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David Moadel

Sun, Sep 10, 2023, 7:00 AM 4 min read

A Famous Fund Manager Dumped NVDA Stock

Here’s something you might not expect. Ark Invest, which is run by founder and CEO Cathie Wood, has reportedly been dumping NVDA stock.

As you may recall, Wood and Ark Invest became famous on Wall Street for buying technology stocks with fast momentum and high valuations.

Now, believe it or not, Wood and Ark Invest object to Nvidia’s lofty valuation.

Wood reportedly posted on social media, “Now up ~80-fold, investors seem to think NVDA is the only AI play. It is not!”

Ark Funds reportedly declared that “the days of relying solely on mega-cap companies for tech innovation are waning and an era of AI-centric small-cap companies is emerging.”

In a similar vein, Tematica Research Chief Investment Officer Chris Versace claimed that, for Nvidia’s investors, “the easy money” has already “been made.”

Versace feels that Nvidia needs to “show a lot more progress on what they’re doing and really start to deliver on that guidance.”

Don’t Get Too Distracted by Nvidia’s Valuation

I understand the concerns surrounding Nvidia’s high valuation. But then, the company’s valuation was quite high two, three and four months ago. Folks who complained instead of buying NVDA stock ended up leaving a lot of money on the table.

And, anybody who short-sold the shares probably received a margin call. Personally, I find Versace’s “show-me” attitude perplexing. Nvidia didn’t just issue optimistic guidance without demonstrating robust growth first. I mean, you can’t argue with 101% year-over-year revenue growth.

I never thought I’d say this, but I’m starting to agree with Melius Research analyst Ben Reitzes’s suggestion that NVDA stock might actually be “cheap” compared to Nvidia’s peers.

According to Barron’s, Reitzes figured that Nvidia “trades at a price-to-earnings multiple of around 28 times its expected 2024 earnings,” which isn’t outlandishly high.

All calculations aside, Nvidia is an in-demand chipmaker for power-intensive AI applications.

Doubling the company’s quarterly revenue year-over-year is an impressive feat. So, Nvidia’s valuation, irrespective of whether it’s high or low, may be irrelevant for a long time to come.

Just Relax and Stick With NVDA Stock

Wood’s timing with stock purchases and sales hasn’t always been spot-on. Plus, Nvidia will always have its critics and worry warts. Nvidia will almost certainly achieve a $1.5 trillion market cap eventually.

The best strategy now is to just relax and hold a small share position in NVDA stock. Sure, I’ll admit, it’s possible that the “easy money” has already been made.

Or maybe there are still more gains to come this year. Either way, Nvidia’s revenue growth suggests that the skeptics and short-sellers will continue to be on the wrong side of the trade.

Therefore, you can feel free to ignore the doubters in 2023 and stay invested in Nvidia.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.