Cathie Wood's aggressive growth style of investing may have fallen flat earlier this year, but the co-founder, CEO, and ace stock picker at Ark Invest has been on a roll lately. Ark's most popular exchange-traded fund has soared 25% over the past three months and 36% over the past six months.
Wood publishes Ark's transactions at the end of every trading day. She closed out last week by adding to her existing stakes in Advanced Micro Devices(NASDAQ: AMD), Iridium(NASDAQ: IRDM), and Tempus AI(NASDAQ: TEM) on Friday. All three stocks are trading lower in 2024. Let's take a closer look.
1. Advanced Micro Devices
This year hasn't played out well for Advanced Micro Devices. The stock heads into 2025 trading 15% lower in 2024 with two trading days left. The computing semiconductor specialist hit a fresh 52-week low earlier this month, even as the general market is bursting skyward.
Despite generating accelerating revenue growth and a heady boom in its artificial intelligence (AI) chips business, AMD is stumbling on its way to this year's finish line. Last month, AMD laid off 4% of its global workforce, and its chief accounting officer resigned. This month hasn't fared better. At least five analysts have downgraded AMD, slashed their price targets, or issued cautionary short-term outlooks for AMD. The stock appears to be falling out of favor, but Wood made AMD the largest of her five purchases on Friday.
Revenue for AMD's data center segment skyrocketed 122% in its latest quarter, accounting for more than half of the $6.8 billion it recorded on the top line for the third quarter. This is the business that is making AMD exciting again as an AI play, but not everyone is convinced the good times will last. One of the firms blinking amber this month on AMD is Wolfe Research. Its checks suggest AMD's AI business will only amount to $7 billion for all of next year, shy of the roughly $10 billion his peers are modeling.
Image source: Getty Images.
AMD can't afford to see its buoyant AI chips business tap the brake. Even with its data center segment more than doubling and its client business bouncing back, revenue rose just 18% in its latest quarter. The rest of AMD's business is spiraling. The third quarter was still AMD's healthiest year-over-year gain in two years.
The guidance calls for a 22% increase in the current quarter that ends later this week. Analysts are modeling a 27% jump for 2025, but that forecast can get chipped away if Wolfe Research is right about softening demand. It has already softened from a 28% consensus a month ago.
Profit targets have been falling even faster, but don't count those Chicken Littles before they hatch. AMD has topped analyst earnings estimates for three consecutive quarters. The shares are now trading at less than 25 times forward earnings. It's not a cheap multiple, but it's a lot lower than the leading AI plays investors have been chasing this year.
2. Iridium
Another stock heading lower this year is Iridium. The chemical element that bears its name may be corrosion-resistant, but the same can't be said about the data and voice satellite communications specialist as an investment in 2024. Iridium stock has fallen 28% this year.
Iridium's growth has been sluggish, clocking in with single-digit revenue growth in five of the last six years. Its latest update calls for service revenue -- accounting for the lion's share of its business -- to climb 5% for all of 2024. Wall Street pros see that pace decelerating in 2025. Unlike AMD, Iridium has fallen short of market earnings estimates in two of this year's first three quarters.
The good news is that it's reaching nearly 2.5 million total billable subscribers, an 11% jump over the past year. It's also making money and returning a lot of it to shareholders. It has put more than $1 billion into share buybacks and dividends since 2021. Wood tends to fancy faster-growing enterprises, but Iridium's specialized services and its strength in both government and commercial markets make it a logical play in Ark's investing universe of disruptors.
3. Tempus AI
Another stock that's fallen sharply lately is Tempus AI. Wood bought the provider of practical applications for the healthcare industry when it went public at $37 in June. It seemed like a great call when the shares more than doubled at their peak last month. However, the shares have given back all those gains -- and then some -- since trading near $80.
Tempus AI is now a broken initial public offering. The 56% plunge since peaking in November is rough. Shares of the AI healthcare play started to weaken last month after hinting that 2025 would be softer than expected, but has the pessimism been overdone? Wood seems to think so, having added to her position on nine different trading days in December. Tempus AI may be far from turning profitable, but its growing line of diagnostic tools should excite risk-tolerant investors, which Wood happens to be.
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Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices. The Motley Fool has a disclosure policy.
