- Ark Invest CEO Cathie Wood's reputation as a star stock picker may be at risk.
- Her investing acumen is under scrutiny after Ark missed out on Nvidia's $585 billion market rally.
Cathie Wood is at risk of losing some of her shine.
The Ark Invest CEO, once hailed as a star stock picker, shot to fame in 2020 when all six of her exchange-traded funds notched stellar returns over 100%. Her flagship fund, Ark Innovation ETF (ARKK), rose 150%, largely driven by bets on Elon Musk's Tesla.
Not only did Ark's outperformance win Wood the hearts of memelord traders, but it also earned her a group of cult-like followers in the tech and finance industries.
Fast forward a few years later, and Wood's hype has lost some steam.
Sure, there are still some Wood fans out there, with forums on Reddit dedicated to her followers. But the tech investor is not without her critics too. Bill Gross and "Big Short" investor Michael Burry are just two of them.
Poor-timed Nvidia bets
Wood's reputation for sound investing acumen took a huge hit this week after the famed money manager lost out on some big gains she would have made on Nvidia shares.
Ark sold nearly 1 million shares of the Santa Clara-based chipmaker in the months before Nvidia's stock exploded, surging more than 160% thanks to the craze around artificial-intelligence companies.
Today, the investment firm holds just 390,000 shares across its next-generation ETFs. Ark would have cashed in more than $200 million in potential profits if it didn't pare its bet on Nvidia in late 2022, Insider's Matthew Fox calculated.
While Wood tried to defend her misstep, saying Nvidia is "price ahead of the curve" and Ark is "on to the next thing," her audience wasn't impressed, with Twitter and Reddit users taking to the web to mock the active investment manager.
It wasn't too long ago when Wood preached her flagship fund as "the new Nasdaq" which forces one to question why Wood sold one of the top stocks powering a rally in the tech-heavy benchmark this year.
ARKK books losses
Another indicator of Wood's poor showing is reflected in the performance of her main ETF.
Earlier in March, Wood revealed that ARKK notched over a $2 billion loss from selling stocks during 2022's brutal market slump. The weakness in equities weighed on ARKK's performance — the fund plunged about 70% last year as rising interest rates reduced investor appetite for growth-focused stocks. Higher rates also tend to lower stock valuations because future profits become less appealing.
"The valuation hit ... has been so severe to our strategy ... and that was all related to the Fed jacking up interest rates 19-fold in less than a year. Unprecedented," Wood said in an interview on CNBC.
This year, the fund rose 37% as part of a broader rally in tech stocks thanks an AI boom, but still lags behind standard Nasdaq 100 ETFs including Invesco QQQ Trust, per Bloomberg.