Cathie Wood lowered Nvidia’s five-year return outlook to 25%, citing rising competition.
- Cathie Wood highlighted Elon Musk, OpenAI, and Anthropic as major forces other than Nvidia driving the industry’s growth.
- Wood expects Nvidia’s GPU market share to fall from 83% to 38% as competitors emerge.
- Wood also cut ARK’s five-year annualized return outlook from above 50% to 25%.
Cathie Wood, CEO of ARK Invest, expects Nvidia’s (NVDA) five-year compound annual growth rate (CAGR) to fall to 25% from previous estimates in the 50% range, citing rising competition from Elon Musk’s Tesla (TSLA), Broadcom (AVGO) and other chipmakers. However, she believes growing AI demand from companies like OpenAI and Anthropic could continue supporting Nvidia’s growth.
Nvidia stock traded 1.9% lower overnight Thursday. The stock is headed for its worst weekly performance in over a year.
Nvidia Leadership Shake-Up Puts Spotlight On New AI Leaders
In an interview with Yahoo Finance, Wood praised former Nvidia CEO Jensen Huang for recognizing the transformative potential of AI decades before it became a mainstream investment theme.“Well, he obviously is a force and a power behind NVIDIA. I have been watching him since Nvidia went public. He had this vision way back then in the late 90s”.
On Thursday, Nvidia named its CFO, Colette Kress, interim CEO after the ouster of Jensen Huang following a relationship scandal and federal investigations into unauthorized chip shipments to China.
However, she pointed to Elon Musk as another influential figure shaping the industry’s direction. Musk has discussed building computing infrastructure in space through Tesla’s Terafab initiative, offering hope as the industry searches for alternatives while data centers on Earth face growing constraints.
“You’ve got powerful forces like Elon Musk, who is also a visionary and understands where AI is going.”
ARK Invest’s Nvidia Market Share And Returns Expectations
Wood explained that ARK had previously expected Nvidia’s share of the graphics processing unit (GPU) market to decline from about 83% to 49%. Potential competitors include Tesla’s TerraFab initiative, Broadcom, and Cerebras Systems (CBRS).
Wood said the firm’s earlier estimates indicated annualized returns in the 50% range over five years.
“If we drop that to 38%, our compound annual rate of return would drop from in the 50s somewhere to 25% over the next five years. We have to get over the shock.”
Despite the possibility of losing market share, Wood does not believe Nvidia’s growth story depends exclusively on maintaining its current dominance. “It is going to be competition like Tesla, Terafab, but it is also going to be these companies who have become very reliant on Nvidia pushing the envelope, like Anthropic and OpenAI,” said Wood.
NVDA Stock: Retail View
On Stocktwits, retail sentiment around the stock remained ‘extremely bullish’. The stock recorded a 593% increase in message volume over the past week, with a 1.2% gain in watchers.
NVDA stock has declined over 10% year-to-date.
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