ARK Invest CEO Cathie Wood said it would take a “significant price correction” for her to reinvest in Nvidia having sold out last January, ahead of a 160% surge in the chip maker's shares price.
Speaking at ETF Stream’s ETF Ecosystem Unwrapped 2024 event last week, Wood said Nvidia was a cyclical stock that could face a significant price reduction as inventory continues to build.
“Nvidia historically has been a very cyclical stock, I remember in 2018 when it benefited from the crypto movement, ending up with a huge inventory correction and crypto was about 3% of its business,” Wood said.
“However, there was so much inventory building in the crypto space there was a glut. I do not think it will be as serious this time, but Nvidia did drop by two-thirds in one quarter.”
She added the “shortage” around graphics processing units (GPUs) – Nvidia’s second largest revenue generator – has not been as acute recently with the likes of Tesla having no problem in acquiring the chips.
It comes as shares in Nvidia passed $1,000 for the first time last week, rising 7% in extended trading, as its first-quarter results topped estimates again, as it continues to benefit from the artificial intelligence boom.
Wood said the group redeployed its capital from Nvidia into Coinbase and other software companies across its range of ETFs including the flagship ARK Innovation ETF (ARKK).
“Maybe some of these software companies did not do as well as Nvidia, however, if Nvidia is to continue working we must see this pool through into the tech stack and the central part of organisations so there are going to be bumps in the road.”
