The Investor Who Changed Wall Street Is Betting Big On Bitcoin And AI

Cathie Wood, the iconic investor behind ARK Invest, is in uncharted territory, facing a question no one had asked her before. It’s a Monday afternoon in July, and the 67-year-old is buzzing with energy, despite having flown in on a red-eye from Los Angeles to St. Petersburg, Fla., the previous night. Darting from one meeting to another, she personifies a powerhouse in action.

As we spoke on a recent Zoom call, I asked who taught her the most about money. It may seem trivial, but in the world of high-stakes investing, where media scrutiny and market expectations loom, it was a refreshing and unexpected inquiry that revealed a deeper truth about the high-profile money manager – she is still very much human.

“This is the first time I’ll be able to say, my mother,” Wood proclaims. “My father prided himself that she never had to work, but she worked like a dog to care for the family – he called her the best economist in the world.”

Coming from humble beginnings, her parents immigrated to the U.S. from Ireland and settled in Los Angeles. Wood’s father, hailing from a military background with no formal college education, instilled in her a spirit of innovation, and her mother’s penny-pinching prowess ensured that they never went without food. It was a testament to the resilience and resourcefulness that shaped Wood’s formative years. “But boy, did she clip every coupon!” she says.

Today, Wood has made waves in the investing world as the founder, CEO, CIO, and star stock-picker of ARK Invest, an investment management firm with nearly $24 billion in total assets under management. With her flagship Ark Innovation Fund delivering an average annual return of almost 45% over the past five years, Wood has proven a formidable figure in money management.

2023 Vibes

Wood takes a moment to find the numbers on her desktop and proceeds to share a real-time update on ARK Invest because it’s Cathie Wood; we are not getting through an interview without crunching numbers.

“What’s interesting about current performance is if I had told you and if you had told me at the beginning of this year,” she began, “that the mega-cap tech stocks would take off and outperform the S&P 500, while healthcare stocks would sink into the negatives, and small to mid-cap stocks would underperform most indexes, I would have thought we’d be the ones underperforming.”

Her words carried the weight of experience, knowing that market conditions could be fickle and unpredictable. But instead, a sense of pride filled her voice as she revealed, “Instead, we are outperforming even the QQQs, the NASDAQ 100. This is an early sign that active management is making a comeback.”

Ready to substantiate her claims, Wood delved into the numbers, citing returns that spoke volumes about their investment strategies. “As of last Friday [July 21], our flagship was at 53.4%, and our genomic strategy was up 31.5%,” she recited with precision.

“The S&P 500 was up 19.2%, the NASDAQ 34.7%, and the QQQs, the NASDAQ 100, up 41.5%. Even though the entire healthcare sector flipped positive at 1.1% for the year, we stood strong at 31.5%.”

Her excitement grew as she delved further into their performance, highlighting the success of their small-cap strategy, which soared at 12% despite challenges in that segment. The pride in her voice was unmistakable, knowing that their unique approach to active management is paying off.

“We’re very gratified by that,” she asserted, “but we also want to communicate that this is active management at its best.”

As the conversation shifted to market conditions and interest rate fluctuations, Wood’s analytical mind kicked into high gear. She weighed the impact of interest rate increases on their long-duration strategy, acknowledging the challenges faced during heightened uncertainty over the last two years.

“The market seems to be looking over the interest rate increases,” she observed. “We think they’re close to the end, and the market seems to agree.”

July started to show ARK Invest’s renewed inflows, a sign that their unique strategies were drawing attention and trust from investors. She likened the market’s fluctuations to waves of truth, rising and falling with the tides of investor sentiment and the ebb and flow of interest rates.

Through boom and bust, ARK Invest weathered the storms, and as she reflected on the journey, she reaffirmed her commitment to the vision that had brought them this far. “We know who we are,” Wood declared, her voice steady. “So, I don’t let either side of this get to me. We keep our eye on the prize. We keep moving forward.”

Research-Backed Optimism

Since establishing ARK Invest in 2014 to provide active stock portfolios in an ETF format, Wood has built a business that mirrors the very essence of her mind.

Wood is not content with being surrounded by ‘yes men’; instead, she enjoys the challenge of intellectual stimulation and curiosity, leading her to seek out diverse perspectives and think beyond conventional norms. She knows that their success hinges on one core principle – their research.

“Our research is first principles-based,” she explained, “which means we start as though we know nothing. Take a white sheet of paper and delve into the possibilities. We questioned what could go into an autonomous vehicle in 2014. Is it even possible? Existing benchmarks do not bind us.”

She emphasized that ARK’s analysts’ responsibilities are broken out not by sector but by technology, so across 14 different technologies, they are sector generalists. The belief is that these technologies would scale to mass market opportunities, crossing boundaries between sectors.

