We recently compiled a list of the Cathie Wood’s Stock Portfolio: 2025 Stock Picks. In this article, we are going to take a look at where Tesla, Inc. (NASDAQ:TSLA) stands against the other stocks in Cathie Wood’s portfolio.
Cathie Wood is one of Wall Street’s most contentious figures. She founded ARK Investment Management around ten years ago and has over three decades of experience in the financial sector, including a notable spell as chief investment officer of AllianceBernstein Holding LP’s global thematic strategies unit. An 87.4% return in the fund, driven by a 1300% growth in Grayscale Bitcoin Trust, made it one of the fund’s best years since its debut in 2017. This performance came about at a time when Bitcoin’s price had reached a record high of $20,000.
Cathie Wood’s investing strategy is pretty straightforward: her ARK ETFs invest in developing high-tech firms in artificial intelligence, blockchain, medicinal technology, and robotics. Wood believes these firms can transform sectors, but their volatility causes significant fluctuations in ARK’s valuations. Although supporters of Wood hail her as a tech visionary, her detractors call her a run-of-the-mill fund manager. Additionally, despite achieving a 153% return in 2020, her long-term performance has raised questions regarding the viability of her high-risk, high-reward investment style. With $6,269 million under management, the ARK Innovation ETF has returned an annualized 14.24% over the last five years and a 12.16% year-to-date. The Nasdaq Composite, on the other hand, has an average return of 106.84% over five years.
Big Ideas 2025
Following recent changes in technology markets, Cathie Wood and her ARK research team released the yearly blockbuster report “Big Ideas 2025.” Wood seems optimistic about the future of AI computing power and AI agents. She added that from the dawn of artificial intelligence in 2018, computer performance has multiplied 40 times, and by 2023, it will have exceeded 48 times. Computing performance is predicted to hit a new high by the end of this century, mainly due to the rapid growth of AI. Specifically, Cathie Wood believes that AI agents are the central subject of future development, with the potential to accelerate the adoption of digital applications and spark unfathomable changes in human-computer interaction. Narrowing it down to specific industries, these agents will also press for an increase in the use of digital wallets in e-commerce. According to ARK research, digital wallets powered by AI purchasing agents are gaining market share from traditional payment methods such as credit and debit cards, with digital wallets anticipated to account for 72% of all e-commerce transactions by 2030.
Our Methodology
For this article, we scanned ARK Investment Management’s Q3 portfolio and chose its top 15 stock picks. The stocks are ranked in ascending order of the fund’s stakes in them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Tesla, Inc. (NASDAQ:TSLA)
ARK Investment Management’s Q3 Stake Value: $1.2 billion
Number of Hedge Fund Holders: 99
Tesla, Inc. (NASDAQ:TSLA) is a leading manufacturer of fully electric automobiles and energy solutions. Cathie Wood labeled Tesla Inc. (NASDAQ:TSLA) as the world’s largest AI opportunity last year due to the release of its newest iteration of self-driving (FSD) technology, which the investor claims has the potential to revolutionize the company’s economics. For that very reason, ARK Invest published a report in June of 2024 that set a $2,600 price target for Tesla shares by 2029.
On January 30, Mizuho reaffirmed its Outperform rating for Tesla (NASDAQ:TSLA), reflecting its faith in the company’s standing in the market, especially as the top provider of electric vehicles in the U.S. With the Cybertruck and Optimus serving as long-term growth engines, the firm thinks Tesla is well-positioned to handle the possible loss of tax benefits and tariffs. Nevertheless, Mizuho cautions that competition in China remains a challenge for Tesla.
Tesla Inc. (NASDAQ:TSLA) reported its fourth-quarter and full-year financials for 2024, which revealed an annual revenue of $97.15 billion. Although its gross margin of 18.23% fell short of analyst forecasts, the automaker maintained strong financials with over $2 billion in free cash flow.
Aristotle Atlantic Large Cap Growth Strategy stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q4 2024 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) detracted from performance in the fourth quarter of 2024. The stock had a strong performance in the fourth quarter, and our portfolio has an underweight position relative to the benchmark weight. Tesla reported better-than-expected third quarter earnings in late October. Given the CEO of Tesla’s position as an advisor to President-elect Trump, performance in the shares accelerated following the U.S. presidential election. There are expectations that regulation for autonomous driving will be centralized with the federal government. There have been reports in the press that tax incentives for electric vehicles will be eliminated or reduced, which could have a negative impact on Tesla’s subscale competitors.”
Overall TSLA ranks 1st on our list of Cathie Wood’s top stock picks for 2025. While we acknowledge the potential of TSLA as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
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