Cathie Wood, head of ARK Investment Management, usually targets tech stocks that she says have a disruptive impact, even if the company is not profitable yet.
She is buying more shares of one of her favorite artificial intelligence positions.
Investors and analysts diverge in their opinions of Wood. Followers contend she’s a technology guru, while critics maintain she’s simply an average asset manager.
Sometimes her strategy works: The flagship ARK Innovation ETF (ARKK) has returned 10.43% this year as of Jan. 23, while the Standard & Poor's 500 Index and the Nasdaq Composite Index each have gained roughly 4%.
Wood delivered an extraordinary 153% return in 2020. But her longer-term performance tells a less rosy story, causing questions over the sustainability of her high-risk, high-reward strategy.
As of Jan. 23, 2025, ARK Innovation ETF, with $6.3 billion under management, has delivered an annualized three-year return of negative 4.30% and a five-year return of just 3.61%.
In comparison, the Nasdaq Composite has a three-year annualized return of 14.27% and a five-year return of 17.27%.
Cathie Wood recently expressed optimism about a shift to looser regulation under Donald Trump’s presidency.PATRICK T. FALLON/Getty Images
Cathie Wood’s investment strategy explained
Cathie Wood’s investment strategy is straightforward: Her ARK ETFs typically buy shares in emerging high-tech companies in fields such as artificial intelligence, blockchain, biomedical technology, and robotics.
Wood says these companies have the potential to reshape industries, but their volatility leads to major fluctuations in ARK funds' values.
Amy Arnott, portfolio strategist at Morningstar Research Services, calculated that ARK Innovation wiped $7.1 billion of shareholder wealth from its launch in 2014 through 2023.
That put the ETF third on the list of the biggest wealth-destroying mutual funds and ETFs for the decade ending in 2023.
But things might get different as Donald Trump returns office.
Todd Sohn, ETF and technical strategist at Strategas Securities, noted that since Donald Trump's 2024 election, the flagship ARKK has jumped 27.6%, while the ARK Next Generation Internet ETF (ARKW) is up 29.5%, according to MarketWatch.
"We still strongly believe that ARKW is about as good a proxy for Trump 2.0 as one might find, with heavy exposure to Bitcoin, Crypto derivatives, Tesla, and Defense," Cohn said.
Wood recently expressed optimism about a shift to looser regulation under Donald Trump’s presidency.
“What the new administration is doing is changing fear with optimism,” Wood told Bloomberg on Jan. 22. It’s “highly underestimated how important deregulation is going to be to unleashing animal spirits. We are pretty excited about this. Our strategies are starting to break out.”
Not all investors share Wood's optimism. Over the past year, ARK Innovation ETF has seen a net outflow of nearly $3 billion, with $108 million exiting the fund in the past month, according to ETF research firm VettaFi.
Cathie Wood bought $173 million shares of Tempus AI
Wood has been actively buying Tempus AI (TEM) stock over the past three months.
Her ARK funds bought 774K shares last November and 1.9 million shares in December, and so far in January, she added 618K shares of Tempus AI.
That chunk of stock was valued at roughly $173.3 million as of Jan. 24.
The recent purchase has likely made Wood a top-five institutional holder of Tempus AI. As of Sep. 30, 2024, ARK Investment Management ranks sixth among the company’s institutional holders, with a stake of 2.4 million shares, according to 13F filings with the SEC.
Tempus AI is a health technology company founded in 2015. It is embedding AI into diagnostics to empower physicians and researchers to make personalized, data-driven decisions.
"The ability to deploy AI in precision medicine at scale has only recently become possible," the company said in an SEC filing.
"Advances in cloud computing, imaging technologies, large language models, and low-cost molecular profiling, along with the digitization of vast amounts of healthcare data, have created a landscape that we believe is finally ripe for AI."
Tempus AI stock surged 46.2% between Jan. 17 and Jan. 24.
The recent rally could be driven by two things:
The launch of its AI-enabled personal health concierge app, Olivia.
The investment of former Speaker of the House Nancy Pelosi.
On Jan. 14, Pelosi purchased 50 call options (a bet that a stock will rise) for Tempus AI, with a strike price of $20 per share. The total trade value was between $50,000 and $100,000.
Tempus AI went public on June 14, 2024, with its initial public offering priced at $37 a share.
The company has not yet turned a profit. It reported losses of $290 million and $214 million for 2022 and 2023, respectively.
On Jan. 13, Tempus AI posted preliminary revenue for Q4 and full-year 2024.
The company expects FY24 revenue to reach $693 million, representing approximately 30% growth year-over-year.
This falls short of Wall Street analysts' expectations of $716.98 million and is slightly lower than the higher end of the company's projections in November.
The company’s projected Q4 revenue of $200 million also falls short of the consensus estimate of $206.07 million.
“We concluded 2024 with continued strength in our core businesses, as genomics revenue is expected to grow at ~30% in Q4 and our data and services revenue is expected to grow at ~45%,” said Eric Lefkofsky, founder and CEO of Tempus AI.
While Wood is buying big, Lefkofsky sold 946,084 shares of Tempus AI between Jan. 15-17, causing the stock to fall by 6% on Jan. 24 following the disclosure.
Loop Capital lowered Tempus AI's price target to $52 from $57 with a buy rating following the preliminary results, citing the company's below-consensus Q4 revenue pre-announcement, thefly.com reported.
Loop adds that Tempus AI did not provide formal profitability guidance other than that it expects a sequential improvement in adjusted EBITDA in Q4.
Tempus AI closed at $51.40 on Jan. 24. The stock has surged more than 50% in January but is still 34% lower than its intra-day peak of $78.49 on Nov. 12.
