Cathie Wood Just Bet $46 Million on a Newly Public AI Chip Stock. Should You Follow Her?

ARK Investment Management came out swinging last week, scooping up shares of one of the year's most hyped artificial intelligence (AI) initial public offerings. According to its trading disclosures published Friday, Cathie Wood's firm bought 149,176 shares of newly public Cerebras Systems (NASDAQ: CBRS) for roughly $46.4 million through its ARK Innovation and ARK Next Generation Internet exchange-traded funds. That came on top of a smaller purchase the day before.

The buying followed one of the year's most closely watched Nasdaq debuts. After pricing its initial public offering (IPO) at $185 per share -- well above an initial range of $115 to $125 -- the wafer-scale chip company opened at $350 on May 14 and closed its first day at $311.07 -- a gain of 68%. Demand for the offering reportedly came in at more than 20 times the available supply, making it the largest U.S. tech IPO so far in 2026.

So, should retail investors follow Wood here and similarly buy shares of this hot AI company? After all, Cerebras' technology and customer wins are genuinely impressive. But once you look at the price tag investors are now being asked to pay, things start to look a little uncomfortable.

Image source: Getty Images.

A wafer-sized chip with hyperscaler interest

Cerebras isn't trying to build a slightly cheaper version of an Nvidia graphics processing unit (GPU). Its pitch is architectural. The Sunnyvale, California-based company's Wafer-Scale Engine 3 takes up an entire silicon wafer rather than being diced into smaller chips -- about 57 times larger than today's largest GPU. That single piece of silicon packs 4 trillion transistors, 900,000 AI cores, and 44 gigabytes of on-chip memory, which the company says can deliver AI inference up to 15 times faster than leading GPU-based systems.

The financial picture is improving quickly, too. Revenue rose 76% in 2025 to $510 million -- up from $290 million in 2024, according to the company's prospectus. Cerebras also swung to a net profit of $238 million after losing nearly $482 million the year before.

The customer roster has expanded as well. In January, Cerebras signed a multi-year compute agreement with OpenAI valued at more than $20 billion, under which OpenAI will deploy 750 megawatts of Cerebras compute capacity through 2028. OpenAI also extended a $1 billion working capital loan to help fund the buildout. Then, in March, Amazon signed a binding term sheet, making AWS the first hyperscaler to deploy Cerebras systems in its data centers, with the solution made available through Bedrock.

"OpenAI and Cerebras have agreed to co-design future models for future Cerebras hardware," wrote Cerebras CEO Andrew Feldman in the founders' letter included in the company's IPO prospectus.

It's a credible challenge to Nvidia's near-total dominance in AI accelerators -- and probably the best reason to take ARK's enthusiasm seriously.

A price tag built for perfection

But excitement about the technology doesn't justify what investors are now paying for the stock. As of this writing, shares trade near $300, putting the company's market capitalization north of $63 billion. That works out to more than 120 times trailing-12-month sales. And, using last year's earnings, the price-to-earnings ratio sits near 700.

For context, Nvidia trades at about 45 times earnings while generating more than $215 billion in trailing revenue and growing in excess of 60% year over year.

Then there's the customer concentration issue. Two UAE-affiliated entities -- the Mohamed bin Zayed University of Artificial Intelligence and G42 -- together accounted for about 86% of Cerebras' 2025 revenue, with MBZUAI alone responsible for 62%. And, going forward, OpenAI is expected to make up a substantial chunk of revenue itself. Concentration like that can be a tailwind when those customers are spending freely. But one paused contract, one budget shift, or one change in U.S. export rules could reshape the income statement in a hurry.

Investors should also note that Cerebras is increasingly operating as an AI cloud provider -- not just a chip vendor. Under the OpenAI agreement, Cerebras is building or leasing data centers, installing its own systems, and running them as a service. That model carries heavier capital requirements and execution risk than simply shipping hardware.

Cerebras -- the business -- may well be a long-term winner in AI infrastructure. But at a price near 125 times sales and 700 times earnings, the stock pretty much leaves no room for anything to go wrong. Wood's funds are built around concentrated bets on disruptive technology -- and small positions in moonshots like this fit her mandate. For most individual investors, though, the better move is probably to watch this one from the sidelines until the stock's valuation comes down meaningfully.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.