Shares of electric vehicle (EV), energy storage, and artificial intelligence (AI) company Tesla (NASDAQ: TSLA) are trading down about 40% from their peak. Slumping sales in the company’s EV segment, which currently provides the lion’s share of its revenue and earnings, have dampened Wall Street’s enthusiasm for the stock, despite the company’s potential in robotics and autonomous vehicle technology.
However, Cathie Wood, who manages billions of dollars for Ark Investment Management, is buying Tesla stock hand over fist for her firm’s exchange-traded funds (ETFs). Since the end of 2023, Ark’s total Tesla position has grown from 3.8 million shares to 5.3 million.
Wood built her reputation in part on her foresight about Tesla stock. So should investors follow her lead now and buy it for its alleged AI upside?
Wood has won big on Tesla before
Wood founded Ark Invest in 2014. The firm operates several actively managed exchange-traded funds (ETFs), most of which focus on various categories of growing, innovative companies. Its flagship fund is the Ark Innovation ETF. Between 2017 and 2019, Wood invested heavily in Tesla, which was at the time fending off bankruptcy as it ramped up Model 3 production.
Tesla worked through its challenges, the business thrived, and the stock gained nearly 1,500% over three years beginning in January 2019:
TSLA Chart
But Ark’s reputation has suffered since then. Market sentiment about speculative growth stocks plummeted as the Fed boosted interest rates to fight inflation, and their valuations plunged too. Many of Ark’s holdings remain down significantly from their former highs. The Ark Innovation ETF has dramatically underperformed the S&P 500 since early 2022.
Now, however, Wood appears to be leaning into Tesla once more, hoping for a big win to get her funds back on track. Her new investment thesis for Tesla credits it with eye-popping investment potential.
Why Wood thinks it will happen again
Ark updated its long-term Tesla forecast this year, pegging its expected value in 2029 at $2,600 per share. That’s over 10 times the company’s value today.
Both CEO Elon Musk and Wood have high hopes for…
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