“With this conviction coming out of research, it’s tough to rattle me about what we do,” Wood admitted. “I genuinely believe we’re doing the right thing, and we’re doing it uniquely. I am surprised that more firms haven’t followed us this way.”

As she spoke about their research principles, it’s clear that she saw the power in sharing their findings, but even Wood is still surprised by how much social media attention the firm has received.

Their social strategy, including social media and social distribution via partnerships with the fintech platform Titan, allows them to engage with a broader audience and garner valuable feedback. ARK Invest’s YouTube channel draws in 545,000 subscribers, regularly tuning into the firm’s insights.

“Many people say we’re crazy to give our research away,” Wood grinned, “but they don’t see the incredible value we receive in return. Founders, venture capitalists, and professors contact us, and we learn from their perspectives and critiques. It’s like having a continuous dialogue with innovators and critics alike.”

Putting ARK Invest’s research center stage also opens the firm to collaboration. In September 2022, Titan announced its partnership with ARK Invest to launch the ARK Venture Fund to retail investors on Titan.

As a result, inflows have been consistent, even during the regional bank crisis in March, she says. “Our first big win came when MosaicML, one of the first companies we put in the venture portfolio, was taken over by Data Bricks for five times what we paid last September.” Now DataBricks is in the most prominent position in their portfolio once the acquisition is consummated.

Not only is Wood interested in making a profit, but she also wants to help the companies in ARK Invest’s portfolio attract talent and prepare for their next funding round or IPO, which she describes as a “truly win-win situation.”

In a world where short-term thinking often dominates the financial landscape, ARK Invest’s long-term horizon sets them apart. For Wood and her team, it’s not just about chasing fleeting gains; it’s about their profound belief that their version of the truth will ultimately triumph.

“We look at companies differently,” she asserted, “We want to see them investing aggressively in their future, even if it means forgoing short-term profitability. The opportunities with emerging technologies, like artificial intelligence and autonomous taxi platforms, demand a different approach, and we’re ready to embrace it.”

Her words resonated with a striking blend of confidence and introspection. “The hope for a brave new world has become very short-term oriented,” she shared, acknowledging the inevitable ups and downs that come with her pioneering investment approach.

Lule Demmissie, CEO of eToro U.S. – and another substantial woman in finance – is drawn to the long-term promise that blockchain technology levels the playing field for educating everyday investors worldwide, a similar sentiment to Wood.

“That does not mean the road cannot be bumpy, and the industry will continue to mature,” she said in an email. “Market cycles are inevitable, and any investment perspective should be deliberate and not be pollyannaish. But differences of opinion and outlook make a market, and Cathie brings a different perspective.”

Bitcoin’s Icon

Despite spending 45 years on Wall Street and over 30 years in portfolio management, Wood’s ascent to icon status occurred in 2020. She made bold investments in innovative companies that she believes will shape the future and level the playing field, even if many still need to be profitable. These bets ultimately paid off. As COVID-19 spread and the economy spiraled, her ARK Innovation Fund returned an eye-catching 150%. That made Wood the toast of Wall Street.

On top of that, Wood’s relentless and research-backed optimism for Bitcoin keeps her name in the headlines. She was early to see and tell the world about public blockchains’ potential. She foresaw the ascent of Bitcoin in 2020, and today, she predicts the asset to hit $500,000 by 2026 and $1 million by 2030.

“She backed that up with high-quality research, and in so doing, widened the Overton window for professional investors about what Bitcoin can become,” said Matt Hougan, chief investment officer of Bitwise, in an email. “The great thing is, she’s now been joined by other mainstream voices, including Fidelity and BlackRock. This is how progress is made in a disruptive field: At first by a few, and then by the many.”

And it’s worth noting that for all the controversy, she has been right. She confidently predicted the surge of Tesla (who else was a big Tesla bull in 2018?), which materialized as one of the top-performing stocks over the last five years. And Bitcoin is one of the best-performing assets of the decade.

All that praise came crashing down in 2022 when ARK Invest’s long-duration strategy was “absolutely hammered” by the rise of interest rates, Wood says. Critics said Wood’s funds were too risky and she was a one-trick pony. Jim Cramer famously called her “the kiss of death,” and there are even funds set up specifically to bet against her.

And while her convictions face ridicule, Wood remains unfazed. She’s aware of the negativity surrounding her contrarian decisions, chronicled in tweets and news stories. In the whirlwind of market highs and lows, Wood reflects on a time when her firm seemed untouchable.

“I can tell you in 2020, toward the end of the year and early 2021, ARK could do nothing wrong – Cathie Wood could do nothing wrong,” she said, reminiscing on what felt like endless negative publicity about her and her company. With the conviction of a seasoned visionary, she recounted her words during those heady days, “We’re the GOAT today, greatest of all time, and will be the goat tomorrow.”

Her belief in her team and their unique approach was palpable, as she emphasized the differentiation between “GOAT” in capital letters and lowercase, illustrating the distinction between public perception and their persistent self-assurance.

