Nvidia is on sale and Cathie Wood is a big buyer

Nvidia is on sale and Cathie Wood is a big buyer

(Bloomberg) — Cathie Wood’s stock market recovery may hinge in part on an equally maligned large-cap technology stock that is a longtime favorite of hers — Nvidia Corp .

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ETFs controlled by growth promoter ARK Investment Management LLC have loaded up on Nvidia shares, buying more than 400,000 in September, according to the company’s daily trading disclosures. ARK funds held more than 675,000 shares as of June 30, according to data compiled by Bloomberg.

Shares of Nvidia have fallen 55% this year, the biggest drop among tech stocks with a market value of $100 billion or more. Sales growth has slowed at a time when valuations for fast-growing companies have come under severe pressure amid rapidly rising interest rates.

That left the stock cheaper than it was last year, when its market capitalization topped $1 trillion. However, at 32 times projected earnings, it is still higher than its average over the past decade.

Wood has long been a fan of Nvidia, whose graphics processors are used in personal computers and for the complex computing tasks required for artificial intelligence. Shares of the Santa Clara, California-based company have been part of its portfolios since ARK launched in 2014, along with electric car maker Tesla Inc.

However, ARK’s conviction has wavered at times. The company sold nearly 300,000 Nvidia shares on Aug. 23, the day before the chipmaker’s earnings report, in which its quarterly revenue forecast fell about $1 billion short of Wall Street’s average estimate. ARK representatives did not respond to questions seeking comment.

“Nvidia is a high-quality company and while it was expensive earlier this year, the correction has made it look quite attractive at these levels,” said Greg Taylor, chief investment officer at Purpose Investments Inc.

Wood’s affinity for Nvidia has been a huge boon as shares have soared from about $4 in early 2014 to more than $330 in late 2021, when Nvidia’s market value peaked at more than $800 billion. This year, however, the stakes were high. Nvidia has fallen 60% since its Nov. 29 record high, shedding about $500 billion in market value along the way.

Of course, Wood has been criticized as her portfolios have taken a beating with economic conditions disproportionately weighing on the high-growth, high-valuation stocks she tends to favor. The flagship $8 billion ARK Innovation ETF is down 55% this year.

As for Nvidia, Wall Street cut earnings estimates. Forecasts for 2023 GAAP earnings have fallen more than 50% in the past three months, according to data compiled by Bloomberg.

Technical chart of the day

The Nasdaq 100 fell 5.8 percent last week as the inflation gauge fueled its biggest weekly percentage decline since January and selling was particularly strong in Microsoft Corp . The software giant fell 7.5%, its biggest drop since March 2020. The stock, which has fallen 27% this year, closed at its lowest level since June.

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