Cathie Wood has quietly been building a position in one of Nvidia’s chief rivals in the chip space.
Throughout her tenure as CEO and chief investment officer of Ark Invest, Cathie Wood earned her reputation as an investor by making big bets on emerging technology themes. Some of Ark’s largest positions are in high-growth, and arguably speculative names such as Tesla, Coinbase, Palantir Technologies, and Archer Aviation.
While the companies above are each disruptive in their own right and stand to benefit from the prospects of artificial intelligence (AI), none trade for a particularly bargain valuation. Instead, recent buying activity at Ark suggests Wood has her eyes on the AI chip market. Yet, interestingly, the savvy investor seems to be interested in an alternative opportunity to chip all-star Nvidia.
Between April 22 and May 1, Wood scooped up more than 212,000 shares of Advanced Micro Devices (AMD 1.14%). Let’s explore what may have influenced this decision and assess why now looks like a lucrative time for investors to follow Wood’s lead.
AMD is making serious moves in the data center space
When it comes to semiconductors and data centers, Nvidia is widely seen by investors and Wall Street analysts as the undeniable market leader. Considering that industry estimates suggest that Nvidia has amassed more than 90% of the market share, it’s hard to deny just how dominant the company is.
Nevertheless, AMD has quietly built a respectable data center business of its own, and I think that is playing a big role in Wood’s decision to buy the stock. In the table below, I’ve summarized AMD’s financial results for its data center segment over the last year.
| Category | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 |
|---|---|---|---|---|---|
| Data Center Revenue (in billions) | $2.3 | $2.8 | $3.5 | $3.8 | $3.7 |
| Data Center Operating Income (in millions) | $541 | $743 | $1,000 | $1,100 | $932 |
| Data Center Operating Income Margin | 22% | 25% | 28% | 29% | 24% |
Data source: Investor Relations.
On a quarter-to-quarter basis, this financial picture may look a tad lumpy. Keep in mind that the semiconductor industry is highly cyclical, so it’s to be expected that companies such as AMD will experience more pronounced levels of demand from time to time. The more important theme here is that AMD’s data center business is accelerating sales while widening its operating margins.
Image source: Getty Images.
The company’s growth acceleration is just beginning
Last year, Nvidia generated upwards of $115 billion in revenue just from the data center business. Given its size relative to AMD, you might think that Nvidia’s lead is insurmountable. However, the next few years are going to be quite interesting in the chip space.
Cloud hyperscalers Microsoft, Alphabet, and Amazon are all developing their own lines of in-house chips. Furthermore, social media and metaverse behemoth Meta Platforms is joining its “Magnificent Seven” peers by building its own chips, too. Each of these companies is believed to be major customers of Nvidia, and so the introduction of new chips to the semiconductor market could pose as a serious headwind to the company’s growth.
On the flip side, AMD is already working with Meta Platforms, Microsoft, and Oracle in the data center space — each of which is deploying AMD’s MI300X accelerators. To make things even more interesting, AMD already has a line of successor architectures, with the new MI350 GPU scheduled to make a splash later this year.
Is AMD stock a buy right now?
Year to date, shares of AMD have plummeted by some 37%. I think a big reason for the sell-off is that most growth investors are viewing the AI chip opportunity through a binary lens. In other words, you’re either all-in on Nvidia or you think AMD may surpass its rival.
I don’t personally see things this way. Despite the introduction of both direct and tangential competition, Nvidia will likely continue to be a critical player in the AI infrastructure space for the long run. However, this does not mean that investors should look the other way when it comes to AMD.
AMD may never become as large as Nvidia, and that is OK. Right now, AMD stock trades at a modest forward price-to-earnings (P/E) multiple of just 22.4. If the downward trend in AMD’s forward P/E suggests anything, it’s that investors aren’t overly optimistic about the company’s future.
AMD PE Ratio (Forward) data by YCharts
In my eyes, it’s not about AMD building a data center business of the same size or footprint as Nvidia. Rather, the bigger idea is whether or not AMD can scale its current GPU business and do so in a profitable way. If the financial profile above, combined with AMD’s notable customer wins, serves as any indication, I’m optimistic that the company’s new chipsets should experience strong demand and help fuel robust growth for AMD.
To me, Wood is making a smart decision to pounce on AMD stock at its current price point. I think investors with a long-term time horizon should consider adding AMD to their AI portfolio.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Alphabet, Amazon, Coinbase Global, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Coinbase Global, Meta Platforms, Microsoft, Nvidia, Oracle, Palantir Technologies, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
