To The Moon

The semiconductor giant $NVIDIA Corp(NVDA)$ is undoubtedly the hottest stock in the field of artificial intelligence (AI) in 2023, with a market value that has exceeded $1 trillion.

And the strong performance of Nvidia's stock price has continued into 2024, with a new record set on January 8. However, on the same day that Nvidia's stock price hit a new record, Cathie Wood, the CEO of ARK Investment Management, chose to buy shares of another semiconductor company.

Specifically, Ms. Wood's two exchange-traded funds (ETFs) collectively bought about 58,000 shares of $Qualcomm(QCOM)$ .

However, we cannot only see the trees and ignore the forest. Ms. Wood's chip stock investment is quite diversified.

Currently, Qualcomm accounts for only 0.06% of ARK's entire investment portfolio, compared to 0.50% for Nvidia, 0.30% for AMD, and 0.17% for $Taiwan Semiconductor Manufacturing(TSM)$ .

Why did Wood choose Qualcomm?

• First, Ms. Wood is a staunch believer in emerging technologies, and her ETFs invest in various high-growth potential areas, such as autonomous driving, genomics, streaming media, gaming, remote healthcare, and e-commerce.

• Given this investment style, it is not surprising that she has invested in AI, and the semiconductor industry plays a critical role in the development of artificial intelligence. According to Statista's prediction, AI chip revenue will increase from $53 billion in 2023 to $119 billion in 2027.

• This market is large enough and has tremendous potential, allowing multiple chip companies to coexist. Therefore, perhaps in the eyes of Ms. Wood, Qualcomm is an overlooked opportunity in the current AI semiconductor market dominated by Nvidia and $Advanced Micro Devices(AMD)$ .

What's so good about Qualcomm stock?

From the perspective of Ms. Wood's holdings, buying Qualcomm stock may just be a hedging strategy. The competition in the AI industry has not yet been determined, and it remains to be seen who will ultimately prevail.

Ms. Wood is gradually increasing her holdings in the largest brands in the AI and chip industries. Compared to Nvidia and AMD, Qualcomm has a dynamic P/E ratio of only 15, which is very low and even lower than that of the $S&P 500(.SPX)$ (21.7).

That's understandable, given that the company has had several quarters of weak revenue growth, growing operating losses and recently announced layoffs. The conclusion is that Qualcomm is now focusing on the concept of reversing adversity.

It may just be a coincidence that Ms. Wood bought Qualcomm stock on the same day that Nvidia's stock price hit a new record, but it could still be valuable as a risk hedge.