (ended January 31, 2026) revenue grew 32%, annualized recurring revenue (ARR) reached $811 million, and grew 31%, the company posted record quarterly net new ARR, and achieved positive free cash flow for the first time. Management guided fiscal 2027 revenue above consensus expectations. We maintain conviction in Netskope’s long-term positioning in the SASE market, where demand for securing cloud and AI workloads continues to grow, and view the current valuation as disconnected from the company’s growth trajectory and competitive standing.
The top ten positions in the Fund represented 29.4% of the Fund’s net assets and cash was 6.1%. Both of these were consistent with historical levels for the Fund.
Forgent Power Solutions, Inc. is a leading manufacturer of electrical distribution equipment used in data centers, the power grid, and energy-intensive industrial applications. Forgent is a low- and medium-voltage equipment specialist and focuses on custom, “engineered-to-order” products (90% or more of revenue) whereas larger competitors in the industry generally focus more on higher voltage and standard products. Forgent differentiates itself from competitors by engaging deeply with customers in the design phase and then offering custom products in shorter lead times than the standard products sold by competitors.
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The company has nearly completed a manufacturing footprint investment which will support $5 billion in revenue, giving it one of the largest state-of-the-art manufacturing footprints in the industry. Plus, it has very good visibility with about $3 billion in annualized orders, with a $1.5 billion current backlog. Electrical equipment, especially power transformers, remains a key bottleneck in the broader data center infrastructure build, and Forgent’s capacity planning and manufacturing efficiency are uniquely positioned to take advantage of this supply/demand mismatch. Despite inefficiencies from excess capacity, Forgent already has near best-in-class adjusted cash flow margins, which we expect to continue to expand as the company drives more volume over its large manufacturing footprint. To date, most of its data center business has focused on colocators and neoclouds, with very large opportunities to engage with and support larger hyperscale customers going forward. We believe Forgent can grow its revenues to over $5 billion in the next five years (from $296 million in 2025 and an expected $1.3 billion in 2026) supported by continued robust grid and data center capital expenditure as well as share gains from competitors in the market.
Enpro Inc. is a diversified industrial technology company whose proprietary, value add products and solutions provide critical functionality and protection across a wide range of demanding environments. Today, more than half of revenue is generated from recurring, high margin aftermarket applications, and a similar proportion is exposed to structurally higher growth end markets. Enpro’s Sealing Technologies segment designs, engineers, and manufactures metallic seals, soft gaskets, wheel end products, and gas analyzers and sensors serving general industrial, commercial vehicle, power generation, food and pharmaceutical, aerospace, and petrochemical markets, supported by strong brands such as Garlock, which is widely regarded as the “Kleenex” of its category. The Advanced Surface Technologies (AST) segment is focused on the semiconductor market and provides precision manufacturing, cleaning, refurbishment, and coating services to leading wafer fabrication equipment original equipment manufacturers and foundries, with a particular emphasis on leading edge production.
We believe Enpro can deliver mid to high single-digit organic revenue growth over time, with EBITDA margins expanding into the high 20% range from the low to mid 20% range today, supported by contributions from both segments. Sealing Technologies should continue to achieve above GDP organic growth driven by strong pricing power and ongoing investment in innovation and attractive growth markets. AST is positioned to benefit from a multi year secular growth opportunity driven by increasing leading-edge semiconductor spending and a rising U.S. share of global manufacturing, particularly supported by AI driven demand in the near term. We also expect the company to continue deploying its strong free cash flow toward highly complementary acquisitions, leveraging its operational excellence capabilities to drive value creation. As Enpro continues to scale and margins improve, we believe the business will warrant a more premium valuation, supporting further upside over time.
We added to our position in Dynatrace, Inc., a provider of “observability” software. For the reasons we laid out above we believe that this is a great deterministic data-oriented company, benefiting from significant competitive advantages. However, it is trading at a rock-bottom multiple (13 times free cash flow, with that metric is likely to grow in the mid-teens for the next few years).
