- Cathie Wood’s outlook for Nvidia is slowing growth, weak demand, and increased competition.
- The CEO of Ark Investments compared the company’s soaring stock price to that of Cisco during the dot-com bubble.
- Wood believes market expectations may be overstated and has reduced his exposure to Nvidia.
Cathie Wood has sounded the alarm on Nvidia, warning that its impressive growth is likely to slow and comparing the company’s soaring stock price to Cisco during the dot-com bubble.
The technology evangelist and CEO of Ark Investments made the shocking comments in a letter to shareholders on Thursday.
She drew parallels between Cisco, which saw demand for networking hardware rise during the Internet boom in the early 1990s, and Nvidia, which today sold record amounts of graphics chips to companies developing artificial intelligence. .
This is a “similar technology moment,” Wood said. She noted that after Cisco’s stock price soared 31 times in the three-and-a-half years ending in March 1994, it fell 51% in the next four months as recession concerns and the launch of competing products reduced customer orders. I reminisced.
The stock had rebounded 71 times by the peak of the Internet bubble in March 2000, but it crashed about 90% over the next few years and hasn’t approached the dot-com highs since.
“Today, Nvidia is that company,” Wood said. He noted that Microchip’s stock price soared 117 times in the nine years starting in February 2015, and in 2018, when chip sales took a hit during the cryptocurrency winter and Nvidia’s stock price fell 56% in three months. He emphasized that the market has jumped 23 times since October.
furious growth
Wood’s point seemed to be that just as Cisco’s routers and switches enabled the Internet revolution, Nvidia has emerged as the company that will define the AI era. And as companies play key roles in new technology paradigms, stock prices can fluctuate dramatically.
In fact, Nvidia has been growing at a breakneck pace in recent quarters as companies like Tesla and Oracle compete to buy its chips. But the fast and furious pace could result in customers getting double or triple the amount they need, Wood said.
He also said Nvidia is steering toward slower growth this quarter, with wait times to secure chips reduced from up to 11 months to as low as three months, indicating supply is catching up with demand. He pointed out that
“I wouldn’t be surprised if there’s a pause in spending unless there’s an explosion in software revenue that justifies overbuilding GPU capacity,” Wood said.
Nvidia customers may also spend less on chips as they begin to clean up and reduce inventory, she continued.
“Unlike its history with Cisco, in the long run, not only will AMD be successful, but also because Nvidia’s customers, cloud service providers and companies like Tesla, are designing their own AI chips. , competition may intensify,” he added.
Wood clearly sees NVIDIA shining brightly in the face of slower growth, declining spending and increased competition. But she made sure to caution that major advances in AI in recent years show that “anything is possible.”
The fund manager has been increasingly wary of Nvidia in recent months. In February, he announced that he would reduce his exposure to Ark shares because “expectations may get ahead of us.”
In fact, Nvidia’s stock price has soared almost 90% this year, increasing the company’s market capitalization to more than $2 trillion. It’s now worth more than Amazon and Alphabet, and has since lost just 13% to Apple. 1/47 worth As an iPhone maker 10 years ago.
According to Ark’s website, the company owns just $64 million in Nvidia shares across its various funds, compared to Coinbase’s $1.3 billion and Tesla’s $788 million, the company’s two largest holdings. It’s nothing more than that. Nvidia is currently the 41st largest holding out of about 200 companies.
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