In a recent investor letter, Cathie Wood, the CEO of ARK Invest, emphasized the pivotal role of NVIDIA Corp NVDA in the company’s performance, despite short-term challenges.
What Happened: Wood, in her letter to investors, underscored Nvidia’s significant contribution to ARK’s performance since its inception in October 2014. She identified Nvidia as a crucial player in the AI space. “Early on, we identified Nvidia as the premier "picks and shovels" play in the AI space, Wood wrote.
Despite the recent market volatility, ARK’s ARK Next Generation Internet ETF ARKW continues to have exposure to Nvidia, with a 1.39% weight as of Jun 28.
Wood acknowledged the impact of OpenAI‘s “ChatGPT moment” on Nvidia, which coincided with the Federal Reserve’s substantial interest rate hike. This led to a surge in investor interest in Nvidia and other cash-rich stocks, prompting ARK to seek diversified exposure to the AI revolution.
She also noted that the weak macro environment and long-term corporate strategic decision-making have posed challenges for software companies. Despite this, Wood remains bullish on AI investments, viewing AI as a foundational innovation platform that will drive value creation for many technologies and new companies.
“Given high and perhaps unfulfilled short-term expectations, customers are likely to reassess their AI strategies, causing Nvidia's business some short-term indigestion,” wrote Wood.
Why It Matters: This letter comes after ARK Invest made significant trades in Nvidia amid considerable market volatility. In late June, the firm’s ARK Autonomous Technology & Robotics ETF ARKQ sold 33,834 Nvidia shares, valued at $4.3 million. This was part of a series of transactions carried out by ARK’s various ETFs.
Despite these adjustments, Wood remains confident in ARK’s AI investments, emphasizing the firm’s continued exposure to emerging tech players. She initially invested in Nvidia in 2014 when the stock was approximately $4 per share, adjusted for splits.
Meanwhile, Nvidia’s sky-high valuation has given some investors pause, with experts warning of a potential reevaluation. Despite this, Nvidia’s performance has been exceptional, with the stock being the fifth largest contributor to ARK’s ARKK performance.
Price Action: Nvidia Corp closed at $134.91 on Wednesday, up 2.69% for the day. In after-hours trading, the stock rose 0.51%. Year to date, Nvidia has shown impressive growth, surging by $86.74 or 180.07%, according to data from Benzinga Pro.
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Photo via Ark Invest
This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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