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 (NVDA -0.41%), DoorDash (DASH -1.06%), and Nextdoor Holdings (KIND 4.52%) on Monday. Let's take a closer look at Wood's latest purchases.
1. Nvidia
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.
Image source: Getty Images.
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.
2. DoorDash
If you figured economic concerns would find folks spending less on restaurant food -- and much less paying a third-party app a premium to have it delivered -- think again. DoorDash saw its revenue rise 21% in the first quarter. Total orders have risen 18% over the past year. Profitability was a concern when DoorDash went public five years ago, but it has now been in the black for the last three quarters.
DoorDash is making its own luck. It continues to broaden its offerings beyond restaurant takeout. It's also made fleet improvements to speed up deliveries and broaden its reach. On that front, it acquired European delivery specialist Deliveroo as well as restaurant reservations booker SevenRooms earlier this year. I guess it's not just DoorDash customers who are hungry these days.
3. Nextdoor Holdings
Most investors probably don't even know that hyperlocal online forum Nextdoor that connects 46 million weekly active users is public. It's been a bit of a dud since it went public as a special purpose acquisition company (SPAC) four years ago. The shares have plummeted roughly 80% in that time.
Revenue growth has slowed considerably since its market debut, failing to top 13% growth in each of the last three years. The platform operator has also yet to turn profitable. However, it is flush with $418 million in cash -- accounting for about two-thirds of its current market cap -- with no long-term debt. A value play isn't typical for Wood as an aggressive growth investor, but she's been building her position up in Nextdoor aggressively over the past two months. Does she think juicy neighborhood gossip is on the rise? She obviously thinks that the stock itself will eventually be on the rise.
