Wall Street has been fretting over a potential AI bubble burst and whether huge AI spending by companies would ever pay off. But Cathie Wood is doubling down. Ark recently bought 80,000 shares of Nvidia (NASDAQ:NVDA) across five funds. Ark also decreased its stake in Roblox (NYSE: RBLX).
Nvidia: Growth Outpaces The Stock Price
Nvidia bears say AI infrastructure spending is running too hot and will eventually slow. That will directly impact Nvidia as its GPU sales will slow down.
Bulls say that fear misses the point. Nvidia’s data center networking revenue jumped nearly 200% year over year last quarter. That shows Nvidia is capturing value beyond the GPU itself, through racks, interconnects, and software. Roughly half of data center revenue now comes from AI cloud, industrial, enterprise, and sovereign customers rather than the handful of hyperscalers everyone watches closely. Combined, Meta, Amazon, Microsoft, and Alphabet plan to spend up to $725 billion this year, up 77% year over year, and Nvidia is positioned to capture 35% to 40% of that.
The Bear Case: A Balance Sheet Under Strain
The bear case is about the balance sheet, not the growth rate. Nvidia’s inventories more than doubled year over year, and prepaid expenses grew over 40%, as the company locks up more supply commitments to protect delivery timelines. Three customers make up 30%, 18%, and 16% of Nvidia’s accounts receivable, so any shift by a major buyer toward custom chips would hit hard. Non-marketable securities, mostly stakes in AI startups and infrastructure partners, now make up 17% of Nvidia’s total assets.
Cathie Wood of ARK Investment Management
Why Is Cathie Wood Selling Roblox (NYSE: RBLX)?
Roblox: Growth Slowed, Guidance Disappeared
Roblox’s second-quarter bookings landed at the low end of guidance, up just 8% year over year, missing Wall Street’s estimate. Management pulled its full-year outlook entirely. The stock fell sharply on the news and is down more than 50% year to date. Monetization per hour slipped as Roblox shifted its algorithm toward long-term retention over short-term spending, on top of new age-verification rules.
Third-quarter bookings guidance points to a decline of 14% to 18% year over year. That’s a sharp reversal from a company that was guiding toward 8% to 12% annual bookings growth just months earlier.
What’s Still Working For Roblox
Bulls point to what hasn’t broken. Content outside Roblox’s top ten experiences grew hours by 25% year over year and Robux spending by more than 20%, while the top ten experiences now make up just 20% of total hours, down from 30% three years ago. That’s a sign the platform isn’t leaning on a handful of hits. AI tool adoption among top creators rose about 15 percentage points quarter over quarter, and Roblox’s new prompt-based game builder could pull in a wave of new creators the way easy video tools did for platforms like YouTube. At current levels, the stock trades near three times trailing bookings, a valuation bulls argue no longer requires smooth growth to work.
While we acknowledge the risk and potential of RBLX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than RBLX and that has 10,000% upside potential, check out our report about the cheapest AI stock.
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