With investors fleeing Cathie Wood’s ARK Innovation ETF ARKK, the fund witnessed a staggering $151.2 million drop in assets under management (AUM) over the past week, constituting approximately 2% of the fund’s total value.
This selloff transpires amidst ARKK’s ongoing battle in a red-hot market climate. Currently, ARKK finds itself nearly 7% down since the markets last closed in 2023, a stark contrast to the almost 8.5% rise seen in the SPDR S&P 500 ETF Trust SPY over the same period.
Navigating the Nvidia Conundrum
A point of contention for many departing investors is Cathie Wood’s stance on Nvidia NVDA. Wood opted to completely divest ARKK of NVDA back in January of last year, missing out on the spectacular surge that saw the company claim the third spot globally, trailing only Microsoft MSFT and Apple AAPL.
Wood’s expectation of an imminent correction within the AI sector and the broader semiconductor industry guides her decision-making process. She anticipates that the short-term downstream value of AI may not sustain the current level of infrastructure expenditure. When combined with reduced manufacturing lead times mitigating the chip “shortage” experienced in the past year, a correction appears increasingly plausible.
Furthermore, Wood remains a vocal supporter of Tesla TSLA, ARKK’s second-largest holding. Despite Tesla’s potential for future success, the tech giant has encountered a rough patch this year, plummeting approximately 14% within this month alone.
COIN: A Silver Lining
Presently, Cathie Wood’s primary bet rests with Coinbase COIN. As the leading winner within ARKK’s portfolio, Coinbase has surged over 50% year-to-date, propelled by Bitcoin’s BTC/USD attainment of record highs surpassing $72,000.
Catering to the Contrarians
For traders skeptical of Wood’s strategy, inverse ETFs offer a simple method to bet against a stock, thereby bypassing the complexities associated with options trading. The AXS Short Innovation Daily ETF SARK, designed to mirror the inverse performance of ARKK, stands as an illustrative example.
Conversely, traders with unwavering confidence in Wood and ARKK, aiming to amplify their positions, may opt for a leveraged fund like the AXS 2X Innovation ETF TARK – recognized as the Best ETF Launch at Benzinga’s 2023 Fintech Awards.
Header Image: Jason Blackeye on Unsplash
