ARK Invest CEO Cathie Wood said it would take a “significant price correction” for her to reinvest in Nvidia after its sale last January, ahead of a 160% surge in the chip maker's stock price.
He speaks in ETF flows At the ETF Ecosystem Unwrapped 2024 event last week, Wood said Nvidia was a cyclical stock that could face a significant price decline as inventory continues to build.
“Nvidia has historically been a very cyclical stock, and I remember in 2018 when it benefited from the cryptocurrency movement, and the stock ended up having a huge correction and crypto was about 3% of its business,” Wood said.
“However, there was a lot of inventory piling up in the crypto space, and there was an abundance. I don’t think it will be that serious this time, but Nvidia is already down by two-thirds in one quarter.”
Nvidia shares reach $1,000
She added that the “shortage” of graphics processing units (GPUs) – Nvidia's second-largest source of revenue – has not been as severe recently as the likes of Tesla have had no problem obtaining chips.
It comes as Nvidia shares topped $1,000 for the first time last week, rising 7% in extended trading, as first-quarter results topped estimates again. The stock price changed by more than $1,100 in Tuesday morning trading in the American markets. The company continued to benefit from the artificial intelligence boom.
The group has redeployed its capital from Nvidia to Coinbase and other software companies across its suite of ETFs, including the flagship, Wood said. ARK Innovation ETF (ARKK).
“Some of these software companies may not have done as well as Nvidia, however, if we want Nvidia to continue to operate, we have to see this pool until it reaches the technology stack and the central part of enterprises, so there will be bumps in the road.”
This article first appeared in etf.com's sister publication, ETFStream.com.