Cathie Wood Onto ‘Next Thing’ In AI After ARK’s Nvidia Exit: What’s On Her Radar?

Ark Invest founder Cathie Wood clarified her firm’s flagship fund Ark Innovation ETF (NYSE: ARKK) decision to cash out of Nvidia.

<p>A company sign is displayed outside the NVIDIA headquarters on May 30, 2023 in Santa Clara, California. Chipmaker NVIDIA reached a $1 trillion market cap at the open bell of the NYSE on Tuesday morning. The company is forecasting second quarter sales of $11 billion, 50 percent higher than analyst estimates of $7.15 billion. JUSTIN SULLIVAN/BENZINGA</p>

Ark Invest founder Cathie Wood clarified her firm’s flagship fund Ark Innovation ETF (NYSE: ARKK) decision to cash out of Nvidia Corp. (NASDAQ: NVDA) following criticisms that it missed the boat on the stock’s massive rally.

Cathie Wood, the CEO and Chief Investment Officer at ARK Invest, speaks during a session at the Web Summit in Lisbon. The Web Summit runs from 1-4 November. HENRIQUE CASINHAS/BENZINGA

Ark owned Nvidia since the inception of its funds and some of its funds, including Ark Autonomous Technology and Robotics ETF (NYSE: ARKQ) and Ark Next Generation Internet ETF (NYSE: ARKW) still own the stock, Wood said in an interview with Bloomberg.

The fund manager also noted that three of Ark’s funds in Japan — metaverse fund, mobility-as-a-service fund and global digitization funds — also own Nvidia.

As the stock went from $5, when Ark first bought, to $400, the Wood-run firm has taken profits on it, she said. “There’s a lot of good news discounted in this stock, and we still think it will do well over time,” she added.

Wood, meanwhile, touted a new group of stocks that can leverage the foundation laid by Nvidia. Nvidia is a hardware stock, although it has some software, she said.

Microchip and Nvidia logo displayed on a phone screen are seen in this multiple exposure illustration photo taken in Krakow, Poland on April 10, 2023. (Jakub Porzycki/NurPhoto via Getty Images)

“The history of hardware and software is, the bigger beneficiary over time is going to be software,” the fund manager said. “In our view for every dollar of hardware that Nvidia sells, software providers, i.e. SaaS providers will generate $8 in revenue.”

Wood said Ark is now looking at software providers, who were now where Nvidia was when Ark first bought it.

Among the AI opportunities, the Ark founder highlighted were:

  • UiPath, Inc. (NYSE: UI) in the software space,
  • Twilio, Inc. (NYSE: TWLO) in the robotics process automation space
  • Exact Sciences Corp. (NASDAQ: EXAS) in the genomics space
  • Teladoc Health, Inc. (NYSE: TDOC)

“We have companies that are because of artificial intelligence, they are going to develop new businesses that we think are going to drive,” she said. These companies are in the $10 billion to $12 billion market cap range, she added.

“We’re on to the next thing,” Wood said.

Wood argue that Tesla’s stock is far cheaper than Nvidia at six times the revenue.

Tesla automobile plugged in and charging a Supercharger rapid battery charging station for the electric vehicle company Tesla Motors, in the Silicon Valley town of Mountain View, California, August 24, 2016. (Smith Collection/Gado/Getty Images).

“Other companies with visionary leaders, strong global distribution and, perhaps most important, large-high-quality pools of proprietary data should be big #AI winners, with revenues and earnings surprising significantly on the high side of expectations during the years ahead,” Wood tweeted.

Wood’s comments on Nvidia as her flagship EFT, ARK Innovation Fund, struggles to return to the pandemic levels of revenue.

The interest rate hike from the Federal Reserve comes as risk has become less popular with investors.

“(Tesla) is the most obvious beneficiary of the recent breakthroughs in #AI, as it aims for an $8-10 trillion revenue TAM in autonomous mobility by 2030,” said Wood about the new technology of AI.

Produced in association with Benzinga

Edited by Alberto Arellano and Sterling Creighton Beard