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The One That Got Away: ARK Invest’s Missed Nvidia Windfall

In the investment world, timing is everything, and it seems ARK Invest, helmed by Cathie Wood, might be reflecting on a recent missed opportunity with Nvidia.

In an intriguing twist of fate, ARK Invest sold almost one million Nvidia shares from early October through to today, only to witness the chipmaker’s stock soar by more than 160% this year. Nvidia’s stocks further rocketed by as much as 30% on a recent Thursday, riding on the back of its impressive guidance and a surge in demand for its AI-supporting chipsets, utilized in innovative platforms like OpenAI’s ChatGPT and Alphabet’s Bard.

ARK Invest, a seasoned Nvidia stakeholder since 2014, began reducing its Nvidia holdings when the stocks were at a 52-week low in mid-October. At the time, ARK held 1.3 million Nvidia shares across its ETFs, but this decision resulted in them missing out on the stock’s stellar 190% ascent, which added a cool $620 billion to Nvidia’s market cap.

Fast forward to today, and ARK’s Nvidia position has dwindled to just 390,000 shares, notably absent from its flagship Disruptive Innovation Fund. A rough estimation suggests this premature sale cost ARK potential profits north of $200 million.

This Nvidia saga underlines the inherent challenges of active portfolio management, especially when the focus is disruptive investments. Even with the right investment theme, selecting the right companies to back can be a bit of a gamble.

Earlier in February, Wood justified Nvidia’s sell-off due to what she called its “very high” valuation and a strategic move to consolidate their portfolio around high conviction names. Despite praising Nvidia as a solid stock and a go-to AI company, she expressed the need for prudent valuation consideration for their flagship fund.

As part of ARK’s AI strategy, the firm is now placing a bet on UiPath, which is currently its second-largest position across its ETFs. Tesla, another AI frontrunner with its self-driving technology, remains the top holding.

However, even with the AI sector’s recent buzz, UiPath and Tesla have only partially replicated the impressive gains seen elsewhere in the space, with year-to-date rises of 14% and 50% respectively.

Interestingly, despite a recent 1.7% jump in the Nasdaq 100, ARK’s Disruptive Innovation ETF saw a dip of 2.7% on Thursday. Whether this Nvidia episode will shape ARK’s future investment strategy remains to be seen.