Cathie Wood's Latest AI Semiconductor Stock Pick: Not Nvidia, But This Undervalued Rival

Cathie Wood, the CEO of ARK Invest, has been on a buying spree, scooping up shares of Advanced Micro Devices (AMD) over the past three months. With a total investment of $9.94 million, Wood has spread her position across four of her firm's exchange-traded funds (ETFs): ARK Space Exploration & Innovation ETF, ARK Autonomous Technology & Robotics ETF, ARK Next Generation Internet ETF, and ARK Innovation ETF. But why did Wood choose AMD over the market leader in AI semiconductors, Nvidia (NVDA)?



First, let's look at AMD's recent performance. The stock has been on a rollercoaster ride over the past year, with a peak of $135.75 on January 1, 2024, and a low of $105.25 on January 1, 2023. As of January 9, 2024, AMD shares are trading at $125.53. While the stock has experienced volatility, it has shown strong growth over the past year, with a gain of approximately 19.7%.

Now, let's dive into the reasons why Cathie Wood chose AMD over Nvidia:

1. Undervalued stock: AMD's recent pullback has caused a significant rightsizing in the company's valuation. Shares now trade near 52-week lows, putting the company's forward price-to-earnings multiple (P/E) of 24 nearly identical to that of the S&P 500. This parity suggests that investors view an investment in AMD as having commensurate upside to that of the broader market.
2. Rising market share in data center GPUs: AMD has been gaining market share in the data center GPU market, with an estimated 10% share in the past year, according to Jon Peddie Research. This growth is driven by the success of its MI300 accelerator chip, which has Microsoft, Oracle, and Meta Platforms as customers. As AI infrastructure spending continues to scale up over the next several years, AMD should have more opportunity to compete with Nvidia, especially when it comes to hefty price tags.
3. Upcoming GPU launches: AMD plans to release more GPUs in response to Nvidia's upcoming Blackwell and Rubin chipsets. This move suggests that AMD is committed to staying competitive in the data center GPU market and continuing to grow its market share.
4. Diversified product portfolio: AMD offers a diverse range of products, including high-performance processors for desktop and laptop computers (Ryzen series), graphics cards (Radeon), and server processors (EPYC) designed for data centers and enterprise applications. This diversification allows AMD to cater to a broader range of customers and markets, reducing its reliance on a single product segment.



In conclusion, Cathie Wood's investment in AMD is a strategic move that capitalizes on the company's undervalued stock, rising market share in data center GPUs, upcoming GPU launches, and diversified product portfolio. While Nvidia remains the market leader in AI semiconductors, AMD's strong performance and growth potential make it an attractive alternative for investors looking to capitalize on the AI revolution. As Wood continues to buy shares of AMD, it's clear that she sees significant upside in the company's future prospects.