Ark's Cathie Wood defends AI strategy despite offloading Nvidia shares below $150

Cathie Wood's decision to sell most of Ark Investment Management’s Nvidia (NASDAQ:NVDA) holdings when the stock was trading below $150 per share has proven to be costly. The transaction caused the renowned money manager's firm to miss out on a rally that could have brought in a roughly $1.2 billion return.

Nevertheless, ARK Invest CEO claims that her firm is strategically positioned in artificial intelligence (AI) assets. Speaking at the Greenwich Economic Forum in Hong Kong this week, Wood highlighted Ark’s diversified exposure to emerging AI companies while maintaining Nvidia shares in specialized portfolios and the flagship fund.

Ark Investment initially bought Nvidia shares in 2014 when they were trading at $4 on a split-adjusted basis. The majority of Nvidia sales took place in November 2022, just before the release of ChatGPT spark a massive artificial intelligence-driven rally in the stock market.

Despite selling most of its position before Nvidia's recent surge, Wood mentioned that Nvidia shares have gained 15% since May 24, following strong first-quarter sales and an optimistic second-quarter forecast. The stock has more than octupled since late 2022, reaching around $1,224, with a market value surpassing $3 trillion, overtaking Apple Inc (NASDAQ:AAPL).

Reflecting on the decision to reduce Nvidia holdings, Wood said, "We began to look at other companies that could benefit from AI if Nvidia continued its rapid ascent."

While she remains positive about the semiconductor sector, she acknowledged a strategic pause as companies reassess their AI strategies. Wood cited Salesforce (NYSE:CRM) Inc. as an example of a company that has yet to see the expected revenue boost from AI this earnings season.

Wood also defended Ark's continued investment in Tesla (NASDAQ:TSLA) Inc., describing it as the "biggest AI project on earth" due to its advancements in autonomous driving. Ark increased its Tesla holdings in the first quarter amid concerns over a slowdown in electric vehicle consumption and competition from Chinese automaker BYD Co (SZ:002594). 

Wood said earlier that she is still not convinced by Nvidia's sky-high valuation. "I've watched Nvidia throughout my career, ever since it went public. It's a very cyclical stock," Wood said, adding that over-ordering of Nvidia's GPUs could lead to a painful inventory correction for the company.

During the pandemic, Wood gained prominence for her investment calls on companies like Tesla, Zoom (NASDAQ:ZM), and Roku (NASDAQ:ROKU), leading to a surge in Ark’s assets, peaking at over $60 billion in early 2021. 

However, the ARK Innovation ETF, now valued at around $6.4 billion, has declined nearly 16% this year, with Tesla’s stock losing nearly 30% of its value. Despite this, the fund outperformed benchmarks last year with a 68% gain, driven by expectations of peaked interest rates and potential rate cuts.