Ark Invest's Cathie Wood explains reason for selling Nvidia: concerns about chip cycle risk, bullish on Meta

Ark Invest's flagship fund sold all Nvidia stocks in January this year, missing out on the surge since then. Founder Cathie Wood explained the reasons for the sale in an interview.

Reviewing Ark Invest's Missed Gain on Nvidia: Flagship Fund Missed Nvidia's Soaring, Surged After Clearing Inventory in January

Cathie Wood Explains Reasons for Withdrawing from Nvidia

Ark Invest founder Cathie Wood explained the reasons for selling off shares of chip manufacturer Nvidia (stock symbol: NVDA) before its stock price surged by 160%.

Wood stated that the main reason for their withdrawal was the risks associated with the boom-bust cycle in the chip industry.

Wood's flagship investment fund, ARK Innovation ETF (ticker symbol: ARKK), reduced its holdings in Nvidia in January, causing them to miss out on over half a trillion dollars in market value growth resulting from the significant rise in the company's stock price. Nvidia's stock price surged by 24% in just one day on Thursday as the company forecasted sales of $11 billion for the quarter, surpassing analysts' expectations by 53%.

During an interview with Bloomberg, Wood stated, "For Nvidia, there were several reasons that gave us pause." She mentioned that upon hearing news of chip shortages, she began to contemplate the cyclicality of the entire chip industry, with these shortages raising concerns about the industry's stability.

Wood also pointed out that Nvidia is facing increasing competition in the AI computing infrastructure chip market. She mentioned that companies like Tesla, Meta Platforms, and Alphabet are developing their own chips, adding pressure on Nvidia in terms of competition.

ARKK Fund Sees Investment Opportunities in Meta AI Development

Despite reducing its holdings in Nvidia, the ARKK fund still holds a portion of Nvidia in its other investment portfolios. Wood mentioned that they are shifting towards undiscovered investment opportunities to seek better returns.

Portfolios such as ARK Next Generation Internet ETF (ARKW) and ARKFintech Innovation ETF (ARKF) still hold some shares of Nvidia. These portfolios focus on specific industries and technological areas, and they still see potential in Nvidia in these fields.

In addition to Nvidia, Wood is also keeping an eye on Meta's artificial intelligence strategy. She mentioned that Meta is focusing on developing more powerful AI technology and highlighted their LLaMA AI language model, which can provide better models with fewer computational resources and more data.

Wood added, "I'm very interested in Meta." She likes that Meta's founder Mark Zuckerberg is now focusing on artificial intelligence as a key area, rather than the metaverse that he was focused on last year. This demonstrates Meta's potential and direction in the field of artificial intelligence. However, Meta has not yet appeared in ARKK's flagship investment portfolio.