Netizens can’t seem to stop talking about Nvidia, not just because of an unprecedented stock price surge, but also because of ARK Invest’s CEO, Cathie Woods.
Cathie Wood is supposed to be the stock guru that spots the next secular tech trend, capable of transforming your dollars into millions. It’s not every day that Cathie Wood labels a stock market darling of the innovation economy (Nvidia stock) too expensive. Recently, she has been caught wrong footed.
The meteoric rise in Nvidia Corp’s shares prompted the founder of Ark Investment Management to defend the decision to cut holdings in the chipmaker in January. Wood’s flagship ARK Innovation ETF has missed out investing on most of Nvidia’s $600 billion rally this year.
Till October, Cathie Wood’s ARK Investment owned 8,oo,ooo shares in Nvidia. The ace investor bought these shares on August 8, 2022 when the price of the stock was $182. On November 9, 2023, she sold all the Nvidia stock in her portfolio at $137, at a loss of $45 a share, resulting in nearly $200 million loss.
This Nvidia misstep has dented her reputation. Nvidia Corp’s outsized jump and bull market rally has prompted an unusually skeptical response from Cathie Wood of ARK Innovation ETF. Wood said in a tweet on Monday that the world’s most valuable chipmaker is “priced ahead of the curve.” This comes after she closed out her Nvidia position in the ARKK fund in early January before the stock more than doubled to the cusp of a $1 trillion market capitalization.
The number that made Wood’s eyes pop is the 25 times sales for the current financial year at which Nvidia is trading amid investor enthusiasm for all things AI.
During an interview on Bloomberg TV, Wood seemed frustrated. Last Thursday, when a trading frenzy added $184 billion in market value to Nvidia’s stock, “We’re just pivoting to another set of plays that most people have not discovered yet,” Wood said. “Much like they did not understand that Nvidia was an AI play, really, until very recently.”
True, Nvidia has traded at a premium since the pandemic but the gap is looking more pronounced amid the recent hype. And beyond AI, some analysts say the outlook for chips is still dismal amid tepid demand for consumer electronics more traditional servers.
“Recent results at Nvidia have heightened expectations for AI servers,” SMBC Nikko Securities Inc. analysts including Takeru Hanaya wrote in a note.
Market prediction for Nvidia stock is how much are the shares pricing in that potential at the current level. Or overpricing it.
“We basically feel that Nvidia’s stock is in bubble territory, regardless of the future potential growth,” independent analyst William Keating wrote in a note on Smartkarma over the weekend. “In other words, we think the train has left the station and we see little point in chasing it down the tunnel at this stage.”
It’s fascinating that Wood is complaining about lofty valuations, which she did not shy away from in the past. She famously had a $3,000 price target for Tesla Inc and was sticking with $1 million Bitcoin forecast earlier this year.
Frankly, Wood’s defense is unconvincing. She may have discovered investment performance of Nvidia’s AI as early as 2014 and bought at $5 a share, but why didn’t she capitalize all the way? Did she fail to grasp the popularity and disruptive power of ChatGPT, which was launched last November? Of all people, Wood should know that a trading frenzy can send asset prices to euphoric levels.
As evident this Nvidia misstep has dented Cathie Wood’s reputation.
