Baron Discovery Fund Trimmed Advanced Energy Industries (AEIS) on Valuation and Position Size

Baron Discovery Fund Trimmed Advanced Energy Industries (AEIS) on Valuation Discipline

Wed, August 12, 2026 at 4:03 PM GMT+3 3 min read

• AEIS +4.33%
• ^RUT +0.32%

Baron Capital, an investment management company, released its Q2 2026 investor letter for the "Baron Discovery Fund". A copy of the letter is available to download here. Baron Discovery Fund appreciated by 19.08% (Institutional Shares) in the quarter, underperforming the Russell 2000 Growth Index, which gained 25.71%. This lag was primarily due to a momentum-driven "AI winners" trade, with these stocks largely contributing to the Benchmark's performance. The Fund experienced a 6.63% underperformance, largely driven by an underweight in strong-performing Momentum and Beta factors. The Fund prioritizes a long-term balanced portfolio over chasing momentum. The letter discussed parallels between the current AI market and the late 1990s dot-com bubble. The firm remains focused on company fundamentals and long-term valuation. Please review the fund's top five holdings to gain insights into their key selections for 2026.

In its Q2 2026 investor letter, Baron Discovery Fund highlighted Advanced Energy Industries, Inc. (NASDAQ:AEIS). Advanced Energy Industries, Inc. (NASDAQ:AEIS) is a leading precision power conversion, measurement, and control solutions provider for semiconductor equipment and data centers. On August 11, 2026, Advanced Energy Industries, Inc. (NASDAQ:AEIS) closed at $327.59 per share, reflecting a market capitalization of $13.12 billion. Advanced Energy Industries, Inc. (NASDAQ:AEIS) posted a one-month return of 8.52%, and its shares gained 101.57% over the past 52 weeks.

Baron Discovery Fund stated the following regarding Advanced Energy Industries, Inc. (NASDAQ:AEIS) in its Q2 2026 investor letter:

"Advanced Energy Industries, Inc. (NASDAQ:AEIS) is a designer and manufacturer of power components that ensure precision power delivery for end market applications including semiconductor manufacturing, medical procedures and data center equipment. We were meaningful buyers between $50 and $110 during calendar years 2020 and 2021 when the company was trading at very low multiples and its strategic value was unrecognized. In the quarter we sold about 60% of our investment at $375, on the back of excitement about the growth in AI data center buildouts. We believe that at those levels the company was approaching our long-term price target, and the position had grown to nearly 4% of the portfolio. Both are reasons that we would sell according to our long-standing risk management process. We really like the company and the management team and would look to add to our investment at lower valuations."

Advanced Energy Industries, Inc. (NASDAQ:AEIS) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 45 hedge fund portfolios held Advanced Energy Industries, Inc. (NASDAQ:AEIS) at the end of the first quarter, up from 27 in the previous quarter. While we acknowledge the potential of Advanced Energy Industries, Inc. (NASDAQ:AEIS) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on thebest short-term AI stock.

In another article, we covered Advanced Energy Industries, Inc. (NASDAQ:AEIS) and shared a list of best large cap stocks to buy according to analysts. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.