Heavy on Tesla, missed out on NVIDIA, the Wall Street top player who once had high hopes for AI, "Wood Sister," failed to catch the feast.

Zhitong App learned that two years ago, Cathie Wood, also known as "Wood Sister," the founder and leader of Ark Investment Management, released a seemingly crazy prediction report at the time: due to the revolutionary upgrade in productivity brought by breakthroughs in artificial intelligence technology, the global economic annual compound growth rate may accelerate to 50%. However, despite being dubbed as a top Wall Street fund manager, "Wood Sister" Wood failed to benefit from the skyrocketing stock price of NVIDIA (NVDA.US) since 2023, brought about by the AI field's "strongest shovel seller."

Statistics show that Ark Investment Management's flagship ARK Fintech Innovation ETF - ARK Innovation (code: ARKK) unexpectedly underperformed the US stock benchmark index - the S&P 500 index, as well as most ETFs tracking the NASDAQ 100 index. Due to heavily investing in the electric vehicle leader Tesla (TLSA.US) for many years and not buying NVIDIA, whose stock price has surged since 2023, ARK Innovation has dropped by over 7% year-to-date.

Due to the global pressure of high-interest rates crushing the demand for electric vehicles, coupled with the gradual depletion of electric vehicle incentives by governments worldwide, one of the heavily invested stocks in ARK Innovation, Tesla, has seen its stock price drop by over 20% this year.

ARK Innovation Seems to Have "Missed an Era"

Although the investment frenzy surrounding AI-related stocks on Wall Street is escalating, driving up US technology stocks, especially chip stocks - the Philadelphia Semiconductor Index has risen by over 11% year-to-date, and even the S&P 500 index has risen by over 6% so far this year. However, Ark's flagship product, ARK Innovation, led by "Wood Sister," has fallen significantly behind with astonishing declines. Ark Investment Management did not respond to requests for comment from reporters on whether they intend to buy NVIDIA in the future.

Despite "Wood Sister" publicly expressing her belief in future disruptive technologies, according to historical data collected by institutions, since the early 2023, under "Wood Sister's" leadership, ARK Innovation's main strategy has had no involvement with the biggest winner in the AI boom, NVIDIA. That is, since the early 2023, ARK Innovation, the flagship product of ARK Fintech Innovation ETF, has never held a single share of NVIDIA stock. On the contrary, some very small ARK Fintech Innovation ETFs under Ark Investment Management have recently reduced their holdings of Nvidia stocks, which have very low holdings. During Thursday's U.S. stock trading session, Nvidia's market value increased by nearly $280 billion, the largest single-day market value increase in history. However, the flagship ARK Innovation ETF led by Cathie Wood was unable to share in such a massive "dividend".

During Thursday's U.S. stock trading session, Nvidia's market value increased by nearly $280 billion, the largest single-day market value increase in history, surpassing the $197 billion increase created by Meta, Facebook's parent company, earlier this month. This is equivalent to adding a whole Netflix or a whole Adobe, or close to half of JPMorgan Chase or two Goldman Sachs.

In 2023, Nvidia can be called the biggest winner of the global AI boom, with an astonishing increase of 240% in 2023. Just in 2024 so far, the market value of the chip giant Nvidia has increased by over $700 billion, reaching $1.9 trillion, surpassing the U.S. tech giants Amazon and Google's parent company Alphabet.

After Nvidia announced another incredibly strong quarterly performance and significantly exceeded market expectations for performance outlook, the market value of this tech giant, ranked third globally, has expanded by 57% in 2024. The S&P 500 index and the Nasdaq 100 index have both risen by about 6% so far this year.

Did "Cathie Wood" Miss Nvidia's Crazy Surge Just Because Nvidia Was "Too Dazzling"?

In the story described by Cathie Wood, everything seems to be carefully designed. She believes Nvidia is "too dazzling", and she prefers those low-key tech companies.

In August, Ark Investment Management researchers wrote on their website that Ark expects market returns driven by artificial intelligence to expand and tends to invest outside major indices, namely the S&P 500 and Nasdaq 100 indices. The asset management company believes that heavyweight stocks like Nvidia are overvalued and tends to look for undervalued potential AI tech stocks that have not been discovered by themselves.

Cathie Wood described Nvidia as "too simple", "too expensive", and "too dazzling" last year, adding that she focuses on less talked-about low-key names, such as software companies UiPath Inc. and Twilio Inc. However, both of these stocks have underperformed the S&P 500 index this year. She has repeatedly emphasized in public that Ark, under her leadership, invests on a five-year cycle.

Mohit Bajaj, head of ARK Fintech Innovation ETF at WallachBeth Capital, said that one thing Ark can count on is its loyal followers. "I don't think a name will really damage the brand value of Ark. It's just a matter of fund performance. With the appreciation of Bitcoin, the situation may improve."

The flagship ARK Fintech Innovation ETF, led by "Wood Sister," currently has its largest holdings in the cryptocurrency exchange Coinbase Global Inc. (COIN.US), followed by Tesla. However, the stock prices of these two companies have declined in 2024. Data compiled by institutions shows that against this backdrop, investors have withdrawn approximately $769 million from the fund.

In this market where the "Magnificent 7" hold high weights and institutions are overly concentrated in their holdings of the "Magnificent 7," Ark, led by "Wood Sister," is not the only company striving to keep pace. The Magnificent 7 includes: Apple, Microsoft, Google, Tesla, Nvidia, Amazon, and Meta Platforms.

Any fund manager managing a concentrated active investment portfolio is likely to miss out in an environment where the rise is dominated by just a few very large tech stocks, as has been the case in recent months with a few tech giants like Nvidia, Microsoft, and AMD leading the way in the US stock market.

Nevertheless, the notable absence of ARK Innovation in the list of big winners in the AI boom, such as Nvidia, highlights the cautious sentiment of some investment institutions in the context of the high weight of the "Magnificent 7," the challenge of judging which stocks will benefit from the AI boom, and when to buy and sell "highly valued growth stocks." According to the statistics, among the providers of mutual funds and exchange-traded funds (ARK Fintech Innovation ARK Fintech Innovation ETF), Ark led by "Wood Sister" is at the forefront in terms of wealth destruction. According to Morningstar's estimation, by 2023, the assets managed by Ark's ARK Fintech Innovation ARK Fintech Innovation ETF series products are approximately $16 billion, with a shareholder value evaporation of as much as $14.3 billion over the past decade.