At the same time, she’s been dubbed a pioneering figure. A female representation standing out in an industry of primarily Warren Buffett’s – and her accomplishments, tireless pursuit of excellence, and staunch dedication to her work have solidified her as one of the most influential women in finance, opening the door for the next wave of female leaders to reach the top.

While Wood’s investment approach is polarizing, no one can deny that she has made substantial contributions to crypto, said Vik Sasi, Chief Strategy Officer at Manhattan West.

“She brings the unwavering conviction of a forward-thinking venture capitalist to the public markets and doesn’t flinch at the first signs of volatility,” Sasi said in an email. “She is conviction-driven—perhaps to a fault given the lofty portfolio projections she makes in public—but has ultimately been a net positive for the asset class and will continue to be a faithful crusader for broader acceptance and adoption of crypto.”

In April, Wood and 21Shares (Wood is a board member), co-founded by Ophelia Schneider, jointly refiled with the Securities and Exchange Commission for the ARK 21Shares Bitcoin ETF . Schneider co-founded 21Shares 2018 to build sophisticated crypto-investing technology her mom could use. It’s now valued at $700 million.

Both Wood and Schneider share the view that innovation will become a flight to safety category of investing. “Very contrary to how people are thinking right now,” Wood says, “an example is when regional banks were falling apart in March, the stocks themselves were imploding, and Bitcoin went from $19,000 to $30,000 – that was a flight of safety against counterparty risk.”

Michelle O’Connor, VP of Brand & Communications at TaxBit, has spent nearly a decade in the crypto industry and shares that she has seen numerous innovative and provocative trailblazers rise and fall.

“I hold in high regard Cathie’s unwavering commitment to this market as she and her team continue to focus on the potential future of cryptocurrency,” she said in an email.

O’Connor acknowledges that Wood’s critics seemingly forget her tenure in the industry. “It’s one thing to have a public persona promoting crypto,” she said, “and it’s another to have a seasoned thought leader who is not only incredibly well versed on the near and long term potential of crypto but the underlying technology.”

A New Home For Innovation

Wood made headlines, again, in October 2021 when she shifted her investment firm’s base from Midtown Manhattan, the home of most legacy financial institutions, to St. Petersburg, a city on Florida’s gulf coast. The new hybrid remote culture born during the pandemic helped drive the decision.

Today, she rotates her teams through the St. Petersburg office, embracing the sun-soaked location that resonates with her optimistic outlook as she embarks on a new era centered around education and building community on her new turf.

St. Petersburg is poised for growth, and Wood is ready to be the first to bet on the future. To help stimulate economic development within the city, ARK has invested $2 million to build the ARK Innovation Center, a 45,000-square-foot facility that will serve as a space to incubate over 50 companies and encourage entrepreneurialism.

Ark Innovation Center will also serve as the home for Wood’s Innovation Foundation, which she launched over three years ago to create a new blueprint for education through the lens of innovation.

Ark’s famous research, made age appropriate by the educators Wood has hired for the foundation, will be the sixth-grade science curriculum for all of Pinellas County’s public schools – a first of its kind in the Northeast.

“There’s no more profound way to make a difference than inspiring young children,” Wood says. “New technology that excites them and gives them the hope and the dream that they’re gonna have a better life than their parents.”

Roughly 60% of the Pinellas County school system is from lower socioeconomic households. And Wood is a firm believer that innovation and technology level the playing field. “It’s a dream come true that I didn’t even know could come true,” she says.

The Next Five Years

Wood is always looking ahead, and for the next five years, she’s thinking about how clear it’ll become to more people that we’re heading into a deflationary world, and “deflation does not have to be bad,” she says.

“Falling prices in a new technology mean more people can harness it around the world; they can afford it,” she says. “So we believe we’re in the sweet spot for these five innovation platforms in ARK’s portfolio: multi-omics sequencing, robotics, energy storage, artificial intelligence, and blockchain technology.”

Wood strongly believes that the convergence of these sectors is experiencing an exponential growth trajectory, and now they are all beginning to feed off each other. “We are confident that this will result in the market cap of truly disruptive innovation increasing from $15 trillion to more than $200 trillion in the next five to 10 years,” she says.

She proceeds to explain how the internet bubble of the 1990s was too early as the technologies were too expensive at that time. Chat GBT has drastically lowered the cost of developing A.I. models, as what once cost $800 million in 2015 now only costs $4.5 million in 2020 and is rapidly decreasing, she says.

If today’s technology represents a dynamic and innovative environment in our history, to capitalize off of it, we need to get everyone on the same page. As Wood enters her new era, she is ready to pursue education in schools nationwide and encourage people to invest in innovation to prepare for the “disruption of the traditional world order,” she says.

“We have the best opportunity to increase the lot in life for so many people if we just get them on the right side of change.”