Cathie Wood, the founder of ARK Invest, remains confident in her firm's AI investments despite scaling back on Nvidia shares prior to their significant rise last year. Wood initially invested in Nvidia in 2014 when the stock was approximately $4 per share. The flagship ARK Innovation ETF held the stock until it surged to around $400 before selling off most of the position just before Nvidia's dramatic rally last year. Wood explained that the decision to reduce Nvidia holdings was based on the belief that Nvidia's success would benefit other companies. Despite Nvidia's ongoing prominence, Wood highlighted that the semiconductor industry is experiencing a pause as companies reassess their AI strategies. Wood reaffirmed her strong stance on autonomous driving as the 'biggest AI project on earth' and increased Ark's Tesla position in the first quarter. Ark's 2023 analysis projects Tesla's share price to reach $2,000 by 2027. The Ark Venture Fund recently disclosed stakes in [f29a0264].
Ken Laudan of Buffalo Funds, who manages the Buffalo Large Cap Fund, has changed his opinion about how long it will take for 'AI adopters' to make the technology useful. Laudan estimated that 'hyperscalers' investing heavily in AI equipment, such as Meta Platforms Inc., eventually would need to generate an annualized $300 billion in annual revenue 'just to be gross-margin neutral to their existing cloud-hosting business.' Laudan asked: 'When will hyperscalers - which represent 53% of Nvidia's revenues - begin to base GPU purchases on end-user demand, rather than buying them on anticipated demand?' Laudan said investors need to see 'hyperscalers dramatically shift' so the gap between AI infrastructure spending spend and AI adopter revenue begins to close 'dramatically.' The Buffalo Large Cap Fund tends to hold about 70 stocks. Laudan said he was 'trimming where I need to in the AI ecosystem, staying overweight in industrials and healthcare (relative to the Russell 1000 Growth Index), and looking at some of the beaten-up large-cap software names.' Laudan still likes Eli Lilly & Co. within healthcare. Microsoft Corp. was the largest holding of the Buffalo Large Cap Fund as of March 31. Laudan appreciates 'industrial compounders,' such as GE Aerospace, Xylem Inc., and Westinghouse Air Brake Technologies Corp. Within healthcare, Laudan still likes Eli Lilly & Co., Abbott Laboratories, DexCom Inc., AstraZeneca PLC, and Merck & Co. [b85d71a2].
Wood predicts significant interest rate cuts in 2024, driven by economic recessions and rate reductions in several countries [f29a0264].