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We also added to Heartflow, Inc., whose software analyzes CT scans of a patient’s coronary arteries done with contrast, and shows calcification, plaque buildup, and blood flow quality in a three-dimensional model. It is hard to understand how Heartflow would be easily disintermediated, given the customer trust it has built up, and its FDA approved software based on significant clinical trials and millions of real-world CT scan analyses.
Finally, we added to Waystar Holding Corp., which like Heartflow has been lumped into the “AI software losers” bucket. Waystar is a provider of revenue cycle management software to health care providers. The company has an AI driven, end-to-end suite of solutions that saves clients massive amounts of working capital costs by getting claims submitted quickly and correctly, and by automating insurance appeals when necessary. At under 11 times adjusted cash flow, but growing cash flow in the low teens, we believe the company is competitively advantaged and very cheap.
We sold several positions in the first quarter, mostly relating to companies set to be acquired. These included Exact Sciences Corporation (a cancer diagnostics company acquired by Abbott Laboratories (ABT) in March), Masimo Corporation, Clearwater Analytics Holdings, Inc. (an investment accounting SaaS company due to be acquired by multiple private equity firms in June), and Arcellx, Inc. We also sold our remaining position in GitLab Inc. (a software company that enables enterprises to coordinate the development and production of software), as we came to the view that the company had the potential to be disintermediated by LLM developed solutions.
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Conclusion
We hate to underperform. We “eat our own cooking, ” as we have personally invested meaningful amounts of our net worth in the Fund. Rest assured that we are devoted to our process of investing in competitively advantaged companies with great management teams for the long term. We spend hours every day performing due diligence on our companies, including speaking with management teams, competitors, industry experts, and customers. So, we have true conviction in our investments for the reasons laid out above. Sometimes we are too early. But we believe we are not far away from seeing outperformance related to our hard work. We are grateful that you have chosen to take this journey with us.
Randy Gwirtzman, Portfolio Manager
Laird Bieger, Portfolio Manager
References
† Historical performance was impacted by gains from IPOs. There is no guarantee that these results can be repeated or the level of IPO participation will be the same in the future.
1 The Russell 2000® Growth Index measures the performance of small-sized U.S. companies that are classified as growth. The Russell 3000® Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market, as of the most recent reconstitution. All rights in the FTSE Russell Index (the “Index”) vest in the relevant LSE Group company which owns the Index. Russell® is a trademark of the relevant LSE Group company and is used by any other LSE Group company under license. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. The Fund includes reinvestment of dividends, net of withholding taxes, while the Russell 2000® Growth and Russell 3000® Indexes include reinvestment of dividends before taxes. Reinvestment of dividends positively impacts the performance results. The indexes are unmanaged. Index performance is not Fund performance. Investors cannot invest directly in an index.
2 The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
† Historical performance was impacted by gains from IPOs. There is no guarantee that these results can be repeated or the level of IPO participation will be the same in the future.
¹ The Russell 2000® Growth Index measures the performance of small-sized U.S. companies that are classified as growth. The Russell 3000® Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market, as of the most recent reconstitution. All rights in the FTSE Russell Index (the “Index”) vest in the relevant LSE Group (LNSTY) company which owns the Index. Russell® is a trademark of the relevant LSE Group company and is used by any other LSE Group company under license. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. The Fund includes reinvestment of dividends, net of withholding taxes, while the Russell 2000® Growth and Russell 3000® Indexes include reinvestment of dividends before taxes. Reinvestment of dividends positively impacts the performance results. The indexes are unmanaged. Index performance is not Fund performance. Investors cannot invest directly in an index.
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² The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
³ Not annualized.
Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary prospectus contain this and other information about the Funds. You may obtain them from the Funds’ distributor, Baron Capital, Inc., by calling 1-800-99-BARON or visiting BaronCapitalGroup. com. Please read them carefully before investing.
Risks:
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Specific risks associated with investing in smaller companies include that the securities may be thinly traded and more difficult to sell during market downturns. Even though the Fund is diversified, it may establish significant positions where the Adviser has the greatest conviction. This could increase volatility of the Fund’s returns.
The Fund may not achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.
The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the respective portfolio manager only through the end of the period stated in this report. The portfolio managers’ views are not intended as recommendations or investment advice to any person reading this report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.
