Cathie Wood's growth investing style could be back in fashion. The co-founder, CEO, and investment manager of the Ark Invest family of exchange-traded funds is getting into good groove in recent weeks. Her largest fund is up 17% since bottoming out last month.
Ark publishes its trades daily, so we know what she's buying these days. Three of her more interesting purchases on Tuesday are Advanced Micro Devices(NASDAQ: AMD), DraftKings(NASDAQ: DKNG), and Tempus AI(NASDAQ: TEM). Let's take a closer look.
1. Advanced Micro Devices
What if the market threw an artificial intelligence (AI) party and one of the largest chip companies in the planet didn't get invited? Shares of Advanced Micro Devices are trading lower in 2024.
AMD is trying to flex some muscle in the space. On Tuesday it unveiled Advancing AI 2024, an event where it will get to show off its next-gen accelerators, server processors, and updates that are fortifying its ecosystem of AI solutions. The event will take place on Oct. 10. It may not be the reason Wood added to her stake in AMD, but it obviously didn't hurt.
Image source: Getty Images.
It's true that AMD hasn't earned its racing stripes in this new age of AI, even though it expects to generate $4 billion to $4.5 billion in revenue this year from AI chips. Total revenue declined 4% last year, with an even bigger hit on the other end of the income statement. AMD has returned to growth since last summer, but it's been single-digit top-line growth forfour consecutive quarters.
It's not too late for AMD. Revenue for its data center segment soared 115% to $2.8 billion in its latest quarter, accounting for almost half of its overall business in the period. It was strong enough to overcome declines of 49%, 59%, and 41% for AMD's client, gaming and embedded segments.
AMD isn't cheap, trading for more than 40 times this year's projected earnings. However, it should return to double-digit revenue growth starting in the current quarter. Analysts see revenue growth accelerating with a 28% jump next year. AMD will be volatile and cyclical, but Wood could be on to something here.
2. DraftKings
The new NFL season kicked off last week. The NBA tips off next month. It's a great time for sports fans. It's a better time to be a fast-growing online sportsbook trying to cash in on a fan's overconfidence.
I bet you've heard of DraftKings. Some 8.4 million unique users have placed a wager on the platform over the past year, a 35% increase from where the same metric was a year ago. Revenue growth slowed to 26% in its latest quarter, half the 53% year-over-year growth rate it delivered just three months earlier. This is its weakest top-line spurt in four years.
Revenue came in weaker than expected, but it did surprise analysts with a profit. Wall Street is starting to pay attention. Two firms have already upgraded the stock this young week, with a third firm tapping the stock as a top pick in the online sector.
3. Tempus AI
Many investors steer clear of market debutantes, but not Wood. She may have found a winner in Tempus AI, a provider of practical applications for the healthcare industry. Tempus hit the market at $37 three months ago. It's been a wild ride. The shares more than doubled from its IPO price by late August, but it's given most of those gains back.
Tempus is generating real revenue, rising 25% in its first quarterly report as a public company. It's another story on the bottom line, where analysts don't see Tempus turning a profit until 2027 at the earliest. Tempus will be volatile, and it also has a sizable strategic investment in a biotech that is even more volatile. I don't know if Wood has an account with DraftKings, but she doesn't mind betting on risky stocks like Tempus AI.
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Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices. The Motley Fool has a disclosure policy.
