Cathie Wood’s Ark Invest sold most of its Nvidia stake just before the company began a massive rally.
Ark owned 1.3 million shares of Nvidia across all of its ETFs in early October, but that holding has since dwindled to just 390,000 shares.
Wood said in February that Nvidia’s valuation was “very high” and that it was targeting higher conviction stocks.
Cathie Wood’s Ark Invest likely wishes it hadn’t sold nearly 1 million Nvidia shares between early October and today after the chipmaker’s massive increase of more than 160% since the start of the year.
Shares of Nvidia surged as much as 30% on Thursday after the company announced stunning guidance as it capitalizes on a surge in demand for its chipsets that power generative AI technology platforms such as OpenAI’s ChatGPT and Alphabet’s Bard.
But the active investment manager, which has occasionally owned Nvidia since the flagship fund’s inception in 2014, missed out on huge gains as it began winding down its position in Nvidia on its way to a 52-week low in mid-October.
Since Ark Invest’s initial sale on Oct. 5, when it held 1.3 million shares of Nvidia across all of its ETFs, the stock is up 190% and added $620 billion to its market value. At the end of November, Nvidia owned just over 500,000 shares of the company.
Today, Ark Invest owns just 390,000 shares of its suite of next-generation technology ETFs. The stock is not in its flagship Disruptive Innovation fund.
Insider’s rough calculations suggest that Ark Invest put more than $200 million in potential profit on the table when it sold its Nvidia stake late last year.
Ark’s ill-timed share sale of Nvidia highlights the difficulties of actively managing a portfolio of disruption-oriented investments, because even if you pick the right theme to invest in, there’s no guarantee you’ll choose the right companies to bet on.
In February, Wood said Ark’s surge in Nvidia sales was in part because valuation was “very high” and that it was consolidating its portfolio in names with higher conviction.
“We like Nvidia, we think it’s going to be a good stock. It’s priced, it’s the ‘check-the-box’ AI business. It has to do with the valuation,” she told CNBC on Feb. 27.
Wood instead counts on UiPath for Ark Invest’s exposure to artificial intelligence, the second-largest holding among all of its ETFs. Meanwhile, Tesla remains Ark Invest’s largest holding company, which is also working on artificial intelligence to enable its self-driving technology.
But despite the hype in AI this year, those two stocks have only made a share of the year’s gains so far. Shares of UIPath are up just 14% year-to-date, while shares of Tesla are up as much as 50%.
Shares of Ark Invest’s Disruptive Innovation ETF fell 2.7% Thursday, despite the Nasdaq 100 rising 1.7%.
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