ARK Invest’s Cathie Wood has never been concerned about taking a contrarian position. When Wall Street was running away from unprofitable technology stocks in 2022, ARK Invest kept buying. Now, as Wall Street gets excited by the possibilities of Artificial Intelligence (AI) and is buying stock of Nvidia (up 200% year to date), ARK Invest is selling.
ARK Invest has owned Nvidia since 2014. Earlier this year, the asset manager raised eyebrows as it updated the market and reported that it had sold 20% of its holding of Nvidia.
In an upcoming interview on the podcast You’re in Good Company, Cathie Wood explained why ARK Invest had been selling the hottest stock of 2023.
“So we own Nvidia in most of our speciality funds, but we’ve been taking it down for quite a while because it’s valuation skyrocketed relative to the other AI plays that we think are pretty profound.”
Wood explained to Maddy Guest and Sophie Dicker, the hosts of You’re in Good Company, that she believed there were better opportunities for investors looking to benefit from the incredible advances in AI. For Wood, a key criteria when looking for AI opportunities is that companies have proprietary data sets. If a company has exclusive access to large amounts of data, AI will help them analyse it and come up with new insights. One particular opportunity she believes investors are overlooking is Tesla.
Most investors know Tesla as the electric vehicle maker led by Elon Musk. Wood explained how its super power may not be its cars, but the data it is collecting.
“Tesla has more miles of real world driving data than all of the auto companies and tech companies going after transportation in the world put together and probably orders of magnitude more. And that’s because it has 4 million plus robots roaming around the world. I have two of them, a Model 3 and a Model Y, and they’re collecting data every day and sending it back to Tesla”
Wood believes that AI’s analysis of this huge data set may unlock truly autonomous driving. And the opportunity in autonomous driving is almost unprecedented.
“[The world is] 5 to 10 years from autonomous driving. Autonomous driving revenues today are basically nothing. We believe by 2030 they’ll be 8 to $10 trillion globally, which if you want to size that the US economy is roughly it’s approaching $25 trillion.”
Tesla’s self-driving functionality is currently in the spotlight. In February, the car maker acknowledged it had handed documents over to US Federal Regulators and in April, the US National Highway Traffic Safety Administration (NHTSA) reported the 17th fatal crash involving Tesla’s semi-autonomous driving systems since June 2021.
Wood addressed these concerns on the podcast and challenged the conventional view of Tesla’s safety issues.
“On the regulation, let’s use Tesla again. Many people say, ‘oh, the government’s never going to allow autonomous driving. That’s going to kill people.’ No, what they forget is 85 to 90% of all accidents out there are caused by human error…
… The National Highway and Safety Transportation Association has concluded that – and this is four years ago – that anyone driving in a Tesla car that has some of these safety features that we now associate with full self-driving is 40% safer than any other car. Yeah, and that was back then. And they’ve gotten a lot better.”
A look at ARK Invest’s recent filings show that Cathie Wood is putting her money where her mouth is. In the same filing that announced ARK Invest had sold 20% of their Nvidia holdings they announced they had added 18% to their holdings in Tesla. Based on the current share price, this was another $215 million invested in Tesla.