Ark Invest CEO Cathie Wood has seen their flagship ETF largely miss the AI-powered Nvidia rally that added more than half a trillion dollars to the market’s value. Marco Bello-Getty Images
Cathie Wood defended her company’s decision to divest from Nvidia Corp. before the chipmaker’s shares soared 160%, saying the computer chip industry’s boom-bust cycle poses risks.
Wood’s flagship ETF, ARK Innovation ETF (ticker symbol ARKK), reduced its stake in Nvidia in January, missing out on most of the rally that added more than half a trillion dollars to the market’s value. Nvidia jumped 24% on Thursday alone after forecasting $11 billion in revenue for the quarter, up 53% from analysts’ estimates.
“As far as Nvidia is concerned, there are a few reasons we’re on hiatus,” Wood said in an interview on Bloomberg TV. She said that when she hears “bottlenecks, bottlenecks, bottlenecks in GPUs or whatever, I start thinking about group cyclicality.”
Nvidia also faces growing competition in the battle to make chips that power the computing infrastructure behind artificial intelligence programs, Wood said, citing companies like Tesla Inc., Meta Platforms Inc. and Alphabet Inc. that make their own chips develop.
While Wood’s flagship fund divested its holdings in Nvidia, some of the company’s “more specialized portfolios,” including the ARK Next Generation Internet ETF (ARKW) and the ARK Fintech Innovation ETF (ARKF), still have some ownership in the company .
“We didn’t get much resistance,” she said of the decision to drop Nvidia, which she describes as “a check-the-box stock.”
ARKK is up 25% so far this year, outperforming the S&P 500’s 9.4% gain. The Nasdaq 100 Index, which includes the megacap tech companies that drove market gains in 2023, is down more than 30 % gone up.
Nvidia has been one of the main beneficiaries of the AI boom, seeing sales increase due to chip demand. Marvell Technologies Inc. jumped 29% on Friday after announcing that sales of AI products would double in the current fiscal year. ARKK holds neither.
“We’re just turning to a different set of pieces that most people haven’t discovered yet,” Wood said. “Just like they didn’t understand until recently that Nvidia is really an AI game.”
Wood said Meta’s strategy to focus on AI is good, although the company doesn’t appear in the company’s flagship portfolio.
Meta’s LLaMA AI language model is “capable of delivering better models,” requiring less processing power and more data, she said.
“Meta is interesting to us,” she said, adding that she “likes the fact that Mark Zuckerberg is prioritizing artificial intelligence now, as opposed to the metaverse, which he was really focused on last year.”