Rick Munarriz, The Motley Fool
5 min read
In This Article:
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Ark Invest bought shares of Nvidia, DoorDash, and Nextdoor on Monday.
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Nvidia stock has rebounded 67% since bottoming out two months ago, but it's probably still cheaper than you think relative to its growth rate.
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DoorDash and Nextdoor serve locals in different ways, and Cathie Wood sees upside in both companies on the opposite ends of momentum.
This is the ideal market environment for Cathie Wood. Stocks are rallying, and the founder, CEO, and chief investment officer of the Ark Invest family of exchange-traded funds (ETFs) is at her best when high-beta stocks are moving higher. She kicked off the week by purchasing four different stocks. I want to talk about three of them.
Wood added to existing stakes in Nvidia (NASDAQ: NVDA), DoorDash (NASDAQ: DASH), and Nextdoor Holdings (NYSE: KIND) on Monday. Let's take a closer look at Wood's latest purchases.
Every starting line tells a different story when it comes to the developer of graphics processing units and artificial intelligence (AI) chips. Thankfully for investors, nearly all of them end in success. Nvidia is a 15-bagger over the past five years, an 8-bagger over three years, and the shares have soared 67% since bottoming out two months ago.
Zoom out a bit from the last starting line and the returns start to look more mortal. Nvidia is up a pedestrian 10% over the past year with a mere 8% year-to-date advance. It's probably still a relative victory for the "Magnificent Seven" stock that's also the country's second most valuable publicly traded company by market cap.
Nvidia and other stocks riding high on the demand for AI chips and data center buildouts have had a couple of hits this year. The first blow came in January when Chinese AI tech start-up DeepSeek announced that it was generating quality generative AI with dated Nvidia chips for a lot less than Western rivals. That was followed by the trade war that restricted the sale of chips into China, resulting in billions in charges -- and rising -- for Nvidia.
This doesn't mean that Nvidia stock has been rising while its fundamentals are shifting to reverse. Revenue soared 69% to $44.1 billion in last month's quarterly update, better than the 65% jump that investors were expecting for the fiscal first quarter. A 73% surge in data center revenue -- now accounting for more than 88% of the period's top line -- led the way. Adjusted earnings increased 57% to $0.96 per share, also exceeding market forecasts.
Its outlook for the current quarter includes an $8 billion revenue hit on the recent export control limitations between the U.S. and China. However, analysts still would go on to jack up their profit targets for this fiscal year as well as fiscal 2027. Despite the stock's run over the last two months, Nvidia is trading for 34 times this year's projected earnings and 25 times next year's mark. This is a discount to its growth rate, even if the pace will inevitably slow in the coming quarters. Investors fortunate enough to grab some shares at the April low got in at what is now just 15 times next fiscal year's profit target.
