ARK CEO Cathie Wood has once again expressed a negative outlook on Nvidia, the biggest beneficiary of the recent AI boom.
In her letter to investors, Wood underscored Nvidia’s significant contribution to ARK’s performance since its inception in October 2014. She mentioned that Nvidia has contributed immensely to the company and its flagship product, the ARK Innovation ETF. She identified Nvidia as a crucial player in the AI space, calling Nvidia the premier “picks and shovels” play in the field.
However, she added that ARK’s investment strategy was inspired by the trend prominent during the 19th-century gold rush. At the time, the people who made the most money were not those who found the gold but those who sold picks and shovels.
Wood explained, “By the end of 2022, Nvidia, a major supplier of accelerators supporting generative AI, began to experience the impact of OpenAI’s ChatGPT reflected in its stock price. Wood pointed out that the impact of OpenAI’s “ChatGPT moment” on Nvidia coincided with the Federal Reserve’s substantial interest rate hike. This, in turn, hurt the nationwide economy, leading to a surge in investor interest in Nvidia and other cash-rich stocks, prompting ARK to seek diversified exposure to the AI revolution.
Wood indicated that her team has intensified its efforts to gain diverse exposure to the AI revolution, which she believes is undervalued in broad benchmarks but poised to drive significant value creation for numerous technologies and emerging companies over the next five years. She noted that AI has not yet enhanced corporate earnings, productivity, and margins to the extent anticipated in their research. Given the high yet unmet short-term expectations, Wood advised customers to reassess their AI strategies, adding that Nvidia may face short-term business challenges.
She further conveyed that some of Nvidia’s customers and competitors seek to capture market share in the AI accelerator market by offering sufficient supply at lower prices and margins. She emphasized that AI is regarded as a fundamental innovation platform that serves as a stepping stone for various technologies and new companies. Consequently, her team invests in the entire AI stack, from semiconductors to cloud platforms to highly integrated AI applications.
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