Cathie Wood explains why Nvidia stock exploded and what the ‘real’ AI play is
Tech company Nvidia has come out swinging as an emerging artificial intelligence (A.I.) leader in recent days, but Ark Invest CEO Cathie Wood allegedly saw their potential back in 2014.
“Back then it was just a sleepy old PC gaming chip company, but we saw it back then as an A.I. company,” the famed stock investor said on “Kudlow” Thursday. “Now what we’re seeing with Nvidia, this massive move today and since we bought it at $5 to today’s almost $380, we are seeing the picks and shovels movement in the A.I. theme.”
“So Nvidia has done a lot of heavy lifting over the years,” the investor continued, “and it is the No. 1 hardware play in A.I.”
While there are no “pure play” A.I. stocks, as all the publicly-traded companies heavily involved in A.I. have other business offerings, Nvidia has come to be considered one of the leaders in the field despite being in a similar position.
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Nvidia stock has soared by 113% year-to-date as of Wednesday’s close, outpacing some of the biggest names in tech and A.I. including Google and Microsoft, which have enjoyed 30% growth in their share prices in the same period.
After the market closed Wednesday and Nvidia held its earnings call, its share price surged as much as 28% in after-hours trading to extend its lead as the world’s most valuable chipmaker and the fifth most valuable company on Wall Street.
“We think the real play in artificial intelligence right now is more on the software side…”
Wood pointed out that A.I. hardware spending is expected to reach $1.7 trillion by 2030, while noting Nvidia’s sales base this year is only estimated at $40 billion.
“So that’s a huge market opportunity. And yet, because of the appreciation we’ve seen from Nvidia, thanks to ChatGPT, we really saw it take off after that, we believe that it will deliver a compound annual rate of return of roughly 15%,” Ark Invest’s CEO and CIO said, “doubling over the next five years.”
However, she expanded on her firm’s intuition that the “real play” in artificial intelligence right now is actually on the software side.
“The companies with visionary leaders, great distribution, so broad distribution globally and proprietary data,” Wood explained, “those companies are going to be some of the biggest beneficiaries.”
Across the tech sector as a whole, the chief investor expressed her belief that people have started to understand the productivity gains A.I. has to offer.
“In terms of competition, Nvidia has roughly 90% of the GPU market, which dominates A.I. training and, increasingly, inference. But there will be competition,” Wood cautioned, “especially now that this market is on fire, [Advanced Micro Devices] certainly, the hyperscalers themselves, Meta platforms, Alphabet and Amazon, they are developing their own chips. So is Tesla.”
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FOX Business’ Eric Revell contributed to this report.