This particular investor increased an existing position in Nvidia.
Nvidia (NVDA 2.59%) has been impressing investors with mind-blowing gains in revenue and profit in recent years. This is thanks to the company’s dominance in selling one of today’s most sought-after products: artificial intelligence (AI) chips. And Nvidia just so happens to design the world’s top-performing product. This has helped the company stand out and rake in the revenue — customers seeking to win in AI want the most powerful AI chips and therefore have consistently turned to Nvidia.
The recent quarter wasn’t an exception. Nvidia delivered a blowout earnings report, with double-digit revenue gains, and revenue reached record levels. The fantastic news didn’t result in positive stock performance, but this didn’t scare away one of the market’s most savvy investors. This particular investor favors innovators and oversees a fund that’s climbed 100% over the past three years. Guess who just bought Nvidia stock? Let’s find out.
Image source: Getty Images.
An investor who likes Tesla and Palantir
The investor I’m talking about is Cathie Wood, founder of Ark Invest and supporter of companies that make innovation a priority. You may know of Wood for her big investments in potentially game-changing companies such as Tesla — the biggest holding in her flagship Ark Innovation ETF — and others such as Coinbase Global and Palantir Technologies. Wood isn’t shaken when shares of a quality company decline or even fall out of favor as long as she’s confident about the company’s long-term potential.
On Nov. 20, the first trading session following Nvidia’s earnings report, Wood bought 93,374 shares, adding to her existing Nvidia position in the Ark Innovation fund. As a result, the fund now holds 620,955 Nvidia shares, and the stock has a weight of about 1.5%, putting it in the 22nd position out of 48 holdings.
What are some of the details that likely pleased Wood? Nvidia chief Jensen Huang said sales of the company’s latest Blackwell platform are “off the charts” — and Huang isn’t the only one who’s had something positive to say about AI demand. Nvidia customers, such as Alphabet and Amazon, also have spoken of high demand for compute from their customers. All of this suggests that Nvidia is positioned for more growth in the months ahead.
Today’s Change
(-2.59%) $-4.73
Current Price
$177.82
Key Data Points
Market Cap
$4436B
Day’s Range
$169.55 – $178.16
52wk Range
$86.62 – $212.19
Volume
321M
Avg Vol
193M
Gross Margin
70.05%
Dividend Yield
0.02%
Benefiting from AI infrastructure spending
But Wood likely is looking way beyond that point, and here, too, there’s reason to be confident about Nvidia. The company aims to update its AI chips on an annual basis and already has set out a roadmap for the next few years. Meanwhile, we’re in a phase of AI development that should greatly benefit Nvidia, and that’s the infrastructure spending ramp-up. With companies including cloud service giants pledging to invest more and more in infrastructure, demand for Nvidia platforms is set to continue.
This means that a dip in Nvidia stock now isn’t a reason for alarm and instead offers long-term investors like Wood a buying opportunity. Nvidia stock may not be dirt cheap, but its valuation is reasonable at 38x forward earnings estimates.
Of course, Nvidia and other AI leaders face some risk. Any decline in economic conditions could weigh on spending in the industry, or a technology setback might delay a product launch — these sorts of possibilities could hurt Nvidia stock or the shares of its peers. Recent concerns among some members of the investment community regarding a possible AI bubble have hurt AI stocks since the start of November — and such worries represent a headwind that could last or even reappear farther down the road.
So, when investing in AI or any other industry, it’s important to be aware of the risks and diversify to protect your portfolio from any potential turbulence.
That said, comments from Nvidia and other AI companies have been encouraging, and the long-term picture remains bright. Cathie Wood, who favors game-changing technologies and isn’t bothered by short-term headwinds, decided to take advantage of the dip and add to her Nvidia position — and she and others who buy Nvidia while it’s down may reap great rewards over the long term.