Artisan Partners Trims Flex Ltd. Stake as AI Boom Pushes Valuation Beyond Small-Cap Mandate

Artisan Partners has reduced its holding in Flex Ltd. (FLEX) within its Artisan Small Cap Fund, a move driven by the company’s expanding market capitalisation. In its second-quarter 2026 investor letter, the fund stated that Flex’s valuation had exceeded the scope of its small-cap mandate, prompting a reallocation of capital to other opportunities within its investable universe.

The decision follows a significant surge in Flex’s share price, which has been underpinned by strong demand for AI data centre infrastructure. The fund highlighted the company’s exposure to high-margin AI and cloud data centre infrastructure, particularly in power and cooling systems, as a key driver of this growth. As of July 24, 2026, Flex Ltd. shares closed at $127.00, valuing the company at $43.42 billion.

Flex Ltd. shares have gained 134.72% over the past 52 weeks, trading within a range of $47.83 to $166.86. The company provides technology innovation, supply chain, and manufacturing solutions across multiple sectors, including data centres, communications, enterprise, consumer, automotive, healthcare, industrial, and power industries.

The reduction in Flex’s position occurred against a backdrop of strong performance for the Artisan Small Cap Fund. The fund reported returns of 26.02% for the Investor Class, 26.05% for the Advisor Class, and 26.11% for the Institutional Class in the second quarter. These figures modestly outperformed the Russell 2000® Growth Index, which gained 25.71% over the same period.

Despite the fund’s success, the manager noted that market leadership in the second quarter favoured loss-making, highly leveraged companies, creating a challenging environment for quality-focused active managers. Technology, industrials, and consumer discretionary sectors detracted from performance, partly because the fund did not own oversized index contributors. The fund has also reduced exposure to software holdings despite strong fundamentals, citing rising valuations and competitive risks.

Hedge fund interest in Flex Ltd. has decreased slightly, with 59 portfolios holding the stock at the end of the first quarter, down from 62 in the previous quarter. While the fund acknowledges the potential of Flex Ltd. as an investment, it believes certain other AI stocks offer greater upside potential with less downside risk.

Global equities rebounded during the period due to resilient US growth, moderating inflation, strong earnings, and continued AI investment, which outweighed concerns over delayed rate cuts, rising bond yields, and geopolitical uncertainty. The fund remains positive on small-cap opportunities, AI infrastructure, and healthcare, while staying selective as valuations rise.