Market Extra

ARK Innovation ETF rises sharply, Cathie Wood views its top holding Tesla as ‘most obvious beneficiary’ of recent AI breakthroughs

Investors seem to think Nvidia is ‘the only AI play,’ Wood tweeted. ‘It is not!’

Cathie Wood is the founder of Ark Investment Management.

Patrick T. Fallon/Agence France-Presse/Getty Images

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Cathie Wood’s ARK Innovation ETF rose sharply Tuesday, as shares of its largest holding Tesla Inc. jumped and technology stocks rallied amid ongoing investor enthusiasm over artificial intelligence.

The ARK Innovation ETF ARKK, -0.40%, an exchange-traded fund that targets disruptive innovation as an investment theme, closed 1.8% higher Tuesday, outpacing the tech-heavy Nasdaq Composite index’s COMP, +0.16% 0.3% rise, according to FactSet data.

But the ETF no longer holds chip maker Nvidia Corp., even as ARK Investment Management founder Wood expects the company will power the era of artificial intelligence. While her firm has believed since 2014 that “Nvidia saw the AI future before most other chip companies” and expects it will continue “to power the AI age,” the company now looks expensive, Wood suggested over Twitter on Monday.

“At 25X expected revenue for this year,” Nvidia’s stock is “priced ahead of the curve,” she said in a thread of tweets. Tesla, which trades at 6x revenues, is “the most obvious beneficiary of the recent breakthroughs” in AI, she tweeted.

Shares of Nvidia NVDA, +0.68% have skyrocketed this year, with their 3% gain on Tuesday bringing the stock’s surge so far this year to more than 174%, according to FactSet data. Electric car maker Tesla TSLA, +4.06% finished 4.1% higher on Tuesday, increasing its year–to-date climb to more than 63%.

“Companies with visionary leaders, strong global distribution and, perhaps most important, large high-quality pools of proprietary data should be big #AI winners, with revenues and earnings surprising significantly on the high side of expectations during the years ahead,” Wood said in her thread of tweets.

Read: AI buzz pushes tech stocks higher – but here’s why the ripple effect in stocks may still be ‘narrow’

“Investors seem to think NVDA is the only AI play. It is not!” Wood wrote over Twitter on Monday, referencing Nvidia’s ticker and surging stock price.

Meanwhile, the Roundhill Generative AI & Technology ETF CHAT, +1.03%, which launched earlier this month, rose 2.8% on Tuesday. The fund, whose top holdings include Nvidia, ended the trading session with larger gains than the ARK Innovation ETF.

So far this year, Wood’s flagship ARK Innovation ETF has surged more than 27% through Tuesday, according to FactSet data. That compares with a more than 24% rise for the Nasdaq this year.

Beyond Tesla, other top holdings of the ARK Innovation ETF on Tuesday included Zoom Video Communications Inc. ZM, +0.60%, Roku Inc. ROKU, +0.55%, Coinbase Global Inc. COIN, -2.95% and enterprise automation software business UiPath Inc. PATH, -6.02%, according to data on ARK’s website.

Tesla should benefit from AI as it aims for an $8 trillion-to-$10 trillion-revenue total addressable market for “autonomous mobility” by 2030, Wood wrote in a tweet Monday. “But, based on our research for the last five to six years, @ARKInvest sees dozens of AI winners!”