Money manager Cathie Wood, the CEO of ARK Investment Management, has raised concerns about a potential market correction in the semiconductor sector.
What Happened: In an interview with Bloomberg Businessweek Radio on Friday, Wood pointed out that the semiconductor industry might face a market correction due to improvements in the supply chain.
"The one place we could see a correction — and it's just a correction, we're not calling it the end of this at all — is in the chip space," she said.
Despite being among the top-performing stocks this year, Wood highlighted that the semiconductor stocks, including Nvidia Corporation NVDA, could be at risk.
Nvidia’s shares have surged by approximately 80% this year, following a 240% increase in 2023. Wood, who initially invested in Nvidia in 2014, mostly divested her position before the company’s rally last year.
Wood also noted that the shortages in GPUs, which escalated last year with the rise of artificial intelligence tools like OpenAI’s ChatGPT, are now starting to ease. Lead times for GPUs, particularly for Nvidia, have decreased from eight to 11 months to about three to four months.
"So that is suggesting that there was probably a lot of double and triple ordering as the word ‘shortage' was making the rounds, and then those inventories will have to be digested," she added.
Why It Matters: Despite expressing concerns about Nvidia’s stretched valuation and unloading its Nvidia shares, ARK earlier this week added $4 million worth of stock in the chipmaker’s supplier, Taiwan Semiconductor.
Earlier this year, ARK Investment Management also made headlines when it trimmed its positions in two major chip stocks, Nvidia Corp. and Advanced Micro Devices, Inc. AMD, ahead of its Q4 results.
Jeremy Siegel, a renowned finance professor from the University of Pennsylvania's Wharton School, previously raised a red flag over the soaring valuations of technology stocks, particularly NVIDIA. Siegel, also known as the "Wizard of Wharton," cautioned that the current enthusiasm for tech stocks, including Nvidia, might be a sign of an impending bubble.
Last month, when Nvidia added $273 billion in value in a single day and made history as it was the most ever recorded, Wood said, “We're just pivoting to another set of plays that most people have not discovered yet. Much like they did not understand that Nvidia was an AI play, really, until very recently.”
Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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