Cathie Wood defended her firm’s decision to bail on Nvidia Corp. before the chipmaker’s shares surged 160%, saying the computer-chip industry’s boom-bust cycle poses risks.
(Bloomberg) — Cathie Wood defended her firm’s decision to bail on Nvidia Corp. before the chipmaker’s shares surged 160%, saying the computer-chip industry’s boom-bust cycle poses risks.
Wood’s flagship ARK Innovation ETF (ticker ARKK) cut its holding in Nvidia in January and missed out on most of the rally that added more than half a trillion dollars in market value. Nvidia jumped 24% Thursday alone after forecasting $11 billion in sales this quarter, 53% more than analysts expected.
“As far as Nvidia goes, there are a few reasons we take some pause,” Wood said in an interview on Bloomberg TV. She said when she hears, “shortages, shortages, shortages about GPUs or anything, I begin to think about the cyclicality of a group.”
Nvidia also faces growing competition in the battle to produce chips to power the computing infrastructure behind artificial intelligence programs, Wood said, citing companies like Tesla Inc., Meta Platforms Inc., and Alphabet Inc. that are developing their own chips.
While Wood’s flagship fund dropped its holdings to Nvidia, some of the firm’s “more specialized portfolios,” including the ARK Next Generation Internet ETF (ARKW) and the ARK Fintech Innovation ETF (ARKF), still retain some exposure to the company.
“We have not gotten much pushback,” she said regarding the decision to drop Nvidia, which she describes as “a check-the-box stock.”
ARKK has climbed 25% so far this year, outpacing the S&P 500’s 9.4% gain. The Nasdaq 100 Index that houses the megacap tech companies that have powered the market’s gains in 2023 is up more than 30%.
Nvidia has been one of the main beneficiaries of the AI boom, seeing its sales surge on demand for chips. Marvell Technologies Inc. rallied 29% Friday after saying its revenue from AI products would double in the current fiscal year. ARKK holds neither.
“We’re just pivoting to another set of plays that most people have not discovered yet,” Wood said. “Much like they did not understand that Nvidia was an AI play, really, until very recently.”
Wood said Meta’s strategy of focusing on AI was good, although the company does not appear in the firm’s flagship portfolio.
Meta’s LLaMA AI language model is “able to deliver better models” using less computing power and more data, she said.
“Meta is interesting to us,” she said, adding that she likes “the fact that Mark Zuckerberg is now prioritizing artificial intelligence as opposed to the metaverse, which was really what he was focused on last year.”
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