Key Takeaways
When stocks from well-known companies decline, many investors tend to leave the market. However, for Cathie Wood, the founder and CEO of Ark Invest, this signals an opportunity. Rather than steering clear, she takes a closer look at companies that may be undervalued, frequently acquiring shares at lower prices. This reflects her investment strategy of entering innovative firms at accessible prices and holding onto them to capitalize on their growth over time.
Wood’s flagship fund, Ark Innovation, has gained over 50% in the past three years. With many of its holdings being potential future winners, the long-term growth narrative for Ark Innovation might only be beginning.
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The slump in AI-related stocks hasn’t gone unnoticed by Wood. She views this downturn as a perfect chance for bargain hunting. Recently, she acquired a stock that plummeted 17% in a single trading day and another that has fallen 50% from its peak. Let’s take a closer look.
1. Advanced Micro Devices
Wood purchased shares of Advanced Micro Devices (NASDAQ: AMD) during the trading session following the company’s earnings announcement, which exceeded analysts’ expectations but failed to impress investors. The anticipated demand for AI chips didn’t align with projections, and AMD forecasts revenues of approximately $9.8 billion for the upcoming quarter.
She invested in AMD across several funds: Ark Innovation, Ark Autonomous Technology, Ark Next Generation Internet, Ark Blockchain and Fintech, and Ark Space & Defense. AMD now ranks as Ark Innovation’s sixth largest holding, representing about 3.9% of the fund.
As a competitor in the AI chip sector, AMD creates the graphics processing units (GPUs) necessary for vital AI functions. These chips are essential for early AI development and problem-solving tasks, making them integral to the sector’s growth.
Despite AMD’s forecasts not meeting some analysts’ expectations, it’s essential to keep a long-term perspective. The AI market is projected to grow into trillions of dollars, which could greatly benefit a semiconductor leader like AMD.
Right now, Wood considers AMD stock a bargain, trading at 29 times future earnings compared to over 60 times a few months ago.
2. CoreWeave
Wood also acquired shares in CoreWeave (NASDAQ: CRWV) last week. Although the company hasn’t released earnings results yet (the next report is due on February 26), the stock is down about 50% from its peak, indicating a potential buying opportunity.
She included CoreWeave in two of her funds, Ark Innovation and Ark Next Generation Internet, on February 4th. CoreWeave debuted in the market last March, impressively rising over 300% in just a few months before retreating gradually. That said, the stock is still over 80% up since its IPO.
CoreWeave has become attractive, offering clients access to high-demand AI workloads by providing Nvidia GPU access without the need for heavy investments in infrastructure. The company has experienced significant growth, with recent revenue soaring, indicating a robust demand that requires aggressive infrastructure investments.
While there are concerns about AI stock valuations and the sustainability of high spending in the sector, these don’t necessarily alter CoreWeave’s long-term outlook. Wood sees this dip as a great opportunity that other proactive investors might want to consider.
Should You Consider Buying Advanced Micro Devices Stock Now?
If you’re thinking about purchasing Advanced Micro Devices stock, there are some things to keep in mind:
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The opinions expressed here are those of the author and may not reflect the position of Nasdaq, Inc.