This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Discovery Fund by anyone in any jurisdiction where it would be unlawful under the laws of that jurisdiction to make such offer or solicitation.
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Enterprise Value (EV) is a measure of a company’s total value, often used as a more comprehensive alternative to equity market capitalization. EV includes in its calculation the market capitalization of a company but also short-term and long-term debt as well as any cash on the company’s balance sheet. Free Cash Flow (FCF) represents the cash that a company generates after accounting for cash outflows to support operations and maintain its capital assets.
BAMCO, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Baron Capital, Inc. is a broker-dealer registered with the SEC and member of the Financial Industry Regulatory Authority, Inc. (FINRA).
SYDNEY — Rio Tinto Ltd. shares declined on Friday, closing at A$184.58 after losing 3.50 or 1.86%, as softer iron ore prices and cautious sentiment across the resources sector weighed on Australia’s second-largest mining company.
The move extended recent weakness for the diversified miner, which has faced headwinds from fluctuating commodity markets despite solid operational performance. Rio Tinto, a major global producer of iron ore, copper, aluminum and other critical minerals, remains highly sensitive to developments in China and broader industrial demand.
Trading volume was elevated as the stock underperformed the broader S&P/ASX 200 index. The decline reflects ongoing investor rotation away from resource stocks amid concerns over near-term demand signals from major economies. Iron ore, Rio Tinto’s flagship commodity, has experienced volatility in recent weeks, pressuring valuations across the sector.
Analysts noted that while Rio Tinto maintains strong fundamentals, near-term commodity softness has dominated market narratives. The company’s low-cost operations and diversified portfolio have historically provided resilience, but current pricing dynamics have led to profit-taking and cautious positioning by investors.
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Rio Tinto has reported robust production figures in 2026, with iron ore output meeting or exceeding guidance at key Pilbara operations in Western Australia. Copper production has also shown growth, supported by assets in Mongolia and elsewhere. The company continues advancing projects in lithium and other future-facing minerals, aligning with global energy transition trends.
Despite these operational strengths, share price performance has been influenced by external factors. Chinese steel production and property sector activity remain key variables for iron ore demand. Recent data showing moderation in some industrial indicators has contributed to the recent pullback in mining stocks.
Rio Tinto maintains a disciplined approach to capital allocation, with strong free cash flow supporting dividends and selective growth investments. The company’s interim dividend has been well-received by income-focused investors, providing a reliable yield even during periods of commodity volatility.
For longer-term investors, Rio Tinto offers exposure to structural demand drivers in copper and other metals essential for electrification and renewable energy technologies. Its Pilbara iron ore operations remain among the world’s most efficient, providing competitive advantages through the cycle.
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Valuation metrics suggest the shares trade at reasonable levels relative to historical averages when considering long-term commodity outlooks. However, near-term uncertainty around China’s economic trajectory and global growth prospects has introduced volatility.
Broader Australian resources sector context shows similar pressure on major players. The sector, a significant contributor to the national economy and ASX performance, has been a key driver of gains earlier in the year but now faces consolidation amid mixed signals.
Looking ahead, Rio Tinto’s upcoming operational updates and production guidance will be closely monitored. The company continues investing in automation, sustainability initiatives and low-carbon technologies across its portfolio. Projects such as the expansion of copper operations and exploration in critical minerals position it for potential growth as global demand evolves.
Global factors, including U.S.-China trade dynamics, energy prices and geopolitical developments, continue to influence commodity markets. Rio Tinto’s diversified asset base across multiple continents provides some natural hedges against regional disruptions.
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Analysts generally maintain constructive longer-term views on Rio Tinto, citing its operational excellence, strong balance sheet and exposure to future-facing commodities. While near-term headwinds exist, the company’s scale and low-cost production should support margins through market cycles.
For investors, the current share price level may represent an opportunity to accumulate a high-quality mining stock with diversified exposure. Those with shorter time horizons might prefer waiting for clearer signals on commodity prices and Chinese demand indicators.
The modest decline on Friday fits within normal daily movements for a company of Rio Tinto’s size. It reflects broader sector sentiment rather than company-specific news. Rio Tinto has not released material updates that would explain the session’s trading.
