Cathie Wood Watches As Nvidia Rides The AI Wave She Predicted Last Year: Why Is Ark Sitting Out?

Shares of Nvidia Corp. NVDA are soaring, riding the AI wave, while Cathie Wood‘s ARK Innovation ETF ARKK sits on the sidelines.

What Happened: ARK’s flagship fund hasn’t held Nvidia shares since early 2023, despite Wood’s belief in the potential of disruptive technologies. This decision has resulted in ARKK missing out on Nvidia’s stellar performance, with the fund down nearly 8% this year, Bloomberg reported on Thursday.

Meanwhile, Wood’s smaller ETFs have recently reduced their already limited investments in the company led by Jensen Huang.

Nvidia recently reported impressive earnings, adding $256 billion in market value in one trading day. The company’s stock has risen 57% in 2024, outpacing the S&P 500 and Nasdaq 100, which are each up about 6%.

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ARK Investment Management opted to move away from Nvidia, judging it as over-priced. Wood, in 2023, characterized Nvidia as "easy," "really expensive," and "very obvious," stating a preference for less-talked-about companies such as UiPath Inc. PATH and Twilio Inc. TWLO.

Why It Matters: The AI revolution has been a key focus for Wood. The Ark CEO last year suggested that Artificial General Intelligence will likely give a strong lift to economic growth, from the 3-5% year-over-year rate currently to as much as 30-50% per year.

In 2023, she stressed the importance of investing in less obvious AI plays, such as UiPath Inc. and Twilio Inc.

Ark Invest's decision to sell Nvidia shares captures attention, especially considering the company's recent financial achievements and the bullish outlook provided by several analysts.

Nvidia in the fourth quarter surpassed revenue expectations and provided strong guidance for the first quarter, signaling continued growth in the AI sector.

Additionally, Wood picked Tesla Inc. over Nvidia as the top AI player for the next five years, a decision that seems to have contributed to ARK’s current position.

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