Over two-thirds of international value's lead on growth this year arrived in the third quarter
MSCI ACWI Ex-US Value beat Growth by over 600 basis points in Q3 and over 850 year to date, ClearBridge said. Over 600 of the roughly 880 basis points came in that one quarter. The lead now depends on how the July AI selloff resolves.
The Investor · Invest desk
Key figures: value's lead over growth was at most about 2.0 percentage points at the end of June, over 600 basis points in the third quarter, and about 880 basis points year to date.
| Figure | Value | Note | Claim |
|---|---|---|---|
| Value's lead over growth at end of June, at most about | 2 pct points | 19 | |
| Value's Q3 lead, over | 600 basis points | 2 | |
| Lead year to date, about | 880 basis points | 15 |
What happened
- The broad MSCI ACWI Ex-US benchmark advanced 0.5% for the quarter. The style gap opened around a market that barely moved.
- ClearBridge dates the reversal to July and into August, when investors questioned returns on historically high AI capex and unwound highly leveraged bets on the buildout.
- The largest detractors in its strategy were AI infrastructure names, among them Samsung Electronics, Infineon, Lasertec and ASM International, many of them top contributors the quarter before.
- ClearBridge said its repositioning left the portfolio overweight in stocks that fell 20% to 40% in the quarter.
Why it matters
- decision ClearBridge's largest purchase was SK Hynix, and it added ASML after the drop. It put its cash back into the AI names that fell, not the value names that led.
- exposure Growth's year-to-date gain of 9.7% still rests on AI buildouts that ClearBridge says reach staples, discretionary, industrials and technology. A second unwind would hit all four groups at once.
- constraint The May reconstitution changed the makeup of both indexes. The year-to-date comparison spans two sets of constituents.
ClearBridge did not publish the value index's quarterly return, but its other figures pin it down. Growth fell 2.7% [1] and trailed value by over 600 basis points [2], so value gained more than 3.3% [14]. Over the year the gap is 18.5% against 9.7%, or 8.8 points [3][15], which means the quarter supplied over 600 of roughly 880 basis points, about 68% [16]. Compounding gives the same picture: growth was up about 12.7% at the end of June [17] and value no more than 14.7% [18], a gap of at most 2.0 points before the July selloff [19].
Two outcomes would call for different explanations. If the AI cohort recovers and the gap closes, the 850 basis points was positioning. If the cohort recovers and value still pulls ahead, the rates-and-inflation account is the better one. We think the first is likelier. ClearBridge credits value's strength to geopolitics, inflation and rising rates, factors it says have run at extremes for years [8], and if those were the driver the gap would not have waited until July to open. At June 30 it was at most 2.0 points [19]. We would be wrong if growth's AI names stabilized and value kept widening its lead anyway.
ClearBridge is an interested party. This is a growth manager's commentary, and by its own account the July selloff accounted for the bulk of its strategy's underperformance against its benchmark [13]. It wrote that "we underestimated the degree of overexposure to AI-indexed stocks in the portfolio" [11]. It also wrote that "this was not an earnings problem: nearly every AI hardware company we own reported record results" [21]. That holds for reported results. ClearBridge lists five triggers for the July unwind: oversupply of AI compute, execution on the newest generation of high-bandwidth memory, lower-cost AI models from China, skepticism that AI capex will pay off, and hedge funds being forced to deleverage [7]. Only the last is a positioning event. The other four concern future demand or pricing, and Prysmian and CATL fell on lower sentiment while their earnings continued to be upgraded [22].
What to watch
- MSCI's published third-quarter return for the ACWI Ex-US Value index, which would replace the derived 3.3% floor with an exact gap.
- Next-quarter results and share prices for Samsung, Infineon, Lasertec and ASM International: record earnings with a recovering price would support the positioning reading.
- Whether inflation and rate pressure persist if the AI names rebound, since that is the case in which ClearBridge's value explanation holds up.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence58
- Adoption
- Insufficient
- Hype gap+10
- Incentives65
- Confidence55
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
The MSCI ACWI Ex-U.S. Growth Index fell 2.7% in the third quarter.
- [2]
The MSCI ACWI Ex-U.S. Growth Index trailed the MSCI ACWI Ex-U.S. Value Index by over 600 basis points in the third quarter.
- [3]
Year to date, value (+18.5%) has outperformed growth (9.7%) by over 850 bps.
- [4]
The benchmark MSCI All Country World Ex-U.S. Index advanced 0.5% for the third quarter.
- [5]
A sharp reversal in AI-linked growth stocks came in July and into August, as investors questioned the return on investment from historically high AI capex and unwound highly leveraged bets on the AI buildout.
- [6]
ClearBridge's active repositioning left the portfolio overweight in stocks that fell 20% to 40% in the third quarter.
- [7]
The July AI unwind was sparked by concerns around AI compute oversupply, execution of the latest high-bandwidth memory chips, cheaper Chinese AI models, doubts over AI capex returns and forced hedge fund deleveraging.
- [8]
ClearBridge says value stock performance has been driven more by geopolitics and the implications of rising inflation and interest rates, factors that have seen extremes in the last few years; it believes the environment is conducive to value companies that make up a large part of the core ACWI Ex-U.S. Index.
- [9]
International growth equities have been affected by meaningful changes to the composition of the ACWI Ex-U.S. Growth and Value indexes during the May reconstitution.
- [10]
ClearBridge's largest purchase of the quarter was SK Hynix, and it also added ASML after the selloff.
- [11]
ClearBridge wrote: "By the start of the third quarter, we had built what we viewed as good positioning, but we underestimated the degree of overexposure to AI-indexed stocks in the portfolio."
- [12]
Growth stocks this year have been driven by AI buildouts across sectors including consumer staples, consumer discretionary, industrials and technology.
- [13]
The July growth selloff accounted for the bulk of the ClearBridge International Growth ACWI Ex-US Strategy's underperformance versus its benchmark.
- [14]
The value index's third-quarter return was above 3.3%.
- [15]
The year-to-date value-growth gap is 8.8 percentage points, about 880 basis points.
- [16]
The quarter's 600-plus basis point gap is about 68% of the roughly 880 basis point year-to-date gap.
- [17]
Growth was up about 12.7% at the end of June.
- [18]
Value was up no more than about 14.7% at the end of June.
- [19]
The value-growth gap at the end of June was at most about 2.0 percentage points.
- [20]
The largest relative detractors in ClearBridge's strategy were AI infrastructure companies, many of which were among its leading contributors in the previous quarter, including Samsung Electronics, Infineon, Lasertec and ASM International.
- [21]
ClearBridge wrote: "Importantly, this was not an earnings problem: nearly every AI hardware company we own reported record results."
- [22]
High-voltage cable supplier Prysmian and battery manufacturer CATL were pulled down by reduced investor sentiment despite earnings continuing to be upgraded.
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Sources
1 independent publisher whose own reporting we read for this story.
- seekingalpha.comClearBridge International Growth ACWI Ex-US Strategy Q3 2026 Commentary
1 article · October 13, 2026
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