Why Cathie Wood is Selling Millions in Nvidia Stock

In the last year, semiconductor giant Nvidia  (NVDA) – Get Free Report has become synonymous with investor sentiment around the practicality of artificial intelligence. The firm's chips make AI products possible, marking it as one of the most dependable bets in the current AI gold rush. 

The company has additionally begun to develop central processing units (CPUs) that would run Microsoft  (MSFT) – Get Free Report Windows operating system for its personal computers, according to a report by Reuters. 

Nvidia, according to the Oct. 23 report, could be in a position to sell PC chips by 2025, a move that would heavily threaten Intel  (INTC) – Get Free Report. Nvidia shares closed the day up more than 3% as Intel shares fell by around 3% following the news. 

In the midst of this, Cathie Wood's Ark Invest further cut its meager remaining Nvidia holdings by 10,396 shares, a sale by Ark's Genomic Revolution ETF valued at around $4.5 million. This latest sale brings the ETF's Nvidia holding down to just 37,874 shares, worth slightly more than $16 million and weighted at 1.13% of the fund. 

Ark's flagship Innovation ETF no longer has any exposure to Nvidia. 

Ark Invest famously sold the bulk of its Nvidia holdings shortly before the company reported record first-quarter earnings, skyrocketing in value. But CEO and investment lead Cathie Wood has defended the decision ever since, claiming staunchly that Tesla  (TSLA) – Get Free Report is a stronger long-term AI bet than Nvidia. 

Part of Wood's reasoning for this approach centers around margins. Wood said last week that Nvidia's gross margins — already high at around 70% — can't get much higher. Tesla's margins, however, which have recently been crumbling, have a lot of room to grow.

“We think that a lot of people understand how important Nvidia is in this ecosystem and they do not understand how much each dollar of hardware spent is going to pull software through,” Wood said. “We think it's on the order of 20 times.”

Nvidia will report third-quarter earnings after market close Nov. 21. The company's stock, up nearly 200% for the year, rose slightly Tuesday morning.


Originally published on TheStreet.com

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