3Q 2026 Global Growth Commentary

Q3 2026 was a modestly positive one for global equities following a sharp sell-off early in the quarter, as the MSCI ACWI Index (the “Index”) returned 1.60% for the quarter. The Polen Global Growth Composite Portfolio (the “Portfolio”) outperformed the Index, returning 3.45% (net of fees) for the quarter.

How did the Polen Global Growth strategy perform in 3Q 2026?

Top relative contributors to the Portfolio’s performance included ServiceNow, Shopify, and Microsoft. By contrast, the largest relative detractors in the quarter were Tokyo Electron, Apple (not owned), and GE Aerospace.

The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Periods over one-year are annualized. Performance figures are presented gross and net of fees and have been calculated after the deduction of all transaction costs and commissions, and include the reinvestment of all income. Please reference the GIPS Report which accompanies the full commentary.

The commentary is not intended as a guarantee of profitable outcomes. Any forward-looking statements are based on certain expectations and assumptions that are susceptible to changes in circumstances. Opinions and views expressed constitute the judgment of Polen Capital as of the date herein, may involve a number of assumptions and estimates which are not guaranteed, and are subject to change. Contribution to relative return is a measure of a security’s contribution to the relative return of a portfolio versus its benchmark index. The calculation can be approximated by the below formula, taking into account purchases and sales of the security over the measurement period. Please note this calculation does not take into account transactional costs and dividends of the benchmark, as it does for the portfolio. Contribution to relative return of Stock A = (Stock A portfolio weight (%) - Stock A benchmark weight (%)) x (Stock A return (%) – Aggregate benchmark return (%)).

All company-specific information has been sourced from company financials as of the relevant period discussed.

What happened in markets during the quarter?

The central feature of the market performance this quarter was a material reversal in leadership, especially early in the quarter. In the first half of the year, global markets sharply rewarded direct AI-capex beneficiaries across regions, particularly semiconductors and semiconductor equipment, memory, and certain industrial businesses tied to data center construction, power, and AI infrastructure. While during the third quarter, that trade cooled notably, with the global semiconductor complex, including its Asian equipment and memory suppliers, underperforming during the July and August market selloff while software and services businesses, which had been under significant pressure from generative AI disruption fears, began to recover.

In the team’s view, this was less a change in the underlying fundamentals than a change in what the market was willing to recognize. For much of 2026 (and prior years), investors have treated the AI trade as almost binary in nature: direct infrastructure beneficiaries were deemed as winners, while many software and services businesses were presumed to be losers. In the team’s opinion, that was always too simplistic. Many of the software, services, and information-based businesses the Portfolio owns continued to grow, continued to generate cash flow, and continued to demonstrate strong competitive positions even while their stocks were under pressure. During the third quarter, it finally felt like some of these negative narratives were overcome.

The team has never believed that generative AI is uniformly negative for software, because while some businesses will clearly be disrupted, it also sees many examples where AI can enhance these businesses rather than displace them. And, in the team’s view, the third quarter offered at least some evidence that some investors may be beginning to make those distinctions.

At the same time, the team does not dismiss the AI infrastructure opportunity as the growth across the broader ecosystem remains meaningful. Demand for compute, memory, storage, data center capacity, power, and grid infrastructure remains significant, and many of the companies enabling that buildout continue to report strong fundamentals. What changed in the quarter was simply how much investors were willing to pay for that growth.

The team could highlight potential reasons that valuations declined across parts of the global semiconductor supply chain during the quarter, but it’s equally plausible that valuations simply reset a bit during the quarter after moving up too much too fast in certain areas during the first half of the year. Notably, many of the companies associated with the most significant bottlenecks in the AI infrastructure buildout were also among the strongest performers during the first two quarters of the year and subsequently experienced some of the largest declines in July and August.

The team is finding attractive opportunities within the AI ecosystem, before and after the recent pullback in share prices, as well as in areas where it believes concerns about AI-related disruption may be overstated. The team feels the Portfolio currently reflects a balanced mix of businesses across a range of growth opportunities, while maintaining its focus on quality, competitive advantage and valuation discipline.

What helped performance?

ServiceNow was the Portfolio’s top-performing holding during the quarter as improving sentiment toward high-quality software companies coincided with another strong earnings report. In a market that had spent much of the year questioning the durability of software business models in an AI world, ServiceNow delivered what the team viewed as an excellent quarter, beating expectations across key metrics (and notably showing an acceleration in AI revenues) and raising full-year guidance. Importantly, the company continues to demonstrate broad-based strength across IT service management, IT operations, security, creator workflows, CRM, and industry workflows, while also showing that AI can be a revenue opportunity rather than a headwind.

What hurt performance?

Tokyo Electron, a Japan-based leader in semiconductor production equipment, was the Portfolio's largest relative detractor during the quarter. The company holds a dominant share in the coater/developer tools essential to EUV lithography and has leading positions in etch, deposition, and cleaning systems. In the team’s view, the weakness primarily reflected the broader cooling in semiconductor-related stocks, as investors reassessed what they were willing to pay for AI-driven growth, rather than any change in the company's fundamentals. Results reported in late July pointed to a healthy backdrop, with management raising first-half guidance and demand from advanced logic, DRAM, and AI applications remaining robust. The team remains mindful of cyclical customer spending and China and export control risks but continues to view Tokyo Electron as one of the most competitively advantaged businesses in semiconductor equipment.

How did the team change the portfolio?

