Key Points
Cathie Wood's Ark Invest recently sold shares of AMD and purchased shares of Nvidia.
AMD's valuation prices in more growth, while Nvidia trades at a forward P/E that looks low compared to its business momentum.
Nvidia is making moves in the CPU space that could curb AMD's growth.
Cathie Wood founded Ark Invest in 2014, and the CEO has made a name for herself as an investor to watch when it comes to growth stocks. Ark provides exchange-traded funds (ETFs) that are heavily built around innovative new technologies with explosive growth potential, and the company takes a very active approach to portfolio management. In other words, Ark's investment teams tend to buy and sell stocks frequently for the funds that they manage.
Notably, Ark offers investors a huge degree of transparency and regularly catalogs all of its trades even when it is not required to do so for regulatory purposes. Due to Wood's status as a high-profile growth investor and the high visibility of her company's trading activities, the investment firm's buying and selling moves tend to attract a significant amount of attention -- and Ark just sold Advanced Micro Devices and bought Nvidia (NASDAQ: NVDA).
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Ark Invest CEO Cathie Wood. Image source: Getty Images.
Cathie Wood is ramping up bets on Nvidia
At the end of September, Ark made a notable move for its flagship Ark Innovation ETF. It sold shares of AMD valued at roughly $111.1 million and effectively used the proceeds from the sale to buy $81 million worth of Nvidia stock. The transactions seem to send a clear message: Ark believed that Nvidia was the more attractively valued of the two artificial intelligence (AI) semiconductor stocks.
NVDA PE Ratio (Forward) data by YCharts
As of this writing, Nvidia is trading at roughly 22 times this year's expected earnings. Meanwhile, AMD is valued at roughly 63.5 times expected forward profits. The valuation disparity reflects expectations that AMD will be able to grow earnings significantly faster going forward.
While Nvidia continues to dominate the market for advanced graphics processing units (GPUs) used for AI computing, investors have been betting that AMD will score market share wins in the GPU space and take advantage of huge opportunities as the central processing units (CPUs) become increasingly integrated in the broader artificial intelligence compute stack. CPUs are a category that AMD currently leads Nvidia in, and growing demand for CPUs for AI inference applications could be a powerful demand catalyst for the company.
On the other hand, Nvidia is making a big play for the future of the CPU space -- and its moves in the category could help explain why Wood's company is buying the AI hardware leader's stock while also reducing its exposure to AMD. Nvidia's new Vera Rubin server platform combines the company's next-generation GPUs with its next CPU offerings, and the tech pairing could threaten AMD's growth opportunities.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.