Tech

Nvidia is for sale and Cathie Wood is a big buyer

ADVERTISEMENT

(Bloomberg) — A rebound for Cathie Wood’s exchange-traded funds may depend in part on an equally battered large-cap technology stock that has long been a favorite of hers — Nvidia Corp.

Most read by Bloomberg

ETFs managed by ARK Investment Management LLC, a proponent of growth stocks, have loaded Nvidia shares, buying more than 400,000 in September, according to the company’s daily trading disclosures. According to Bloomberg data, ARK funds held more than 675,000 shares as of June 30.

Nvidia shares are down 55% this year, the biggest drop among technology stocks with market values ​​of $100 billion or more. Revenue growth has slowed at a time when valuations for high-growth companies have come under severe pressure from rising interest rates.

That has made the stock cheaper than last year when its market value climbed to $1 trillion. But at 32 times expected earnings, the price is still above the average of the past decade.

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

Still, ARK’s convictions wavered at times. The company sold nearly 300,000 Nvidia shares on Aug. 23, the day before the chipmaker reported profit, with its quarterly revenue forecast about $1 billion below Wall Street’s average estimate. ARK representatives did not respond to requests for comment.

“Nvidia is a 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.

READ  Tycoon who runs a quarter of China's copper trade is at stake

Wood’s affinity with Nvidia has been a huge boon, as its shares rose from about $4 at the start of 2014 to over $330 at the end of 2021, when Nvidia’s market value peaked at over $800 billion. This year, however, stock was a major drag. Nvidia is down 60% from a November 29 record, losing about $500 billion in market value along the way.

Of course, Wood has been criticized for taking a beating on her portfolios from economic conditions that have weighed disproportionately on the fast-growing, highly valued stocks she prefers. Its flagship $8 billion ARK Innovation ETF is down 55% this year.

As for Nvidia, Wall Street has cut earnings estimates. According to data from Bloomberg, 2023 earnings forecasts have fallen by more than 50% in the past three months under generally accepted accounting principles.

Technical card of the day

The Nasdaq 100 Index fell 5.8% last week as a reading of inflation caused the biggest weekly percentage drop since January, and sales were especially severe in Microsoft Corp. The software giant fell 7.5%, its biggest slump since March 2020. Its stock, which is down 27% this year, closed at its lowest level since June.

Top tech stories

  • China’s heated rivalry with the US over tech supremacy adds new pain points to the world’s second-largest stock market as the Biden administration ramps up efforts to reduce the Asian nation’s economic dependence.

  • The UK’s Financial Conduct Authority has issued a warning to consumers about Sam Bankman-Fried’s crypto exchange FTX, stating that it is not authorized by the regulator to offer financial services or products in the country.

  • The App Association calls itself the leading voice for thousands of app developers around the world. In reality, the vast majority of funding comes from Apple Inc.

  • Oyo Hotels, the once-high-flying Indian start-up, is reviving plans for a stock market debut after cost-cutting and a recovery in travel helped reduce losses.

  • Sea Ltd. prepares to lay off 3% of Shopee workers in Indonesia, as part of a wider wave of regional job cuts designed to curb rising losses and win back investors. According to a Bloomberg News memo, the Singapore-based company will notify affected staff of its money-guzzling e-commerce business on Monday.

  • A drop in the Hang Seng Tech Index brought the meter near oversold territory for the first time since a March rout, signaling extreme bearishness that some technical traders see as a sign of rebound momentum.

  • A hacker has published authentic, pre-release footage of the development of Grand Theft Auto VI, Take-Two Interactive Software Inc.’s most anticipated video game.

  • Li Zexiang grew up in rural China during the Cultural Revolution, when capitalists were the enemy. Now, the 61-year-old academic has quietly emerged as one of the country’s most successful angel investors, with support from more than 60 startups, including drone giant DJI.

  • MicroStrategy Inc. co-founder Michael Saylor, one of Bitcoin’s biggest proponents, said the software update to the Ethereum blockchain serves to improve the outlook for the world’s largest cryptocurrency.

  • If you work in American film and TV, the bad news comes in almost daily. A multi-year boom in film and TV production, driven by media companies rushing to sign up subscribers for their new streaming services, has painfully stalled, giving way to layoffs, introspection and hand wringing.

READ  Ports Advance, Euro Drops as Putin Steps Up War: Markets Wrap

Most read from Bloomberg Businessweek

©2022 Bloomberg LP

ADVERTISEMENT

ADVERTISEMENT