Cathie Wood, the head of Ark Investment Management, has once again demonstrated her investment strategy of capitalizing on stock price dips following earnings announcements. This approach was evident in her recent move with Advanced Micro Devices (AMD).
On Oct. 30, Ark Funds took advantage of a market reaction to AMD’s third-quarter earnings report by purchasing 111,080 shares of AMD, a move that valued at approximately $15.7 million based on the stock’s closing price on November 2.
AMD’s earnings for the third quarter were somewhat of a mixed bag. The company managed to meet Wall Street’s expectations with an adjusted earnings per share of 92 cents, and it slightly outperformed on revenue, reporting $6.82 billion against the consensus estimate of $6.71 billion. However, the stock took a hit, falling over 10% in response to what was perceived as a disappointing fourth-quarter revenue guidance. AMD forecasted sales for the next quarter to be around $7.5 billion, which fell just shy of the expected $7.55 billion.
Despite this immediate negative market reaction, AMD’s year has not been without its highlights. The company has positioned itself as a formidable competitor in the AI chip market, especially with the unveiling of its MI235X AI chip. CEO Lisa Su has expressed optimism about the company’s direction, particularly noting the strong interest in the MI325X with production shipments anticipated to commence in the current quarter. This development, coupled with an upward revision of its AI chip sales forecast to $5 billion, signals AMD’s strategic focus on high-growth areas.
The financial performance in specific segments showed varied results. AMD’s client segment, which includes PC sales, saw a significant 23% increase to $1.9 billion, driven by the demand for high-end laptops with AMD chips tailored for AI applications. Conversely, the gaming division experienced a sharp decline, with sales dropping by 68% due to reduced demand for custom console chips.
In the broader context, AMD is positioning itself as Nvidia‘s primary competitor in the AI chip sector, with expectations of sustained growth in data center, client, and embedded businesses.
This growth is anticipated to be fueled by the increasing demand for computational power, as noted by Lisa Su in her statement, “Looking forward, we see significant growth opportunities across our data center, client, and embedded businesses driven by the insatiable demand for more compute.”
Despite these promising developments, AMD’s stock has seen a 3.7% decrease year-to-date, closing at $141.93 on November 1. Although it’s not among the top 10 holdings in Ark’s flagship ETF, ARKK, as of the same date, Cathie Wood’s recent purchase reflects a strategic bet on AMD’s future in the AI and computing space, leveraging the company’s potential to ride the wave of increasing AI adoption by major tech players like Amazon (AMZN).
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