(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.
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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.
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.
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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.
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