As one of Australia’s largest listed companies, Rio Tinto plays a vital role in the national economy through employment, exports and tax contributions. Its performance influences broader market confidence and reflects conditions in global commodity markets.
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Rio Tinto continues emphasizing safety, sustainability and community engagement across its operations. Its commitment to reducing carbon emissions and investing in renewable energy projects aligns with evolving stakeholder expectations and regulatory requirements.
Investors evaluating Rio Tinto should consider individual risk tolerance, portfolio allocation and time horizon. The company offers exposure to global commodity cycles with a high-quality operator, but volatility remains inherent to the mining sector. Diversification across industries can help manage company-specific and cyclical risks.
Friday’s trading session served as a reminder of the resources sector’s sensitivity to sentiment shifts. While near-term pressures exist, structural drivers supporting demand for Rio Tinto’s key commodities suggest potential for recovery as markets digest current uncertainties.
Market participants will now assess next week’s economic calendar, including any further data from China and other major economies. The balance between global growth expectations, supply responses and energy transition trends will remain central to mining sector performance.
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Overall, Rio Tinto maintains a position of strength in the global mining industry. Its diversified asset base, operational excellence and strategic focus on critical minerals position it favorably to navigate current challenges while capitalizing on longer-term opportunities in the evolving resource landscape.
A delay in getting enough electricity to the Port Talbot site means there is currently a 12-month delay to the new electric arc furnace opening but bosses are confident that could come down
Ruth Mosalski Political Editor
08:04, 08 Jun 2026Updated 08:04, 08 Jun 2026
(Image: John Myers)
The opening of Tata’s new electric arc furnace at the Port Talbot steelworks could be delayed by up to 12 months, bosses have said, although they say they are hopeful that time can be reduced.
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The electric arc furnace is a £1.25bn scheme to build one of the largest such furnaces in the world. The project, partly funded by the UK Government, is to replace the historic blast furnaces at the steelworks.
But issues have emerged with getting power to the site which could delay its start date by up to a year.
Tata Steel’s chief financial officer Koushik Chatterjee has said the delay was 18 months but has already reduced to 12 months. The Indian-owned company is hopeful it will reduce further.
He said “securing access to high-power electricity is critical for our planned transition”.
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“While we are working with the electricity system operator and the National Grid for new electrical infrastructure National Grid has formally alerted us that their connectivity project is delayed,” said Mr Chatterjee.
“This is critical for Tata Steel UK for the project commissioning. We are in conversation with National Grid and the UK Government on resolution of the issues.”
Asked about how long the delay might be Mr Chatterjee, Tata’s executive director and chief financial officer, said that was being discussed.
He replied: “Somewhat between, say, six months to eight months will certainly be there, maybe higher, after we have built the plant. The initial estimate was around 18 months. It has come down to 12 months and we’re actively working to see if we can reduce it further but there will be some delays imminent.”
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He said the company was working with partners including the UK Government, the National Grid, and its electricity supplier to “see if we can mitigate”.
In a call three weeks ago CEO TV Narendran told journalists: “There is a delay of about 12 months in the electricity supply. What we are trying to see is at least some connection, one line, as soon as the plant is ready so we can do some trials, test out some equipment etc so we don’t waste the time that we’re waiting for the full electricity connection.
“Then what we are planning to do is to ramp up that we had scheduled after the commissioning how to compress that to make sure we catch up on the project.
“if we do the preparatory work before the full electricity connection is there we can do a quicker ramp up”.
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In the call Mr Chatterjee said fixed costs in the UK in the last two years had fallen by 50%.
Before the delay in power access an operational estimate of late 2027 or early 2028 had been given. For our free daily briefing on the biggest issues facing the nation, sign up to the Wales Matters newsletter here.
The National Grid is building a new substation at its Margam site and delivering a second 275kV substation on Tata Steel’s Port Talbot site – which requires new supergrid transformers, as well as a 2km underground cable connecting the two substations to deliver the EAF.
It is understood issues emerged with ground conditions, and environmental and planning considerations, once work had started but that teams from National Grid have been on site since September.
