Cathie Wood’s ARK ETFs Depend Heavily on Nvidia

The fate of ETFs controlled by Cathie Wood’s ARK Investment Management LLC could depend heavily on the share price of Nvidia Corp (NVDA).  According to the firm's daily trading disclosures, ETFs controlled by ARK Investment Management LLC have been buying up Nvidia stock, purchasing more than 400,000 shares this month.

According to Bloomberg data, ARK funds held more than 675,000 shares of Nvidia as of June 30. Nvidia’s shares have plunged 55% this year, the biggest drop among technology stocks with market values of $100 billion or more.  The valuations for high-growth tech stocks have come under intense pressure amid surging interest rates.

Cathie Wood’s ARK Investment Management LLC has been a huge fan of Nvidia, and the stock has been a part of her portfolio since ARK began in 2014.  However, ARK’s conviction of Nvidia has not always been bullish.  For example, the fund sold nearly 300,000 Nvidia shares on August 23, the day before Nvidia reported that its quarterly revenue forecast fell about $1 billion short of consensus.

Shares of Nvidia were a massive boon for Cathie Wood’s ARK funds as the price of Nvidia soared from about $4 in 2014 to more than $330 in late 2021 when Nvidia’s market value peaked at more than $800 billion.  However, this year the stock has plunged 60% from a record high back in November, shedding about $500 billion in market value.  

With the plunge in Nvidia’s share price this year, Cathie Wood’s portfolios have taken a beating, with economic conditions and surging interest rates weighing disproportionately on the high-growth, high-valuation stocks she tends to favor.  Her $8 billion ARK Innovation ETF has dropped 55% this year.  In addition, analysts continue to cut earnings estimates for Nvidia, with projections for the company’s 2023 profits falling more than 50% over the past three months. However, even with the recent slump in Nvidia, it is still priced at 32 times projected earnings, above its average over the past decade. 

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