At its latest meeting, the Federal Reserve decided against lowering interest rates as some have initially expected. In addition to this decision, the Fed suggested that further cuts may not materialize until late in the year. Traditionally, high interest rates weigh on share prices thanks to higher borrowing costs for corporations and discounting of valuations. However, many observers note that the AI sector possesses strong innate demand drivers that could sustain robust growth despite monetary policy shifts, and one of those people is Ark Invest CEO Cathie Wood, who recently made some notable trades right after she bought $2.2 worth of PLTR stock
According to reports, Wood augmented positions in prominent AI-focused organizations like Palantir Technologies (NASDAQ: PLTR) and AMD (NASDAQ: AMD). But these trades are nowhere near as interesting as her third trade, where she acquired BYD (OTCMKTS: BYDDF) shares, despite being one of Tesla’s (NASDAQ: TSLA) most prominent supporters.
Cathie Wood’s PLTR Stock Bet
A few days ago, Ark Invest’s chief futurist, Brett Winton, was a guest on the Point Forward podcast, where he said that his firm thinks that the AI software market will be worth $13 trillion by 2030, underscoring the sector’s lucrative long-term prospects. This forecast might be considered too ambitious by some, but it doesn’t take away from the fact that demand for AI software is very strong, and explains why Cathie Wood is currently betting on PLTR Stock.
Over recent weeks, Wood went on a Palantir buying spree, spending more than $2.2 billion on shares in just one day. Most recently, Ark acquired approximately 45,453 additional shares of PLTR stock valued at around $1 million. Wood has maintained a longstanding investment in Palantir and envisions the data analytics firm potentially reaching a trillion-dollar valuation as it disrupts incumbents like Microsoft (NASDAQ: MSFT) in AI. Her optimism stems largely from Palantir’s perpetually expanding government contract base as well as its growing commercial operations.
In fact, revenue acceleration stemming from the commercial business is the major story for Palantir through 2024 and into 2025, with revenue growth poised to accelerate from 17% last year to 20% this year and nearly 21% in 2025. The sheer scale and timing of Wood’s latest Palantir purchases indicate her bullish expectations for the company’s upcoming May 6th earnings report. Consensus analyst estimates foresee PLTR stock reporting $625.33 million in quarterly revenues and $0.08 EPS, representing an increase from the previous quarter. Wood’s endorsements reflect her conviction that Palantir remains well-positioned to capitalize on the growing AI market.
Buying the Dip on AMD
Alongside augmenting her PLTR stock position, Cathie Wood bought AMD shares on the same day AMD reported Q1 financials, which modestly surpassed analyst estimates. Ark acquired 1,658 AMD shares valued at around $262,000 and while that’s not much compared to some of Wood’s other trades, it’s still a vote of confidence in AMD. The firm holds roughly 190,000 shares overall.
Despite the stock dipping because investors didn’t like the company’s Q2 guidance as its numbers were very close to Q1’s numbers, Wood appeared to view the weakness as a buying opportunity. AMD’s raised full-year outlook for $4 billion in 2024 MI300X AI chip sales versus a prior $3.5 billion forecast supports her bullishness. AMD’s chips are used extensively in data centers, gaming systems and other tech products, and the company has massive customers like Microsoft, so it wouldn’t be too surprising if Wood is seeing some potential upside here, especially with how bullish she is on AI.
Notably, Ark recently reduced holdings in Nvidia (NASDAQ: NVDA), suggesting that Wood sees AMD as relatively undervalued against its largest competitor. The investments align with her stated strategy of capitalizing on quality names experiencing short-term share price dislocations but poised for growth, especially considering AMD’s strategic importance to burgeoning AI applications.
Cathie Wood Buying a Tesla Rival
Recently, Ark Invest bought 18,748 shares of Chinese electric vehicle maker BYD, and the estimated value of this trade was approximately $1.02 million. Many thought this was a strange move from Wood, as she always made it clear that she preferred Tesla to the Chinese automakers.
As the current top EV seller in China, BYD provides exposure to the rapidly growing Chinese auto market, which is the biggest EV market in the world. This adds to Ark’s existing investments in EV players like Tesla, GM (NYSE: GM) and Rivian (NASDAQ: RIVN). Cathie Wood is a firm believer in Tesla’s long-term story, having previously said that Tesla is the biggest AI project on Earth, and that the company could grab 85% margins in Robotaxis and AI. Additionally, she has a $2,000 price target on Tesla stock. Therefore, buying BYD now doesn’t mean that she’s turning against Tesla.
Instead, this move likely reflects a broader strategy by Ark to capitalize on the surging electric vehicle market, even as Tesla faces some near-term headwinds. Wood believes that increased EV adoption will depend solely on EV prices going down, and while Tesla’s CEO, Elon Musk, said that Tesla plans to release affordable models, that still needs another year or two. Therefore, Wood might be buying BYD because of the Chinese company’s expansion plans and affordable models. Diversifying into other promising EV players like BYD also allows Ark to hedge against Tesla’s headwinds, and this BYD trade indicates that Ark recognizes the shifting dynamics in the EV space, while remaining confident in Tesla’s technological leadership overall.
Should Investors Follow Suit?
Rather than taking a defensive stance, Ark remains convicted in its disruptive innovation thesis during periods of turbulence. The firm maintains its focus on finding companies poised to benefit from technology transformations over a 5+ year time horizon, and these recent purchases from Cathie Wood proves that.
Ark shows discipline in sticking to its strategy rather than reacting to shifts in sentiment, and all the stocks that were recently picked by the firm, also including Tesla, have bright futures ahead, and that’s according to many analysts and experts. However, it remains to be seen whether Ark’s faith in AI and disruptive technologies will be rewarded as markets continue to experience turbulence thanks to the Fed’s decision, and only time will tell if doubling down on these stocks will eventually pay off.
As always, these investments carry substantial risk. For instance, being a Chinese company, BYD is considered a risky bet by some because of the tense U.S.-China relations, and on the other hand, many think AMD will struggle to gain market share against Nvidia. As for Palantir, many analysts think its valuation is still too rich. Therefore, investors should weigh risks and do their own due diligence before deciding to invest in any of these stocks.
Disclaimer
Please visit and read our disclaimer here.
