(Bloomberg) — The payback for Cathie Wood’s exchange-traded funds may depend in part on a big-cap technology stock that’s just as beaten as her longtime favorite — Nvidia Corp.
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ETFs controlled by growth stock advocate ARK Investment Management LLC have been loading up on Nvidia shares, buying more than 400,000 in September, according to the firm’s daily trading disclosure. 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 market values of $100 billion or more. Sales growth has slowed as valuations for fast-growing companies have come under pressure amid rising interest rates.
That left the stock cheaper than it was last year when its market value was climbing toward $1 trillion. But at 32 times projected earnings, it’s still higher than the average price over 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 for artificial intelligence. Shares of the Santa Clara, California-based company have been part of its portfolios since ARK started in 2014, along with electric car maker Tesla Inc.
Still, ARK’s conviction has wavered at times. The firm sold nearly 300,000 Nvidia shares on Aug. 23, the day before the chipmaker reported earnings in which its quarterly revenue forecast fell about $1 billion short of Wall Street’s average estimate. ARK representatives did not respond to inquiries seeking comment.
“Nvidia is a quality company and although it was expensive earlier this year, the correction has looked quite attractive at these levels,” said Greg Taylor, chief investment officer at Purpose Investments Inc.
Wood’s affiliation with Nvidia has been a boon as the shares have risen from around $4 at the start of 2014 to more than $330 in late 2021, when Nvidia’s market value reached a new peak. more than $800 billion. This year, however, there was a big draw on the stock. Nvidia has fallen 60% since its November 29 record, losing about $500 billion in market value along the way.
Of course, Wood has been criticized because her portfolios have progressed with economic conditions weighing disproportionately on the high-growth, high-value stocks she favors. Its flagship ARK Innovation ETF, $8 billion, has fallen 55% this year.
For Nvidia, Wall Street is cutting earnings estimates. Projections for 2023 profits under generally accepted accounting principles have fallen more than 50% in the past three months, according to data compiled by Bloomberg.
Tech Chart of the Day
The Nasdaq 100 Index fell 5.8% last week, as a reading on inflation prompted the biggest weekly percentage drop since January, and the sell-off was particularly intense in Microsoft Corp. The software giant fell 7.5%, the biggest decline since March 2020. The stock, which is down 27% this year, closed at its lowest level since June.
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