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Work on the new Margam substation will start in the coming weeks.
In recent days the Tata site has also been hit with a major fire.
Tata said its controversial decision to shut the historic steel plant’s two blast furnaces, signalling the end of steelmaking from raw materials in Wales, was due to a combination of cost-cutting and a move to decarbonising its operations.
On September 30, 2024, blast furnace four – the final one operating at the vast site – was closed ending 100 years of primary steel-making .
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The site is being reworked around an electric arc furnace to recycle previously-used steel and when the decision was made Tata announced 2,800 job losses with the majority in Port Talbot. We now know that between September 2024 and the end of July 2025 2,162 people left the business.
Tata says it has lost £4bn in Port Talbot since 2007 and the new furnace would ensure a “financially and environmentally sustainable future” as well as reducing the site’s carbon emissions by 90%.
The UK Government gave £500m to the plans.
A Tata spokesman said: “The electric arc furnace programme is a major industrial project and, like all projects of this scale, timelines continue to evolve as detailed engineering, construction, and infrastructure work progresses.
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“While we are still discussing potential adjustments to the commissioning timetable we are working closely with National Grid, our construction partners, and the UK Government to deliver the project safely and as quickly as possible.
“We have already met a series of key milestones in the construction phase and the shipment of major components including the EAF shells, tilting platform, and Consteel conveyor will commence imminently.”
A National Grid spokesperson said: “We recognise the importance of this project and remain committed to delivering the connection safely and at pace, working closely with our partners. Construction is underway and good progress is being made. This is a major, multimillion pound programme involving complex engineering, subject to environmental and planning considerations which require careful design and delivery.”
Shares of Sterlite Technologies dropped 5% to hit the lower circuit on Monday, after a massive 56% surge in one month and a whopping 474% rally so far in 2026, as a pause in the global AI optimism dampened sentiment.
Shares of the company remained locked in the lower circuit at Rs 588.30 apiece on NSE in the morning trading hours of Monday.
AI rally slams the brakes
South Korea’s Kospi plunged 9% on Monday morning, leading to a 20-minute trading halt, as the massive selloff in tech stocks raged on. The index is now down about 14% from the record high it touched last week. The sharp downturn came after heavyweights and semiconductor stocks tumbled, including Samsung shares which crashed over 6%.
The sharp plunge in Kospi reflects the sharp pause in the AI rally, as too much of the benchmark index’s earlier momentum had become tied to the performance of a small group of AI-linked stocks. Samsung Electronics and SK Hynix together account for nearly half of the KOSPI’s weighting and have contributed roughly two-thirds of the benchmark’s gains this year. Also read:Kospi crashes 9%, trading halted for 20 minutes, as chip rout deepens; Samsung, SK Hynix worst hitSterlite Technologies shares had emerged as one of the biggest multibaggers of 2026, riding on explosive demand for AI-linked data centre infrastructure. Sterlite, the optical-fiber maker owned by the Vedanta Group, was seen as the “poster child” for the AI boom. This came amid expectations that the world’s AI expansion needs massive amounts of high-speed connectivity infrastructure, and optical fibre is becoming the backbone of that ecosystem.
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The company late in May announced that its subsidiary has secured a multi-year supply agreement valued at $1.11 billion from a global hyperscaler for AI-ready data centre infrastructure projects in the US. Hong Kong-based CLSA had said that this significantly strengthens Sterlite’s positioning in AI data centres while improving medium-term growth visibility. It expected the order to reinforce Sterlite’s competitiveness in global markets, while maintaining an “Outperform” rating on the stock. However, the sharp crash in tech stocks led to rising worries that the AI rally was fizzling out, which may have led to the downtrend in Sterlite Tech shares today. Also read: Hidden AI Winners
Sterlite Tech share price
Sterlite Tech shares have gained 5% in one week and 56% in one month. The stock delivered a whopping 676% return over one year, 282% over three years and 119% in five years.The company currently has a market capitalisation of nearly Rs 28,719 crore.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
SYDNEY — Wesfarmers Ltd. shares rose modestly on Friday, closing at A$78.93 after advancing 0.32 or 0.41%, as solid performance in its core retail businesses helped the diversified group outperform a softer broader market.
