Tech investor Cathy Wood says she’s hesitant to adopt AI darling Nvidia because the company’s shares are now too expensive.
Chipmaker “is ahead of the price curve,” says ARK Invest CEO wrote on twitter on Monday, suggesting that the stock is too overbought to be a good investment.
Since 2014, @ARKInvest recognized that Nvidia saw the AI future before most other chip companies, and we now believe it will continue to power the AI era. However, at 25X expected revenue for the year, $nvda Price is ahead of the curve.
— Cathy Wood (@CathieDWood) May 29, 2023
Wood’s ARK Innovation ETF cut its shares in Nvidia in mid-January. Shares of the chipmaker are up 172% so far this year.
Nvidia experienced the third-biggest single-day jump in market value on Thursday after the company predicted $11 billion in sales for the current quarter, far exceeding analyst expectations. The chip maker now has a market capitalization of $960 billion, behind only four other US companies.
Nvidia’s rosy guidance lifted the entire sector as well, with the value of AI-related stocks rising by $300 billion on Thursday.
The rally in AI-related tech companies is prompting some observers to worry about a bubble. Economist David Rosenberg said in a Thursday interview on CNBC that the bounce looked “very strange,” adding that “there is no question that we have a price bubble.”
Still, unlike the previous bubble when “we were getting tremendous valuations from companies that didn’t have earnings,” Nvidia is a real, good company,” Wharton professor Jeremy Siegel said in a Monday CNBC interview. The boom “isn’t a bubble yet,” he said.
Shares of Nvidia are up more than 3% in pre-market trading on Tuesday, breaching $400 per share.
boom and bust
Wood may also be concerned about the bouncy and bustling nature of the chip area. In an interview with Bloomberg on Friday the tech investor said she was worried about “shortages”. “I started thinking about the cyclicality of a group,” she said.
Chip companies are suffering from a slump, as the sector recovers from chip shortages in 2020 and 2021. Consumers are buying fewer PCs, smartphones and other consumer electronics, reducing demand for the chips. Manufacturers and retailers are also selling excess inventory accumulated during the chip shortage.
Nvidia, still feeling the effects of the chip downturn, reported a 38% year-over-year decline in quarterly revenue from its gaming division.
Yet the company now clearly sees AI as its future, with CEO Jensen Huang announcing new AI services, products and partnerships on Monday to help big tech companies create the next viral AI sensation, like ChatGPT. A new supercomputer platform for
Tesla
On Monday, Wood described himself as an early believer in Nvidia. “In 2014, most investors considered Nvidia, priced at ~$5, just a PC gaming chip stock. Arc Invest’s first-principles research pointed to Nvidia as the dominant equity play on AI,” he said. Tweeted,
But Wood said investors are wrong to think Nvidia is “only an AI play.” Electric car maker Tesla is “the most obvious beneficiary of recent breakthroughs in AI”, he Tweeted On Monday, because of its investment in automated driving.
in our view, $tsla – at 6X revenue – is the most obvious beneficiary of recent successes in #AIBecause it aims for an $8-10 trillion revenue TAM in autonomous mobility by 2030. But, based on our research over the last five to six years, @ARKInvest View dozens of AI winners!
— Cathy Wood (@CathieDWood) May 29, 2023
Wood calls talks with Tesla “biggest AI play out ever” Luck Editor-in-Chief Alison Shontell at the MPW Next Gen Summit in May. Tesla could be in “pole position” to grab the “lion’s share” of the autonomous taxi market, at least in the US, the investor predicted, estimating that robotaxi platforms could be worth $8-10 trillion globally. It is possible
Tesla CEO Elon Musk believes the company will begin fully self-driving this year, further helping to drive its profits. Yet the company had to halt installation of its beta “full self-driving” software earlier this year after the National Highway Traffic Safety Administration deemed it a “crash risk” and called for a safety recall.
Customers using Tesla’s existing self-driving services have reported thousands of instances of braking problems and sudden acceleration, according to a set of complaints leaked to German outlets, covering the period between 2015 and March 2022. handelsblatt before the weekend.
