AI Powers Cathie Wood’s Wall Street Comeback

Bassyonni

ago 5 hours

Cathie Wood is experiencing a remarkable turnaround on Wall Street. Her flagship Ark Innovation Fund (ARKK) suffered significant losses, dropping two-thirds of its value in a challenging market. However, the fund has rebounded spectacularly, tripling in value over the past three years and gaining 87% in the last year. This recovery is largely driven by the rise of artificial intelligence.

AI Powers Cathie Wood’s Wall Street Comeback

Stocks like Palantir, AMD, and Tesla are at the forefront of this resurgence. According to Wood, skeptics overlook the profitability of companies investing in AI. She mentioned in a conversation with Forbes, “The companies investing in AI are some of the most profitable companies in the world.” Wood emphasizes that contrary to expectations, performance remains strong.

Ark’s AI-Driven Portfolio

The recovery of Ark is heavily rooted in its AI-focused investments. Notably, AMD has doubled its value in 2023, outperforming Nvidia, which has seen a 36% increase this year. Wood believes AMD’s smaller market cap and cutting-edge chip design position it favorably for long-term growth.

Palantir has surged 337% since last November, leveraging its data analytics tools in government and corporate sectors.
Despite reducing her stake in Palantir by 70%, it remains a top holding in Ark’s portfolio.

Tesla’s Dominance

Tesla remains a central player in Ark’s portfolio. The electric vehicle manufacturer constitutes nearly 12% of ARKK’s total assets, which is double that of the next largest position. Analysts project Tesla’s stock price could reach $2,600 by 2029, particularly due to its new robotaxi service launched in Austin this summer.

Wood believes that while electric vehicles are low-margin, robotaxis offer a high-margin recurring revenue model. She stated, “EVs are one and done, they’re low margin. Robotaxis are recurring revenue, and very high margin.”

A Challenging Path to Recovery

This resurgence is especially notable following a difficult period for Wood. From 2021 to 2022, ARKK saw a dramatic decline of 67%, primarily impacted by speculative tech stocks such as Teladoc and Unity Software. However, Wood claims the investment landscape has shifted positively, attributing favorable policies from the Trump administration to the renewed focus on innovation.

With a three-year annualized return of 31.8%, ARKK now surpasses the S&P 500’s return of 24.9%, even if its five-year performance still trails behind the Nasdaq. Wood reflects on historical downturns, noting, “The Nasdaq lost 80% during the dot-com bust. Decades later, that looks like a blip. I think the same thing will happen here.”

Analyst Ratings for ARK Innovation ETF (ARKK)

Analysts currently hold a “Moderate Buy” rating for ARKK based on 48 evaluations. Of these, 39 analysts recommend a Buy while nine suggest a Hold. The average 12-month price target for ARKK stands at $99.68, indicating an anticipated upside of 16.8% from its most recent closing price.

In summary, Cathie Wood’s focus on innovative AI-driven companies is steering ARKK back into favor on Wall Street, showcasing the potential of advanced technology in reshaping investment strategies.