The gain came as the S&P/ASX 200 index closed lower, highlighting Wesfarmers’ relative resilience. The company, which operates leading Australian retail brands including Bunnings, Kmart and Officeworks alongside industrial and chemical operations, continues to benefit from steady consumer demand and operational improvements in 2026.
Wesfarmers has reported consistent results this year, with its home improvement and department store divisions showing particular strength. Bunnings has maintained robust sales supported by ongoing housing activity, renovations and trade customer demand. Kmart and Officeworks have delivered value-focused offerings that resonate with cost-conscious shoppers amid economic pressures.
The group’s diversified structure provides balance across retail, chemicals, energy and fertiliser businesses. This mix has historically helped Wesfarmers navigate economic cycles better than more concentrated peers. Recent updates have emphasized cost discipline, digital investment and sustainability initiatives across its portfolio.
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Analysts generally maintain positive outlooks on Wesfarmers. The stock is frequently cited for its strong brand portfolio, reliable earnings and consistent dividend growth. Its market leadership positions in key retail categories and prudent capital allocation support a premium valuation justified by quality and execution track record.
For income investors, Wesfarmers offers an attractive and growing dividend yield backed by strong cash flow generation. The company has a long history of increasing payouts, making it a core holding for many Australian equity income portfolios.
The current share price movement reflects continued investor confidence in Wesfarmers’ defensive qualities and growth potential. Trading volume was in line with recent averages, indicating steady rather than speculative interest.
Broader Australian market context shows mixed performance, with resources facing pressure while consumer and industrial names like Wesfarmers found buyers. The company’s exposure to everyday consumer needs provides insulation from commodity volatility affecting other large-cap stocks.
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Looking ahead, Wesfarmers’ upcoming half-year results will be closely watched for updates on retail trading conditions, industrial performance and capital management strategy. The company continues expanding its store network, enhancing digital capabilities and advancing sustainability targets.
Global consumer trends and domestic economic indicators will influence near-term performance. Wesfarmers’ value-oriented retail offerings position it well to benefit from cautious consumer spending patterns. Its industrial businesses provide additional exposure to commodity and agricultural cycles.
Analysts project continued earnings stability for Wesfarmers, supported by operational excellence and strategic investments. While near-term economic uncertainty exists, the group’s diversified model and strong balance sheet provide a solid foundation for navigating challenges.
For long-term investors, Wesfarmers represents a high-quality Australian blue chip with defensive characteristics and growth potential. Those with longer horizons may view current levels as attractive for accumulation, particularly given the reliable dividend stream. Shorter-term participants might monitor upcoming earnings and economic data for direction.
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The modest gain on Friday fits within normal daily fluctuations for a company of Wesfarmers’ size. It reflects steady support for a business with proven resilience and clear strategic direction rather than a major catalyst.
As one of Australia’s largest listed companies, Wesfarmers plays a significant role in the economy through employment, retail presence and industrial operations. Its performance influences broader market sentiment and reflects conditions in consumer spending and industrial activity.
Wesfarmers continues focusing on operational excellence, customer experience and sustainable practices. Its ability to adapt to changing retail landscapes while maintaining strong returns has been a hallmark of its long-term success.
Investors evaluating Wesfarmers should consider individual risk tolerance, portfolio allocation and investment horizon. The company offers stability, income and moderate growth potential that can complement other holdings in diversified portfolios. Prudent monitoring of key metrics such as same-store sales, margins and capital returns remains advisable.
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Overall, Wesfarmers maintains a position of strength in the Australian corporate landscape. Its diversified operations, iconic retail brands and disciplined management position it favorably to navigate current economic conditions while pursuing longer-term opportunities in retail, industrial and emerging sectors.
NEW YORK — Crude oil prices jumped sharply on Monday, with West Texas Intermediate futures rising more than 4% to settle at $94.39 a barrel, the highest level in several months, as escalating geopolitical concerns and supply disruption fears fueled a broad energy rally.
