Cathie Wood and her suite of Ark funds are having a moment as tech stocks in her portfolio rebound from last year’s market rout. And lately she has been buying more shares in companies like Tesla (TSLA) and Coinbase (COIN) in an investment strategy much criticized by other fund managers not long ago.
Since the beginning of 2023, the Ark Innovation Fund, the flagship exchange-traded fund (ETF) run by Wood’s asset management firm ARK Invest, is up 42 percent, after losing nearly 70 percent of its value in 2022.
During the same period, Ark Innovation has acquired more than half a million Tesla shares, worth $101 million at yesterday’s (Feb. 16) close, about 360,000 Coinbase shares worth $23 million, and $12 million worth of shares in Teladoc Health, a New York-based telehealth company, according to regulatory disclosures. Ark Innovation has also increased stakes in Intellia Therapeutics, Twist Bioscience and video game developer Roblox.
Wood rose to fame during the pandemic for pioneering so-called thematic investing, which involves building portfolios around certain technological trends instead of traditionally defined sectors. At Ark Invest, some funds focus on solely fintech companies while others concentrate on bioscience and robotics. Before last year’s sharp decline that started in mid-2021, the Ark Innovation Fund returned 238 percent in 2020, far exceeding the S&P 500’s 14 percent gain that year.
Wood is apparently riding a monster rally of Tesla and Coinbase stocks, both of which have nearly doubled in value since the beginning of the year. Although the market still appears uncertain how long the tech rebound can last, depending on monetary policy moves and geopolitical climate, Wood said she is bullish on the industries and companies she has picked regardless of what macroeconomic conditions may suggest.
In Ark Invest’s annual “Big Ideas” report published earlier this month, Wood and her research team listed artificial intelligence (A.I.), blockchain, electric vehicles and autonomous taxi among the top growth sectors to watch this year, based on the firm’s research.
In A.I., for instance, the training cost is dropping by an annualized rate of 70 percent, according to Ark’s research. “If you cut the cost of something by 70 percent per year, you are gonna get a lot more of it,” she said during an episode of Ark Invest’s podcast last week. The most demonstrative example is ChatGPT. “In 2020, it cost $4.6 million to train a [language] model to achieve GPT-3 performance. Today, it cost $150,000. By 2030, we think it will cost $30,” she said.
Wild predictions for Bitcoin and Tesla stock
In the “Big Ideas” report, Ark predicts Bitcoin could surpass $1 million before the end of this decade. “Of course, we’ll have to take assumptions for corporate and treasury uses of Bitcoin on their balance sheets,” Wood said on the podcast. “Our base case for Bitcoin in 2030 is $700,000. Our bull case is roughly double that.”
Bitcoin is currently trading at $23,800, down more than 60 percent from its peak in November 2021.
Wood also recently predicted Tesla stock, the top holding across all Ark funds, will rise more than 800 percent to above $1,500 by 2028, not only because of the growing adoption of electric cars but also because of Tesla’s commitment to A.I.
“EVs have hit price parity with gas-powered vehicles. Now they are about to go into another accelerated decline in price that gas-power vehicles won’t be able to compete,” Wood said on last week’s podcast.
She is particularly bullish on Tesla’s self-driving effort, which at its core is driven by A.I. technology. Wood believes autonomous driving is the biggest opportunity in the next five to 10 years around A.I. and its application in autonomous taxi could see a profit margin as high as 80 percent, she said in an interview with Fox Business on Feb. 9.
“Tesla is one of the most profound A.I. companies out there. It’s not an auto company, it’s a technology company,” Wood said in the Fox interview.
The success of Tesla’s self-driving software has been a subject of dispute. Despite what its name—Full Self-Driving (FSD)—might suggest, the software can’t drive a car without human supervision at all times. This week, Tesla was ordered by the National Highway Traffic Safety Administration to recall more than 360,000 cars equipped with the FSD system over risks of it causing crashes.
After the latest trades, Ark’s top holdings include Tesla, Zoom, video streamer Roku and Exact Sciences, a maker of cancer diagnostics.