Cathie Wood is on a roll. The co-founder, CEO, and chief investment officer of Ark Invest is at her best when growth stocks are rallying, and that's the case right now. Her largest exchange-traded fund is up 42% over the past three months and a whopping 79% over the past year.
Ark bought shares of Nvidia (NVDA -0.84%), Advanced Micro Devices (AMD -0.15%), and Deere (DE -0.95%) on Monday, expanding her existing stakes. All three companies report earnings later this month. Let's take a closer look.
1. Nvidia
It's not surprising to see Wood adding to the world's most valuable company by market cap. Artificial intelligence (AI) is a booming theme for aggressive growth investors. Nvidia is living proof that sometimes the best bet is the most obvious one. Its early leadership in graphics processing units (GPUs) has translated into putting out the most popular chips for data centers cranking out generative AI.
Nvidia is a 15-bagger over the past five years, and the shares have more than doubled since bottoming out three months ago. The stock hit another all-time high last week. It's the first -- but now not the only -- company to top $4 trillion in market cap. Nvidia has a crucial financial report coming before the end of the the month.
Image source: Getty Images.
Expectations are high heading into the fiscal second-quarter results that will be released on Aug. 27. Analysts see Nvidia's revenue soaring 52% to $45.7 billion. They are targeting $1 a share in earnings per share, a 47% improvement. It's not ideal to see the top line outpacing the bottom line, but Nvidia is navigating the current trade war constraints within the backdrop of booming demand for its wares. Nvidia is now starting to stockpile H20 chips, anticipating an ease of export restrictions into China.
Nvidia is now trading for 31 times next year's projected earnings. It's a high multiple, but justified if Nvidia can keep its heady growth rate going. It's even more remarkable that you could've bought the same stock three months ago when it had a forward earnings multiple in the teens. Analysts are scrambling to keep up.
Morgan Stanley boosted its target price on Nvidia from $170 to $200 last week. You can expect other Wall Street pros to follow suit in the coming weeks ahead of Nvidia's financial report. The stock's rapid ascent has many bulls with price targets below where their shares are now, and that included Morgan Stanley perched at $170 with the stock now roughly $10 higher.
2. Advanced Micro Devices
Timing is everything. Ark boosted its position in AMD on Monday. The maker of microprocessors and GPUs reports fresh financials after the market close on Tuesday. One might assume that Wood believes that AMD will crank out well-received financial results, even though it wouldn't be a surprise to see her step up again as a buyer on Wednesday if the stock sells off on the news.
AMD hasn't performed as well as Nvidia over the past few years. The shares have merely doubled over the past five years. It's rallying now.
It heads into Tuesday afternoon's critical update with momentum. Revenue is accelerating sharply in each of the last four quarters, fueled by a surge in its data center business.
- Q1 2024: 2%
- Q2 2024: 9%
- Q3 2024: 18%
- Q4 2024: 24%
- Q1 2025: 36%
This week's update will be interesting. Expectations aren't exactly elevated. Analysts are targeting a 27% jump on the top line, ending the four-quarter streak of accelerating growth. The market is also bracing for a 30% decline on the bottom line, as trade restrictions temporarily slow its shipments into China.
Wood is still a believer here. Ark's stake in AMD is actually more than double its Nvidia position across all of its ETFs. There's a lot riding on this week's report, and Wood is putting more chips on the table.
3. Deere
In a portfolio loaded with tech-savvy disruptors, it may seem odd to find a 188-year-old company that makes farm tractors and construction site backhoes. However, Deere is a niche leader in tech and automation. It was even all over artificial intelligence before AI became popular. Just last week it launched a new digital self-repair tool.
Deere is a global leader in agricultural, commercial, and construction equipment. This is a lumpy business, and revenue is declining for the second fiscal year in a row. Next week's fiscal third quarter isn't expected to be a winner. Analysts see a 27% slide in earnings on a 9% decline in revenue. However, Deere has managed to crank out double-digit percentage beats on the bottom line in three of its last four reports. The current tariff war and iffy global economy will sting in the near term, but infrastructure and agriculture needs aren't going away. Deere will be there, just as it has for nearly two centuries.
