Cathie Wood Just Sold AMD Stock and Bought This AI Chip Stock Instead

Cathie Wood, the CEO of Ark Invest, recently made a notable shift in her investment strategy. The CEO sold AMD shares valued at approximately $111.1 million and invested the proceeds into Nvidia stock, adding $81 million worth of the latter to her portfolio. This move indicates that Ark Invest believes Nvidia to be the more attractive investment compared to AMD, a company which Wood founded.

Nvidia's valuation stands at around 22 times this year's expected earnings, while AMD is valued at roughly 63.5 times expected forward profits. This significant valuation gap suggests that investors expect AMD's earnings to grow at a faster pace in the future. Nvidia already dominates the market for advanced graphics processing units (GPUs) used in AI computing, and investors are betting that AMD could gain market share in this space and capitalize on the increasing integration of central processing units (CPUs) in the broader AI compute stack.

AMD currently leads Nvidia in the CPU category, which Wood's company sees as a potential growth opportunity. However, Nvidia is aggressively pushing into the CPU space with its Vera Rubin server platform, which combines its next-generation GPUs with CPU offerings. This development could pose a threat to AMD's growth prospects. Thus, it appears that Wood's company is capitalizing on Nvidia's position in the CPU market while reducing its exposure to AMD.