ARK Invest CEO Cathie Wood expressed reservations about participating in the initial public offering (IPO) of British chip designer Arm, citing overvaluation relative to its competitive position. Arm, controlled by Japanese investment giant SoftBank (TYO:9984), listed on New York's Nasdaq last week at an IPO price of $51 a share, valuing the company at almost $60 billion. The stock saw an initial surge of almost 25% on its first trading day, closing at $63.59. However, the stock has since experienced consecutive daily declines, ending Tuesday's trading session at $55.17.
Wood shared her views on CNBC's “Squawk Box Europe” this Wednesday, stating that while the recent frenzy around AI-exposed companies was justified, Arm might be overemphasized in terms of its AI capabilities and not enough focus was placed on the competitive dynamics in the industry. She added that from a valuation perspective, Arm's IPO price was on the high side compared to other stocks in ARK's portfolios that she believes offer much more exposure to AI at lower prices.
ARK Invest also made headlines this Wednesday with its acquisition of British thematic ETF issuer Rize ETF for £5.25 million ($6.5 million), marking the company's first venture into the European passive investment market. Wood stated that despite accounting for around 25% of demand for ARK's research since its inception in 2014, Europe had not had access to invest in the company's U.S.-based ETFs until now.
The top holdings in Wood's flagship ARK Innovation ETF include Tesla (NASDAQ:TSLA), Shopify (NYSE:SHOP), UiPath, Unity, Zoom (NASDAQ:ZM), Twilio (NYSE:TWLO), Coinbase (NASDAQ:COIN), Roku (NASDAQ:ROKU), Block and DraftKings (NASDAQ:DKNG). After suffering during a recent cycle of aggressive interest rate hikes from the U.S. Federal Reserve, the ARK ETF has seen a resurgence this year, as investors have flocked to stocks with AI exposure. Wood believes that the anticipation of interest rates peaking would further this trend.
Wood suggested that with inflation decreasing across major economies and central banks expected to begin unwinding their aggressive monetary policy tightening over the next year, the coming period “should be a very good environment for innovation and global megatrend strategies.” She also emphasized the decreasing cost of technology, especially with artificial intelligence, making it easier to build and scale tech companies anywhere in the world, not just in Silicon Valley.
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