Cathie Wood’s Surprising Bet on Artificial Intelligence
Cathie Wood, the renowned CEO of ARK Invest, has made a name for herself by identifying and investing in innovative companies that disrupt traditional industries. When it comes to artificial intelligence (AI), Wood’s conviction in certain companies has led to remarkable returns. However, her latest move may surprise even the most seasoned investors.
A Rival GPU Stock Takes Center Stage
While Nvidia has dominated the AI landscape, Wood has been quietly accumulating shares of a rival GPU stock, Advanced Micro Devices (AMD). Over the last three months, ARK Invest has consistently added to its position in AMD, spreading the investment across four exchange-traded funds (ETFs). This move is particularly intriguing, given that AMD’s shares have declined by approximately 21% since Wood began buying in late October.
Unstoppable Growth Prospects
So, what’s driving the sell-off, and why is Wood betting big on AMD? The answer lies in AMD’s growing presence in the data center GPU market, where it has amassed an estimated 10% market share in just a year. The company’s MI300 accelerator chip has gained traction with major customers like Microsoft, Oracle, and Meta Platforms, all of whom are also Nvidia clients. As a result, AMD’s data center GPU business is now growing at a rate comparable to Nvidia’s.
A Valuation Disconnect
The recent sell-off has led to a significant undervaluation of AMD’s stock, with its forward price-to-earnings multiple (P/E) of 24 nearing parity with the S&P 500. This presents a compelling opportunity for investors seeking underpriced growth potential. Wood’s continued buying spree suggests that she believes AMD’s current valuation is a bargain, and its growth prospects are far from fully priced in.
A Long-Term Play
For investors with a long-term horizon, AMD’s current discount may be an attractive entry point. As AI infrastructure spending continues to scale up over the next several years, AMD is well-positioned to compete with Nvidia, particularly on price. With its rising trajectory in data center GPUs and a valuation that seems disconnected from its growth prospects, AMD may emerge as a major force in semiconductors sooner rather than later.
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