Key Takeaways:
- Cathie Wood’s ARK Invest did not bet on Nvidia stock (NVDA) and missed an explosive rally.
- How are NVDA gains compared to COIN gains since bottoming out in Nov 2022?
- Was capitalizing on Coinbase stock a wise choice?
YEREVAN (CoinChapter.com) – Cathie Wood founded her investment firm ARK Invest in 2014 and earned a reputation as a “treasure hunter” with ARK Invest Innovation ETF.
However, the portfolio manager missed the ball and opted out of AI-driven Nvidia’s $600 billion year-to-date (YTD) rally. On the other hand, it capitalized on Coinbase, one of the world’s largest crypto exchanges by volume. So was it the right choice? Let’s see.
Nvidia Stock Rally Shoots Past ARK Invest
Nvidia specializes in manufacturing graphics processing units (GPU) and AI technologies. The corporation stock NVDA has rallied nearly 250% since bottoming out in November 2022 and traded at $389, a record high, on May 30.
Nvidia-based profits vs. Coinbase-based profits
ARK Invest initially purchased just over 1,000 Nvidia shares in 2021, gradually increasing its holdings. As a result, the firm held nearly 144,000 shares in November 2022, worth over $20 million. However, the Wood missed the mark, selling in consecutive batches as the NVDA price grew.
As seen in the chart above, since November 2022, ARK has sold 94,000 of its NVDA shares, which cost $141. Thus, the explosive 250% price appreciation could have brought the investment firm over $46.3 million in profit.
As of May 30, the portfolio manager still holds 48,000 NVDA shares, which make up only 0.97% of ARK investments. According to calculations, the profit from those shares has stood at $23.6 million since November 2022.
Conversely, ARK bought 3.7 million COIN shares in May 2021 at the mean price of $230 per share.
The firm then gradually increased its stash, bringing it up to 11 million shares on May 30, 2023. Thus, in the same period since November 2022, ARK profited $175 million from Coinbase holdings, which trumps the Nvidia miscalculation.
Is Capitalizing on Coinbase Wise?
Coinbase is a well-established crypto exchange that saw its stock price rally over 75% year-to-date, albeit underperforming compared to NVDA.
Nevertheless, Wood’s investment firm capitalized on the exchange’s stock and now holds nearly 6% of all COIN shares at a cost average of $239-254, as seen in the chart above. Meanwhile, the stock traded at merely $57 in presale on May 30, after the mentioned year-to-date rally.
Moreover, Q2-Q3 assessments for the Coinbase stock are not optimistic. The exchange is still vulnerable to lowering crypto transaction volumes, despite its efforts to hedge against the volatility and introduce alternative sources of revenue, such as “subscriptions and services” fees.
The latter grew from 13% in Q4 2022 to an impressive 49% in Q1 2023.
Also read: Meta stock up 110% YTD as the company faces challenges in Q2 – what to expect?
However, the interest income, which is included in the growing “subscriptions and services,” is largely dependent on Circle’s USDC stablecoin, which is rapidly losing market share, unable to hold a competition to Tether’s USDT.
Coinbase’s troubles with the regulators could also damper COIN growth in 2023.
Surely, Nvidia’s explosive rally could fizzle in Q3 as well. However, the possible stall does not negate that ARK Invest missed a big opportunity in Q1 when the firm did not bode well against rising competition.
