MW 'AI now has to play out elsewhere,' for Nvidia's valuation to make sense, ARK's Cathie Wood says
By Barbara Kollmeyer
"Now AI has to play out elsewhere in a very big way for Nvidia and others to deserve their valuations."Cathie Wood, chief executive and chief investment officer of ARK Invest
That's ARK Invest's chief executive and CIO, Cathie Wood, saying that Nvidia needs help from other artificial-intelligence companies for the AI boom to continue.
Wood had nothing but praise for Nvidia and its founder and CEO, Jensen Huang - who not surprisingly appears to be something of a workaholic - in comments at the Greenwich Economic Forum in Hong Kong Thursday, according to Bloomberg.
She said ARK started investing in Nvidia in 2014 when it traded at just over $4 on a split-adjusted basis. "We rode that stock in the flagship portfolio up to roughly $400," she said, adding that the company's stock performance would have to be matched by other companies in the AI arena as well.
Wood has achieved some Wall Street infamy for dumping Nvidia shares before the company's eye-popping earnings report roughly a year ago first showed the great extent to which the tech giant benefitted from artificial-intelligence demand.
The stock hasn't looked back since. From that initial earth-shattering earnings report in May 2023, Nvidia shares have climbed 300% to $1,224. The company announced a 10-for-1 stock split last month that will kick in after Friday's market close.
Wood said Thursday that ARK still has some exposure to Nvidia, but has broadened out their hunt for AI-related companies.
"We do own Nvidia in specialized portfolios, both well in Europe, Asia and the U.S. In the flagship though, where the real estate is more clear and we need to be exposed to all of the innovation platforms...that are evolving, we did pull away," she said.
While that exit became a bit of a "statement," she said, their thinking was that if "this wasn't going to benefit other companies, then what is this move in Nvidia all about?"
She flagged autonomous driving as "the biggest AI project on earth," with Tesla $(TSLA)$, ARK's largest position, the leader there. The autonomous-driving ecosystem "is going to scale from a revenue point of view, from essentially nothing now, to $7 -$8 trillion," in the next five to 10 years, she predicts.
Other names she sees harnessing AI and not well recognized are found in biotechnology and AI, with Recursion Pharmaceuticals Inc. $(RXRX)$, and in synthetic biology likes Twist Bioscience and then Palantir Software Inc. $(PLTR)$, which is "helping companies set up to capitalize on AI."
Wood said the market is too dominated by Nvidia and other technology stocks. "We have never seen concentration in the market like we're seeing today towards very few stocks," she said.
The manager, who last month cautioned over a Great Depression-like search for safety in the stock market, again mentioned that historic economic slump on Thursday. Wood said the current concentration by a handful of stocks is bigger than during the Great Depression.
"This can mean one of two things, either we're about to see the market broadening out dramatically, and a more healthy market...or the number of times we've seen this, we're about to go into a very significant correction," she said.
"In 1973 and 2000, you saw peaks, but in 1932 and 2009 you also saw peaks like this in terms of concentration and the follow through, there was a bull market that broadened out and benefited more stocks," said Wood.
-Barbara Kollmeyer
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 06, 2024 10:35 ET (14:35 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.