The gain of $3.85, or 4.25%, marked one of the largest single-day percentage increases this year and reflected renewed anxiety over potential supply shortfalls amid ongoing conflicts in key producing regions. Brent crude, the international benchmark, also climbed significantly, trading above $96 per barrel in late dealings.
Analysts attributed the surge to a combination of factors, including heightened tensions in the Middle East, signs of tighter global inventories and expectations of sustained demand from major economies. The move caught some traders off guard after a period of relatively stable pricing, highlighting the market’s sensitivity to headline risks.
The rally extended gains across the energy complex, with gasoline and heating oil futures also posting strong advances. U.S. equity markets showed mixed reactions, with energy sector stocks rising while broader indices displayed caution amid concerns over the inflationary impact of higher fuel costs.
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Market participants pointed to renewed supply risks as a primary driver. Disruptions in key shipping routes and potential escalation in producer regions have raised fears of tighter physical markets in the coming months. At the same time, strong industrial activity in Asia and resilient U.S. consumption have supported the demand side of the equation.
This latest spike comes after several weeks of consolidation, during which prices had traded in a relatively narrow range. The breakout above important technical levels has prompted short covering and fresh bullish positioning by hedge funds and other speculative accounts, amplifying the upward momentum.
Energy analysts noted that while the move appears sharp, it aligns with broader macroeconomic trends. Persistent global economic resilience, particularly in emerging markets, continues to underpin oil demand even as some developed economies show signs of moderation. At the same time, OPEC+ production policies and compliance levels remain closely watched variables.
For consumers, the rise in crude prices is expected to translate into higher gasoline costs at the pump in the coming weeks. U.S. regular gasoline averages have already begun edging higher, and further increases could add pressure to household budgets during the summer driving season.
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The energy sector’s performance has broader implications for inflation readings and monetary policy expectations. Higher oil prices feed directly into transportation and manufacturing costs, potentially complicating central banks’ efforts to manage price stability.
Industry executives have emphasized the need for balanced investment in both traditional and renewable energy sources to ensure long-term supply security. Major producers continue to highlight disciplined capital spending while advancing lower-carbon initiatives across their portfolios.
Looking ahead, market attention turns to upcoming inventory data and geopolitical developments. Weekly U.S. crude stockpiles figures from the American Petroleum Institute and the Energy Information Administration will provide fresh insight into domestic supply-demand balances.
Analysts remain divided on the sustainability of the current rally. Some view it as a temporary spike driven by headline risk, while others see structural tightening in the market that could support higher prices through the remainder of 2026. Long-term forecasts continue to emphasize the role of oil in the global energy mix even as the transition to renewables accelerates.
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For investors, the energy sector’s recent performance has offered both opportunities and volatility. While higher prices benefit producers, they also raise concerns about demand destruction if economic growth slows in response to elevated costs. Refiners and downstream companies face margin pressures depending on how quickly price changes pass through the supply chain.
The move in oil also influenced currency and bond markets. The U.S. dollar strengthened modestly against several major currencies, while Treasury yields showed limited reaction as investors weighed the inflationary implications.
Broader commodity markets displayed mixed signals, with some industrial metals easing while precious metals found support amid safe-haven flows. Agricultural futures were largely steady, reflecting balanced supply outlooks for key crops.
As trading continues, participants will monitor developments in producer regions and any statements from major consuming nations. Diplomatic efforts to reduce tensions could temper the rally, while any escalation would likely add further upward pressure on prices.
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The current environment underscores oil’s enduring role as a critical global commodity. Despite long-term shifts toward cleaner energy sources, near-term supply risks and economic resilience continue to drive significant price movements that affect economies, consumers and financial markets worldwide.
Market veterans caution that sharp moves in either direction can quickly reverse as new information emerges. Position squaring ahead of key data releases often contributes to volatility, making risk management essential for participants across the energy complex.
For now, the surge to $94.39 represents a notable shift in sentiment, reminding traders and policymakers alike of the persistent geopolitical and fundamental risks embedded in global oil markets. The coming days and weeks will determine whether this latest rally has staying power or proves to be another temporary spike in an uncertain trading environment.
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