Cathie Wood Defends ARKK’s Decision to Ditch Nvidia, Citing Chip Cycle Risks

(Bloomberg) – Cathie Wood has defended her company’s decision to bail out Nvidia Corp. before the chipmaker’s shares jumped 160%, saying the computer chip industry’s boom and bust cycle presents risks.

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

“As far as Nvidia is concerned, there are several reasons why we are taking a break,” Wood said in an interview on Bloomberg TV. She said when she hears, “shortages, shortages, GPU shortages or whatever, I start thinking about the cyclicality of a band.”

Nvidia also faces increasing 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. that develop their own chips.

While Wood’s flagship fund has spun off its holdings to Nvidia, some of the company’s “more niche portfolios,” including the ARK Next Generation Internet ETF (ARKW) and ARK Fintech Innovation ETF (ARKF), retain some exposure to society.

“We haven’t had a lot of hindsight,” she said of the decision to drop Nvidia, which she describes as “a check mark stock.”

The ARKK has climbed 25% so far this year, outpacing the S&P 500’s 9.4% gain. more than 30%.

Nvidia has been a major beneficiary of the AI ​​boom, seeing its sales rise on demand for chips. Marvell Technologies Inc. rose 29% on Friday after saying its revenue from AI products would double in the current fiscal year. ARKK owns neither.

“We’re just pivoting to another series of games that most people haven’t discovered yet,” Wood said. “Kind of like they didn’t realize Nvidia was an AI game, really, until very recently.”

Wood said Meta’s strategy of focusing on AI was good, despite the company not appearing in the company’s flagship portfolio.

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

“We are interested in the meta,” she said, adding that she appreciates “the fact that Mark Zuckerberg is now prioritizing artificial intelligence as opposed to the metaverse, which was really what he focused on. Last year”.

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