Cathie Wood Just Went Bargain Hunting. Here Are the 3 AI Stocks She Bought.
Key Points
Ark expects Nvidia to remain the lead supplier for AI servers even as custom chips gain market share.
Wood also likes the prospects of emerging challengers like Cerebras Systems in the AI compute market.
Broadcom remains one of Wood's top stocks for riding the growth of custom chip alternatives.
Cathie Wood's Ark Invest hasn't had a great year so far. Of the firm's seven exchange-traded funds (ETFs), only the Ark Genomic Revolution ETF has outperformed the market. The flagship Ark Innovation ETF (NYSEMKT: ARKK) is slightly trailing the S&P 500's 13% year-to-date gain, up just 11.8% at the time of writing.
Still, Ark founder and Chief Executive Officer Cathie Wood continues to hold stakes in companies positioned to ride the artificial intelligence (AI) boom. In late August, several Ark ETFs added shares of Nvidia (NASDAQ: NVDA), Cerebras Systems (NASDAQ: CBRS), and Broadcom (NASDAQ: AVGO).
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Let's explore why Wood might have bought more shares.
Ark Invest CEO Cathie Wood. Image source: Getty Images.
Nvidia
Nvidia remains Ark Invest's largest chip-stock holding across its ETFs. On Aug. 28, Ark Invest bought roughly $55 million worth of Nvidia across five funds.
Ark Invest's research projects spending on AI to triple from $500 billion in 2025 to roughly $1.5 trillion by 2030. That backdrop favors the graphics processing unit (GPU) leader. Nvidia just reported an impressive 106% year-over-year increase in revenue, reaching $96 billion. Management is guiding for 70% growth in fiscal 2028 (ending in January).
Competition is heating up in AI data centers. Google's Tensor Processing Units (TPUs) and Amazon's Trainium can rival Nvidia's performance for certain workloads. These custom chips are expected to gain share against Nvidia's accelerated GPUs in the coming years, but Wood appears to like the stock's upside if GPU demand remains strong.
Nvidia trades at just 15 times next year's consensus earnings estimate, while Ark expects Nvidia's GPUs to still make up the majority of the AI server market by 2030. Nvidia is widening its customer base beyond hyperscalers like Google to AI clouds, industrial, and enterprise buyers. Revenue from these non-hyperscaler customers surged 138% year over year to $40 billion last quarter. That diversification could help sustain growth even if hyperscalers gain share with in-house chips.
Cerebras Systems
On Aug. 26, Ark Invest purchased roughly $26 million of Cerebras Systems stock across two ETFs. It's still a small position, making up about 2.8% of the Ark Innovation and Ark Next Generation Internet ETF.
The move aligns with Ark's view that emerging start-ups will capture a growing share of the market from incumbent chip suppliers. Cerebras is known for its wafer-scale engine, a computing system designed to deliver high tokens-per-second for advanced AI models. Revenue grew 74% year over year in the second quarter to $180 million.
The risk for Cerebras is that it still lacks scale in the AI market. Nvidia is growing faster at a much larger revenue size. A relative lack of resources could pose challenges for Cerebras in ramping new generations of systems on schedule.
At 68 times sales, the stock doesn't look like a bargain, but it's trading 45% off its previous high. Wood seems to be broadening Ark's bets across multiple AI infrastructure suppliers, which can help reduce the risk of a single stock underperforming expectations. Cerebras says its next-generation CS-4 platform delivers up to 30 times faster AI inference performance than GPU systems. If demand broadens beyond GPUs and revenue growth remains robust, Cerebras could be a winner.
Broadcom
On Aug. 26 and Aug. 28, Ark bought roughly $41 million of Broadcom across three Ark ETFs. It's a relatively small holding, at about 1.7% of the flagship ARK Innovation fund.
Broadcom fits Ark's thesis that custom AI chips will continue to gain market share through 2030. Broadcom's specialized chips, or XPUs, are in high demand. It is a top supplier for Google, Anthropic, and others, with AI semiconductor revenue surging over 200% year over year to $16 billion in the most recent quarter.
Beyond competition, the shared risk for Nvidia, Cerebras, and Broadcom is continued growth in AI infrastructure spending. If hyperscalers slow or pause spending, these stocks would likely sell-off.
Wood, however, appears to view Broadcom's valuation as offering attractive upside if AI spending remains strong. Management is targeting more than $30 in earnings per share by fiscal 2028. Yet the stock is trading at about 11 times that estimate, which looks like a bargain.
John Ballard has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Broadcom, and Nvidia. The Motley Fool has a disclosure policy.