HomeBusinessCathie Wood defends ARKK's decision to ditch Nvidia, citing chip cycle risks

Cathie Wood defends ARKK’s decision to ditch Nvidia, citing chip cycle risks

(Bloomberg) — Cathie Wood defended her company’s decision to sell Nvidia Corp. to be released on bail before the chipmaker’s shares rose 160%.

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Wood’s flagship ARK Innovation ETF (ticker ARKK) trimmed its stake in Nvidia in January, missing most of the rally that generated more than half a trillion dollars in market value. Nvidia rose 24% on Thursday alone after forecasting $11 billion in sales this quarter, 53% more than analysts had expected.

“As for Nvidia, there are a few reasons why we’re taking a break,” Wood said in an interview on Bloomberg TV. She said when she hears, “shortages, shortages, shortages of GPUs or whatever, I start 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. developing their own chips.

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While Wood’s flagship fund dropped 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 maintain some exposure to Company.

“We didn’t get a lot of backlash,” she said of the decision to drop Nvidia, which she describes as “a check-the-box stock.”

ARKK is up 25% year-to-date, surpassing the S&P 500’s gains by 9.4%. The Nasdaq 100 index, which houses the mega-cap technology companies that drove market gains in 2023, is up more than 30%.

Nvidia is one of the main beneficiaries of the AI ​​boom, given the rise in chip demand sales. Marvel Technologies Inc. rose 29% on Friday after it said revenue from AI products would double in the current fiscal year. ARKK has neither.

“We’re just pivoting to a different set of plays that most people haven’t discovered yet,” Wood said. “Just like until recently they didn’t understand that Nvidia was an AI game.”

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Wood said Meta’s strategy to focus on AI was a good one, even though it’s not in the company’s flagship portfolio.

Meta’s LLaMA AI language model is “capable of delivering better models” with less computing power and more data, she said.

“Meta is interesting to us,” she said, adding that she likes “that Mark Zuckerberg is now prioritizing artificial intelligence as opposed to the metaverse, which he was really focused on last year.”

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