Cathie Wood's flagship fund missed out on Nvidia's surge, skyrocketed after liquidating in January

Cathie Wood, known as the "female Warren Buffett," missed out on the soaring opportunity of Nvidia stock. Her flagship fund, the ARK Innovation ETF, sold off its Nvidia shares in early January, but since then Nvidia's stock price has skyrocketed, becoming one of the hot stocks in the artificial intelligence sector. Since Wood sold her shares, Nvidia's market value has increased by nearly $560 billion. However, investors in the ARKK fund missed out on the intense 159.90% surge this year. Wood's stance on Nvidia has also wavered, despite her long-standing bullish outlook on the stock. While she still holds some Nvidia shares in other smaller funds, the lack of investment in AI-related stocks in the ARK flagship fund caused investors to miss out on significant returns in this sector. Experts point out that the risk of this concentrated active management approach is the potential to miss out on a particular theme or the right stock within it, as seen in Wood's missed opportunity with Nvidia.

Cathie Wood's Flagship Fund Misses Out on Nvidia's Soaring Opportunity

Cathie Wood's flagship exchange-traded fund cleared out her holdings of Nvidia shares in early January. However, the subsequent artificial intelligence frenzy led to a surge in the stock price of Nvidia and other large tech stocks.

Since Wood sold her shares, the chipmaker's market value has increased by about $560 billion, with the last $200 billion of growth coming overnight after the company easily surpassed earnings expectations.

Despite holding Nvidia shares in some of her smaller funds, investors in the flagship ARK Innovation ETF (ticker ARKK) were mostly left out of this year's sharp rise of 159.90%.

Wood's Mixed Feelings towards Nvidia Stock

Wood has been bullish on Nvidia for a long time, but her confidence in the stock can sometimes waver. When the ARKK fund launched in 2014, the chipmaker was one of the top holdings in the fund.

According to Bloomberg's data, Nvidia has contributed 13% to the fund's total returns since its inception, trailing only Tesla, Grayscale Bitcoin Trust, and Invitae.

However, Wood's significant investment in Nvidia was made before the company became a large-cap stock. For new ARKK investors, Wood missed out on many opportunities for returns from Nvidia.

In October 2021, when Nvidia stock began to rebound from its lowest point since August 2020, the ARKK fund held over 750,000 shares of Nvidia. However, Wood gradually reduced this position over less than two months, completely exiting by mid-January 2022.

ARK's Flagship Fund Lacks Exposure to AI-related Stocks

Despite ARK's focus on disruptive innovation, its flagship fund ARKK has had little exposure to AI-related stocks this year, which have performed exceptionally well. As of 5/26 2:44 PM ET, ARKK fell 3% while Nvidia surged 25% and the Nasdaq 100 rose 2.4%.

Wood holds diversified Nvidia shares worth $150 million in the other four smaller ARK ETF funds. In the ARK Next Generation Internet ETF, Wood holds $25 million worth of shares of Nvidia's peer, Advanced Micro Devices Inc. (AMD). However, other AI-related stocks in ARK's portfolio, such as TSMC and C3.ai, do not appear in any ARK funds.

Experts suggest that one of the risks of this concentrated active management approach is the possibility of missing a theme or the right stocks within that theme. Given the importance of semiconductors in the AI/automation space, it is surprising that ARK's flagship fund lacks more investments related to semiconductors.

Learn more about ARK Investment's strategy: Understanding ARK's Investment ApproachBig Ideas 2021: Bitcoin as Corporate Cash