Benzinga - by Shanthi Rexaline, Benzinga Editor.
Semiconductor stocks have experienced a resurgence in recent sessions, rebounding from a slow start to the year as investors anticipate robust quarterly results. In a surprising move, money manager Cathie Wood‘s Ark Investment Management trimmed positions in two major chip stocks on Monday.
What Happened:
The Ark Next Generation Internet ETF (NYSE:ARKW) reduced its holdings by 4,012 shares of Nvidia Corp. (NASDAQ:NVDA) and 24,458 shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) on Monday. The sales likely generated approximately $2.39 million and $4.11 million, respectively.
Nvidia closed Monday’s session up 0.27% at $596.54, while AMD experienced a 3.47% pullback, closing at $168.18, according to Benzinga Pro data.
Ark also sold AMD shares last week, offloading a total of 69,752 shares valued at $11.77 million over two sessions.
Why It’s Important:
Sell-side analysts have shown increasing optimism toward Nvidia and AMD, along with other AI-focused chip stocks. KeyBanc Capital Market analyst John Vinh noted on Monday that while semiconductor companies may face weakness in end-market demand during the fourth quarter, AI-focused chipmakers are expected to outperform due to solid AI server demand.
Vinh maintains Overweight ratings on both stocks, with a $740 price target for Nvidia and $195 for AMD. These targets suggest upside potentials of 24% and 16%, respectively.
As Nvidia stock rebounded early in 2023 from its weakness in 2022, Cathie Wood hinted that the chipmaker’s valuation might have become stretched. Ark has been reducing its Nvidia stake amid the rally, indicating a preference for undervalued AI stocks with robust growth potential.
One plausible explanation for Ark’s decision to trim AMD and Nvidia holdings could be to secure profits following their recent uptrend. Ark may redirect these funds into its spot Bitcoin exchange-traded fund (ETF), the ARK 21Shares Bitcoin ETF (ARKB), recently approved for trading.
AMD reached a record closing high of $174.23 on Friday before a pullback in Monday’s session, while Nvidia continues to break records, closing Monday at another high of $596.54.
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