In a recent investor letter, Cathie WoodCEO ARK Investteeth, NVIDIA NVDA Despite short-term challenges, the company is performing better.
what happenedIn his letter to investors, Wood emphasized that NVIDIA has been a major contributor to ARK's performance since its founding in October 2014. He positioned NVIDIA as a key player in the AI field. “Early on, we identified NVIDIA as the premier 'pick and shovel' player in the AI space,” Wood wrote.
Despite recent market volatility, ARK's ARK Next Generation Internet ETF arc It continues to maintain exposure to Nvidia with a weighting of 1.39% as of June 28th.
Wood said: Open AI's “ChatGPT moment” around Nvidia coincided with a big interest rate hike by the Federal Reserve, which sparked investor interest in Nvidia and other cash-rich stocks and prompted ARK to seek diversified exposure to the AI revolution.
She also noted that a weak macro environment and long-term corporate strategic decisions pose challenges for software companies. Nevertheless, Wood remains bullish on AI investments, seeing it as a fundamental innovation platform that will drive value creation for many technologies and startups.
“High and likely unmet near-term expectations may cause customers to reevaluate their AI strategies, resulting in near-term distress for Nvidia's business,” Wood wrote.
See also: Shares of Nvidia, Apple supplier TSMC surge in premarket trading after Morgan Stanley raises price target ahead of earnings release
Why is this important?The letter comes after ARK Invest made a big trade in Nvidia amid huge market volatility. ARK Autonomous Technology & Robotics ETF arc The company sold 33,834 shares of Nvidia stock worth $4.3 million, part of a series of transactions made by ARK's various ETFs.
Despite the adjustments, Wood remains confident in ARK's AI investments and stressed that the firm continues to invest in emerging technology companies. He first invested in Nvidia in 2014, when the stock was trading at about $4 a share, adjusted for splits.
Meanwhile, Nvidia's lofty valuation has put off some investors, with experts warning of a possible rerating. Nonetheless, Nvidia's performance has been exceptional, with the company's stock being the fifth-largest contributor to ARK's ARKK performance.
Price Action: Nvidia Inc. shares closed at $134.91 on Wednesday, up 2.69% for the day. In after-hours trading, shares were up 0.51%. Nvidia has seen impressive growth so far this year, climbing 180.07% to $86.74, according to Benzinga Pro data.
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Photo courtesy of Ark Invest
This story was written and edited with Benzinga Neuro. Kaustubh Bagalkote
