Cathie Wood is one of the most closely followed investors on Wall Street. As CEO of ARK Invest, Wood has made a name for herself mostly from her high-conviction narratives around up-and-coming (albeit sometimes speculative) companies looking to disrupt legacy incumbents.
When it comes to artificial intelligence (AI), no other company has garnered the kind of following that Nvidia has. Its graphics processing units (GPU) have become a base on which generative AI is being developed, and the company’s momentum over the last two years has looked downright unstoppable.
Nevertheless, per usual with Wood, the savvy investor appears to be scooping up shares of a rival GPU stock en masse over that of Nvidia right now. The best part? This particular semiconductor stock looks dirt cheap relative to its growth prospects.
Let’s look at that chip stock and make the case for why this player could emerge as a major force in semiconductors sooner rather than later.
Over the last three months, ARK Invest has been consistently adding to a position in Advanced Micro Devices (NASDAQ: AMD).
|
Category |
October |
November |
December |
|---|---|---|---|
|
AMD shares bought |
122,279 |
156,637 |
156,561 |
Data source: ARK Invest
Starting in late October, Wood started buying AMD and spread the position across four of her firm’s exchange-traded funds (ETFs): the ARK Space Exploration & Innovation ETF, ARK Autonomous Technology & Robotics ETF, ARK Next Generation Internet ETF, and ARK Innovation ETF.
Since Wood began buying AMD on Oct. 24, shares of the chip stock have declined by roughly 21% (as of Jan. 9). Below, I’ll dig into what forces could be causing the sell-off and make the case for why investors may want to follow Wood’s lead and buy the dip.
AMD is considered to be Nvidia’s top competitor in the data center GPU market. But given Nvidia’s 90% market share in the space, does AMD even stand a chance?
In my eyes, it most certainly does. For much of the last two years, Nvidia had virtually zero competition in the GPU realm. Hence, the company was able to command enormous pricing power for its chips and acquire an overwhelming stake in the total addressable market.
But during this time period, AMD went to work and has amassed an estimated 10% market share in data center GPUs in the past year or so, according to Jon Peddie Research.
This move comes on the heels of AMD’s MI300 accelerator chip, which counts Microsoft, Oracle, and Meta Platforms as customers. All three of these hyperscalers are also Nvidia customers, but complementing their Nvidia GPU clusters with AMD’s chipsets has caused something interesting to happen: AMD’s data center GPU business is now growing at a similar rate to Nvidia’s. In other words, AMD’s data center business is accelerating as Nvidia’s, while still enormous, is beginning to show signs of slowing down.
