Cathie Wood is leaning into Cerebras Systems (CBRS) stock’s recent weakness. Ark Invest (ARKK) bought 93,290 shares of Cerebras on August 25 through two of its ETFs, with the position worth about $17.2 million at the time. The move came at a time when Cerebras stock had been extremely volatile around its biggest product catalysts of the year. Following the highly anticipated August 18 Supernova event, investors locked in profits, with the stock plummeting 8% in the last month and 32.4% since its debut on May 14.
While the timing stands out, it is not unusual for Wood to add exposure while investors were still digesting the selloff. Why is Wood betting $17 million on Cerebras stock, and should other investors follow suit?
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www.barchart.com The Situation Is More Complicated Than The Selloff Suggests
Wood is well-known for ignoring short-term weaknesses in a business and focusing on the long-term picture. The case is the same here. She isn’t necessarily betting Cerebras has already solved every problem facing its business. She appears to be betting that while the market is heavily focused on the company’s near-term challenges, it is ignoring the fact that Cerebras is building infrastructure for a much larger opportunity.
In the second quarter, Cerebras reported a 103% year-over-year (YOY) increase in core revenue to $209.9 million, benefiting heavily from the expansion of its cloud business and the ramp of its OpenAI deployment. The cloud business generated $127.7 million, increasing 287% YOY, while core hardware revenue rose 17%. The company reported a core gross margin of 40.6%, lower than the 46.5% achieved in the first quarter. CFO Bob Komin explained that the company has been renting back some of its own systems from cloud customers and deploying that capacity through Cerebras Cloud to meet demand more quickly. Because rented capacity is more expensive, it weighs on short-term margins. However, core operating margin improved to negative 16%, compared to negative 42% a year earlier.
While Cerebras' margin pressure is real, management believes it is temporary and will improve by Q4 as more company-owned systems are brought online. The company even aims to achieve a long-term core gross margin of more than 60%. Investors will have to monitor to see if margins rebound as owned capacity replaces rental systems.
Turning to backlog, Cerebras ended the quarter with $25.4 million in remaining performance obligations. While this backlog doesn’t mean revenue is generated now, management described it as providing significant visibility into future revenue and giving the company confidence to invest ahead of demand. The company said it has secured over 600 megawatts of data center capacity, which is either operational or scheduled to be delivered by the end of 2027. Management also said Cerebras is building data centers across multiple locations, and manufacturing capacity is now four times larger than it was in the first half of 2025. It is predicted to grow more than tenfold in 2026.
This creates both an opportunity and a risk, as building this capacity will need capital, coordination, and time. Investors will have to watch whether the infrastructure expansion translates into revenue growth without permanently affecting the company’s cost structure.
Cerebras Has A Stronger Balance Sheet Than Its Losses Suggest
Cerebras operates in a capital-intensive industry. It needs to fund manufacturing expansion, data center deployments, and product development while working towards profitability. Therefore, a strong cash position is essential. It ended the quarter with over $8.6 billion in cash equivalents, restricted cash, and marketable securities. It also has access to an $850 million revolving credit facility, which it hasn’t used yet. Management also said that the IPO strengthened its liquidity, giving it the flexibility to invest as opportunities develop.
Why Wood May Be Willing To Make The Bet
Currently, Cerebras represents 2.68% of the ARK Innovation ETF and 2.73% in the ARK Next Generation Internet ETF. Wood’s exposure to Cerebras is a calculated bet. Basically, Wood is buying shares of a company that could benefit if fast inference becomes a much larger part of the AI infrastructure market. While the company is still unprofitable and has plenty to prove, it still has rapidly growing revenue, expanding capacity, a healthy backlog, and a growing customer base.
The Bottom Line
Investors should not buy Cerebras shares solely because Wood did. The decision should be based on whether the company can turn its enormous contracted opportunity into a much larger and more profitable business. Cerebras remains a high-risk, high-reward AI stock. While Wood is betting $17 million on it, it is for investors to decide if they believe so too.
On Wall Street, Cerebras stock holds a consensus “Strong Buy” rating. Of the 11 analysts covering the stock, eight rate it a “Strong Buy,” one has a “Moderate Buy,” and two analysts a “Hold” rating. The average target price of $283.91 implies a potential upside of 35.1% from current levels. Plus, the high price estimate of $330 suggests the stock could climb 57.1% over the next 12 months.
www.barchart.com On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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