NEW YORK – Ark Invest, led by star stock picker Cathie Wood, made several major trades on Thursday reflecting the asset management firm’s evolving perspectives on key holdings. Most notably, Ark invested over $40 million into Pinterest stock despite the company missing revenue expectations in its latest earnings report. To fund this purchase without deploying more capital, Ark trimmed its stakes in Nvidia and Shopify.
The moves highlight Ark’s long-term conviction in Pinterest contrasted with growing caution towards rich valuations and slowing momentum for Nvidia and Shopify. While the firms have excelled in recent years, concerns over post-pandemic consumer demand and rising rates have led to recent pullbacks. Still, Ark maintains exposure reflecting these companies’ leadership in pivotal secular growth trends like AI and e-commerce.
Pinterest Purchase Displays Long-Term Conviction
Ark purchased nearly 1 million Pinterest shares worth over $40 million on Thursday, spread across its ARK Innovation ETF (ARKK), ARK Next Generation Internet ETF (ARKW), and Ark Fintech Innovation ETF (ARKF). The investment came despite Pinterest reporting fourth quarter revenue of $877 million, missing analyst estimates of $886 million.
However, monthly active users grew to 450 million, up 11% year-over-year. The company also announced a partnership with Amazon to boost shoppable content and social commerce. Ark likely views these developments, along with Pinterest’s reasonably valued stock trading at 17x sales, as overshadowing the slight revenue miss. With the shift to digital advertising still early innings, Pinterest offers substantial room for monetization of its growing user base over the long run.
Trimming Nvidia and Shopify On Rich Valuations
To fund the Pinterest purchase, Ark trimmed holdings in semiconductor leader Nvidia and e-commerce platform Shopify. Despite strong fundamental performance, both stocks trade at elevated valuations after surging in recent years.
Ark sold around 2,000 Nvidia shares across several ETFs worth $1.4 million on Thursday. The move caps several days of profit-taking, after Ark sold 4,000 NVDA shares earlier this week. While Nvidia dominates gaming graphics and maintains leadership in AI semiconductors powering growth in cloud computing, data centers, and autonomous vehicles, the stock changed hands at nearly 60x earnings as of Thursday’s close of $696.41 per share. With a $1.7 trillion market capitalization, Nvidia approaches the size of megacaps like Alphabet, Amazon, and Tesla.
Similarly, Ark parted with around 108,000 Shopify shares worth $9.5 million in its various funds tracking innovative and disruptive technology firms. Shopify remains richly valued at over $87 per share, or nearly 9x 2023 revenue projections of $9.6 billion. However, growth is forecasted to slow to around 20% next year, down from over 50% in 2022. While the shift to e-commerce likely continues expanding Shopify’s addressable market, a potential recession poses risks that may be weighing on Ark’s outlook.
Maintaining Exposure to Long-Term Winners
Importantly, Ark maintained substantial exposure to Nvidia and Shopify across its ETFs. The firms rank among the 10 largest holdings across Ark’s diverse set of 7 funds. Thursday’s moves suggest more of a rebalancing rather than a fundamental shift away from these innovative companies.
With Nvidia and Shopify combining world-class technology in AI and e-commerce with seasoned leadership teams, Ark likely continues viewing them as long-term winners. The recent sales captured profits on extraordinary gains registered over the pandemic amidst economic re-openings.
Meanwhile, the significant investment into Pinterest on a slight pullback highlights Ark’s conviction in the visual search platform’s future. As online activity continues migrating towards video, images and discoverable shopping integrate directly into social media. Despite the quarterly revenue miss, Pinterest offers an early-stage opportunity in this seismic shift powering outsized growth potential over the next decade.
