ARK Backs Nvidia's AI Lead Amid Bubble Fears

Cathie Wood's ARK Invest has resumed its investment in Nvidia, allocating $17 million to the chipmaker as part of a broader strategy to capitalize on artificial intelligence-driven growth. The move comes as ARK simultaneously ramps up purchases of crypto-linked equities, including BitMine and Bullish, amid a market downturn. The firm's latest trades reflect confidence in Nvidia's dominance in the AI hardware sector, despite growing investor anxiety over the sustainability of the AI boom according to recent reports.

Nvidia's recent performance has underscored its pivotal role in the revenue of $57 billion, exceeding Wall Street estimates by $2.1 billion, driven by robust demand for its Blackwell and Spectrum-X chips. CEO Jensen Huang highlighted "off-the-charts" Blackwell sales and sold-out cloud GPU inventory, while CFO Colette Kress noted that A100 GPUs from six years ago remain fully utilized according to Barrons. These results fueled a short-lived 5% post-earnings rally before broader market jitters pulled the stock back down as reported by Forbes.

The earnings report also revealed a $500 billion backlog of Blackwell and Rubin chip orders through 2026, reinforcing Nvidia's position at the center of the AI industrial revolution. This momentum has attracted significant partnerships, including a $15 billion investment from Nvidia and Microsoft in AI startup Anthropic, which develops the Claude chatbot. The deal, part of a $30 billion agreement to integrate Anthropic's models with Microsoft's Azure cloud, signals intensified competition in the generative AI space as noted by Free Malaysia Today.

Analysts remain cautiously optimistic. Raymond James reiterated a "Strong Buy" rating with a $272 price target, citing Nvidia's leadership in AI infrastructure and its two-year product cycle strategy. Stifel raised its target to $250, emphasizing the company's $500 billion in cumulative orders for Blackwell and Rubin systems according to Investing.com. However, concerns linger about the financial sustainability of AI's rapid expansion, with SoftBank and Peter Thiel's hedge fund recently offloading Nvidia stakes.

The market's mixed reaction to Nvidia's results highlights broader uncertainties. While the company's gross margin of 73.6% and $32 billion in adjusted net income impressed investors according to Forbes, fears of an AI "bubble" resurfaced as shares reversed from a 5% gain to a 3% loss within hours as reported by Reuters. These anxieties are compounded by the concentration of Nvidia's revenue—four customers accounted for 61% of Q3 sales as noted by Reuters-and questions about when AI infrastructure investments will yield tangible returns according to Seeking Alpha.

ARK's renewed focus on Nvidia aligns with its broader bet on AI's long-term potential. The firm has also purchased $46 million in Circle shares and expanded its holdings in Ethereum treasury firm BitMine, betting on crypto's resilience amid a $1 trillion correction in the digital asset market according to Yahoo Finance. Wood's strategy underscores a belief that volatility presents buying opportunities in transformative technologies, even as macroeconomic headwinds and regulatory scrutiny persist.