A Shift in Tech Stocks: What You Need to Know
Recently, Ark Invest, a prominent asset management firm with $6.7 billion worth of assets under management, witnessed a significant drop in their funds. The firm, known for its influence in the market, saw investors withdraw a staggering $2.2 billion due to its disappointing performance. However, the firm’s head, Cathie Wood, is hoping to turn things around.
Purchase of Tech Stocks by Ark Invest
Several ETFs at Wood’s firm, including the Ark Innovation ETF and Ark Next Generation Fund, purchased shares in tech companies whose shares had taken a hit over the past month. The Ark Innovation ETF bought approximately $45 million worth of shares in companies such as Amazon, Advanced Micro Devices, and Coinbase. The Ark Next Generation Fund made a significant investment of $9.5 million in tech giants like Meta, Tesla, and Robinhood.
The Market Rout
All of these companies were caught up in the drastic rout that hit the entirety of the market. The question now is whether Wood’s decision to buy these stocks was a savvy move to capitalize on their lowered prices, or a poorly timed investment just as the market begins to plummet. “She could be right, she could be wrong,” says George Kailas, CEO of Prospero.ai, a fintech investment platform.
Performance of Ark Invest
Ark Invest’s performance has been a mixed bag over the past couple of years. The firm made a fortune from their bet on Tesla, which paid off when its stock rallied in 2021. However, Ark Invest’s performance has since been much more disappointing. The Next Generation Internet fund is down 2% so far this year, while the Innovation ETF, Ark Invest’s flagship fund, has dropped almost 20% for the year.
The Global Sell-off and Predictions
The slump in tech stocks coincided with a global selloff across equities. Some investors, like Gene Goldman, the chief investment officer of Cetera, predict a “peak to trough fall in the S&P 500 of 10% or more.” Kailas agrees with this prediction, albeit more tentatively.
Opportunities Amidst the Market Turbulence
Despite the turbulent state of the market, some long-term growth investors, like Wood, view it as an opportunity. Many tech companies remain in good shape, and their cheapening stocks could be a bargain, according to an analyst note published by UBS. The bank estimates second quarter earnings growth for the global tech sector to be 20% to 25% higher year over year and expects sustained earnings growth of 15% to 20% over the next year and a half.
Proceeding with Caution
Despite these potential opportunities, even investors who want to make a move are proceeding with caution. “I’m still not buying yet,” says prominent tech investor and former portfolio manager Paul Meeks. “Even though I love the price. I don’t like the timing.”
Political Uncertainty and Tech Regulations
Investors are also grappling with uncertainty stemming from the upcoming U.S. election. The potential impact on tech regulations under either a Republican or Democratic White House remains unclear. Notably, the Democratic party has shown an unprecedented determination to regulate Big Tech, while the Republican party presents its own source of uncertainty, with potential tariffs on Chinese imports that could significantly impact some tech firms.
As it stands, the world of tech stocks remains volatile and unpredictable. Despite this, the potential for growth and profit still exists for those willing to navigate the complexities of this ever-evolving realm. As always, it’s advisable for investors to stay informed and remain cautious in their decisions.
