Cathie Wood's Recent Tesla Stock Sale and Her New AI Stock Investment

author: FutureCar Staff    

Cathie Wood's Ark Innovation (ARKK -1.82%) ETF has been making adjustments to its stock portfolio, which has proven to be a successful strategy in 2023. With a net asset value of $8 billion, the fund has generated returns of 40% so far this year.

Recently, the fund sold 54,847 shares of Tesla, valued at $14 million, and used more than $10 million of the proceeds to purchase shares of Palantir Technologies, an artificial intelligence (AI) specialist.

This selling streak began earlier this year, and the total number of Tesla shares sold by the Ark Innovation fund since late April is now 739,637. This raises the question of whether Cathie Wood is losing confidence in Tesla or if this is simply a bout of profit-taking.

Despite the recent sales, Tesla remains the largest holding in the Ark Innovation Fund. As of market close on Thursday, the fund still has nearly 3 million shares of Tesla, worth $765 million, making up about 11% of the portfolio.

It seems that Wood is trimming Tesla as the stock price rises, even though the overall percentage of the portfolio allocated to Tesla continues to grow. At the end of 2022, Tesla represented only 7% of Ark Innovation's holdings. However, the stock has surged by 108% so far this year, making up for the sales.

There is additional evidence that Ark is still bullish on Tesla. The fund's most recent Tesla valuation model predicts that Tesla shares could climb to $2,000 by 2027, implying potential gains of 682% over the next four years. This suggests that Wood remains extremely optimistic about Tesla's future prospects, despite trimming her holdings.

Ark Innovation's focus is on finding and investing in companies that have the potential to disrupt industries. Palantir Technologies, with its expertise in big data analytics and AI, fits this criteria. The company's platform can identify patterns in large amounts of data that may not be easily noticeable.

CEO Alex Karp has expressed his belief in the potential of AI, stating that the latest large language models have provided hints of more generalizable forms of artificial intelligence. Palantir's AI platform has seen significant demand and engagement.

Palantir has also impressed analysts. Wedbush analyst Dan Ives called Palantir the "Messi of AI" and gave the stock a buy rating with a $25 price target, suggesting potential upside of 79% compared to the closing price on Thursday.

Despite a recent decline, Palantir's stock is up 119% this year. Ark Innovation's recent purchase brings its total stake in Palantir to over 6.7 million shares worth $93 million, or about 1.3% of its total holdings.

Cathie Wood's bullishness on AI is no secret. Ark's Big Ideas 2023 report highlighted AI as a catalyst that will impact all other technologies. The report predicts that disruptive AI platforms could grow at an annual rate of 40%, reaching $200 trillion by 2030.

Given these market dynamics, it is not surprising that Wood would reduce Ark's position in Tesla to increase the fund's exposure to generative AI. Palantir, with its promising AI capabilities, is one of the most attractive pure-play AI stocks available.

FutureCar Staff