There is opportunity in the volatility. Cathie Wood is a widely watched growth investor who has steered her Ark Invest family of exchange-traded funds to success when equity prices are rising. She's also not afraid to put money to work when stocks are sliding.
Wood added to her stakes in Nvidia (NASDAQ: NVDA), Baidu(NASDAQ: BIDU), and Iridium Communications(NASDAQ: IRDM) on Monday, a day that featured the market's widest swing in the last five years. The three stocks are trading well below their recent highs. Let's take a closer look at the growth prospects from these three investments at current levels.
1. Nvidia
Shares of Nvidia have cooled down after more than tripling in 2023, and tacking on another 171% jump last year. The chipmaker has fallen 27% this year as of Monday's close, down a blistering 36% since hitting an all-time high just three months ago.
Nvidia is the country's third most valuable company by market cap. Its pole position in graphics processing units with gamers has widened over the years, and now it's the undisputed top dog in artificial intelligence (AI) chips. The surge in demand for data centers to crank out generative AI is making Nvidia one of the world's fastest growing megacaps. Nvidia is also at the intersection of other booming trends from autonomous driving to virtual reality.
Image source: Getty Images.
Revenue more than doubled for five consecutive fiscal quarters, decelerating to 94% and then 78% in its last reports. Most companies would love to be delivering year-over-year top-line gains of 78%, but tailwinds are bumping up against headwinds here. Against the backdrop of booming demand, Nvidia took an initial stumble in January after China's DeepSeek announced that it was able to crank out AI results with seemingly outdated Nvidia chips. The pullback has intensified on the impact of what the tariff-fueled trade war will do to global demand for Nvidia's industry-leading solutions.
There is good news for opportunistic investors. Nvidia entered this volatile week trading for just 21 times this year's earnings and 16 times next year's target. It's a compelling value proposition for a company growing as quickly as Nvidia. Sure, the semiconductor industry itself is historically cyclical. However, there should still be a couple of more years of robust double-digit growth as long as the tailwinds don't overcome the headwinds.
2. Baidu
Baidu stock has fallen 31% from its October high-water mark, but the math grows more unkind if you scroll back to its all-time high. China's leading search engine operator has plummeted 78% since peaking four years ago. Like Nvidia, Baidu is also at the leading edge of buzzy industries. More than just a search engine, Baidu is a player in autonomous driving, machine learning, robotics, computer vision, and naturally AI as well.
Unfortunately for Baidu, it hasn't been able to deliver the kind of growth that one would expect for a company that's in the right place at the right time. Baidu has posted just one year of double-digit revenue growth in the last six years. Making matters worse, it has seen its top line decline slightly in half of those six years.
Wood is getting a good price by adding to Baidu here as she waits for a potential return to historical growth levels. Baidu is trading for just 8 times this year's profit target and only 7 times what analysts see the Chinese dot-com laggard producing on the bottom line come 2026. The multiples get even lower if you lean on enterprise value as the numerator, as its $27.4 billion market cap contracts to just $23.5 billion in enterprise value given Baidu's healthy net cash position.
3. Iridium Communications
Let's close out with a stock that is out of this world, at least thematically. Iridium is a data and voice satellite communications specialist, but its stock has also fallen down to Earth. The shares have fallen 35% from its October highs. Like Baidu, Iridium has failed to transform its niche leadership into a moneymaker. It has also posted just one year of double-digit revenue growth in the last six years. On the bright side, the other five years of single-digit percentage moves have all been positive.
Iridium has seen its audience of billable subscribers increase 8% to 2.5 million over the past year. It's also turned profitable in the last three years, and it even began shelling out a quarterly dividend two years ago. The yield has improved to 2.4% with the stock's recent pullback. Analysts see continued single-digit revenue growth for Iridium despite some competitive challenges. It trades for less than 18 times next year's earnings forecast -- making it even pricier than Nvidia on a bottom-line multiple basis -- but it's still a compelling consideration in Wood's eyes after the recent pullback.
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