In Q3 2026, the team initiated new positions in Seagate Technology, Advanced Micro Devices, Quanta Services, and SK Hynix, while selling Oracle. The team also added to existing positions in Meta Platforms and Keyence, while trimming NVIDIA, Broadcom, Shopify, ServiceNow, Tencent, Aon, Adyen and Tokyo Electron. The net goal of this activity was to improve the Portfolio’s balance by redeploying capital toward businesses where the team sees stronger current momentum, attractive long-term growth prospects, and more visible demand tailwinds.

The team acquired a new position in Seagate Technology, one of only two major suppliers in the hard disk drive market. Demand for data storage continues to grow, driven by cloud, AI training data, video, telemetry, archival storage, and physical AI data. Hard disk drives remain an economically attractive solution compared to SSDs at datacenter-relevant capacities, while supply is constrained and major customers are entering into longer-term supply arrangements. The team believes this creates an attractive combination of volume visibility, pricing power, and operating leverage, though it remains mindful of cyclical hyperscaler capex risk and potential pressure from NAND pricing.

The team also initiated a position in Advanced Micro Devices (AMD), a fabless semiconductor company that designs high-performance computing chips for data centers, PCs, and other applications. AMD has evolved from a PC processor challenger into one of the leading providers of compute hardware for AI. The company competes in both central processing units (CPUs), where it has gained meaningful share, and graphics processing units (GPUs), where it is a newer entrant gaining adoption. The team is particularly interested in CPUs, which coordinate computing tasks. The team expects AI agents that perform tasks on users’ behalf to increase demand for this capability. AMD already holds a leading position in server CPUs, and in GPUs it appears to be gaining traction as major AI labs and hyperscalers may seek alternatives to Nvidia. The team does not expect AMD to displace NVIDIA, nor does it assume it dominates the CPU market, but with the addressable market for both likely to be very large, the team believes AMD has a meaningful opportunity to grow its business over time.

Additionally, the team acquired a new position in Quanta Services, North America’s largest specialty infrastructure contractor, mostly focused on the electric power grid in North America. Quanta provides end-to-end services for electric utilities, renewables developers, hyperscalers, pipelines, and industrial customers. The team views the company as a picks-and-shovels beneficiary of grid modernization, rising electricity demand, and the broader infrastructure buildout. Importantly, much of this work relates to essential infrastructure needs and multi-year projects, which can be constrained by permitting, supply chain, and skilled labor availability. The team believes the company’s capabilities and positioning should support growth over time.

Lastly, the team initiated a position in SK Hynix, one of three major global suppliers of DRAM memory and the current leader in high-bandwidth memory (HBM), which is critical to AI. Demand tied to AI has left the industry in severe under-supply, giving Hynix unusual pricing power and growth. Memory has historically been a deeply cyclical industry, but the team believes strong AI-related demand could extend the current cycle. Suppliers are also shifting customers to long-term agreements with binding volume commitments, pricing floors, and prepayments. If these prove durable, they could reduce the industry's volatility and support more consistent earnings and a higher through-the-cycle valuation. The team can't be certain they will hold, but customers who walk away risk losing access to future memory supply, which would be costly to their competitive position. The team believes Hynix should see very strong growth for at least the next couple of years before meaningful new capacity arrives, and the shares trade at a valuation more typical of a cyclical peak, implying to the team that the market expects the cycle to end soon with no benefit from these agreements.

During the quarter, the team exited its position in Oracle. The team had been trimming the position and exited the remaining position to fund the new position in SK Hynix. While the team continues to believe Oracle still has an attractive growth profile, it views the Portfolio as having ample exposure to hyperscale opportunities through its other holdings.

What is the team’s outlook?

In recent quarters, it has felt as if capital has been running from one side of the boat to the other. Earlier this year, the boat tilted heavily toward semiconductors and AI infrastructure. In the third quarter, it shifted back toward software and services. As stewards of its client’s capital, the team does not want the Portfolio to be swung around violently by every thematic or sentiment driven rotation. The team’s goal is to own competitively advantaged businesses in their respective market while maintaining enough balance that the Portfolio can navigate through leadership rotations.

Importantly, that is the broader purpose of the changes the team has made this year. The team has added select exposure to semiconductor supply chain businesses, AI infrastructure enablers, commercial aerospace, and power-related companies where it believes industry structures are attractive and demand visibility has improved. Importantly, within these more cyclical areas, the team has emphasized businesses that it believes hold leading competitive positions and may provide greater resilience across market and economic cycles. At the same time, the team continues to own software, services, payments, internet, and information-based businesses where it believes long-term competitive advantages remain underappreciated. The third quarter may suggest that this improved balance is beginning to matter.

Additionally, the macro backdrop also remains worth watching, in particular long-term government bond yields which continue to make multi-year highs in most industrialized countries. Further, the US dollar moved sharply higher towards the end of the quarter, inflation remains somewhat persistent, and energy prices have not yet relented much—reinforcing the need to remain disciplined on valuation. The team continues to be careful about the prices it pays, particularly for businesses with more distant earnings power.

Overall, the team is encouraged by the quarter, but it also remains clear-eyed. However, it believes the Portfolio has improved balance today amidst the broader market backdrop, with exposure to what it finds to be both durable compounders and areas of strong business momentum, and it remains focused on applying its time-tested process with discipline, humility, and enough flexibility to help it avoid getting caught on the wrong side of the boat.

Who manages the Polen Global Growth strategy?

The Polen Global Growth strategy is led by Damon Ficklin, Head of Team, Portfolio Manager, who has 24 years of industry experience, and Stephen Atkins, CFA, Portfolio Manager & Analyst, who has 29 years of industry experience.