Explosive Growth Stock Bought After Cathie Wood Sells Tesla and Shopify

author: FutureCar Staff    

Ark Invest CEO Cathie Wood has been reducing her holdings in Tesla and Shopify from the investment firm's ETFs. On August 15, Ark Invest sold 1,884 shares of Tesla, followed by the sale of 182,314 shares of Shopify the next day.

Interestingly, the funds from these sales are being used to invest in a potentially explosive, high-risk growth stock.

On August 16, Wood's company purchased approximately $16 million worth of Archer Aviation shares for its Ark Innovation ETF. Archer is a maker of flying vehicles, specifically electric vehicle takeoff and landing (eVTOL) aircraft, and is still in a pre-revenue state.

What do these recent stock moves by Wood indicate about Tesla, Shopify, and Archer Aviation?

Despite the recent sales, Wood remains bullish on both Tesla and Shopify. Tesla is still the largest stock holding in Ark Innovation ETF, accounting for 10.1% of the total portfolio weight. Shopify, on the other hand, represents approximately 9.6% of the total portfolio weight in the Ark Fintech Innovation ETF.

Tesla also accounts for 6% of the total portfolio weight in the Ark Next Generation Internet ETF, while Shopify represents 4.4% of the equity weight in the same portfolio.

The sales of Tesla and Shopify by Ark Invest amount to roughly $439,000 and $8.9 million, respectively. These amounts are relatively small compared to the overall holdings of Ark Invest. It is likely that these moves were made to free up funds for other potentially explosive investments, such as Archer Aviation.

So why is Cathie Wood buying Archer Aviation stock?

Archer Aviation went public in 2021 through a merger with a special purpose acquisition company (SPAC). Since its public debut, the stock has experienced volatile swings, but it has seen significant growth in 2023, with a year-to-date increase of approximately 220%.

Archer is a pioneering player in the field of flying electric vehicles, and Wood seems to believe that it has the potential to be a long-term winner. This recent investment is not the first that Ark has made in the company.

In the second-quarter report, Archer announced that it secured $215 million in new investment funding, with participation from Ark, Stellantis, Boeing, and United Airlines. This funding brought the company's total funding to over $1.1 billion.

The urban air-mobility market is projected to be worth $29 billion annually in 2023 and over $1 trillion by 2040, according to estimates from Morgan Stanley. Archer aims to achieve FAA certification and begin commercial operations in 2025, and it has received confirmation from the regulatory agency that it is on track to meet that goal. The company's Midnight vehicle has already received the FAA special airworthiness certificate, allowing it to fly in limited settings and scenarios in U.S. airspace.

While there is promise in Archer Aviation, investors should be aware that its outlook is highly speculative. Cathie Wood is known for her high-risk, high-reward growth plays, but she is not heavily betting on the company just yet.

Even with these recent purchases, Archer Aviation represents a relatively small portion of Ark's flagship growth fund. The Ark Innovation ETF currently holds Archer stock worth approximately $26.1 million, accounting for about 0.4% of the fund's total stock holdings.

FutureCar Staff