Cathie Wood's ARK Bought $40 Million of Nvidia, Tesla, and SpaceX During Last Month's AI Sell-Off. Was She Right to Buy the Dip?

Cathie Wood, the CEO of Ark Investment Management, is a believer in the power of innovation to enable companies to deliver outstanding returns. That's why her investment firm continues to buy shares of companies that lead transformative industries such as artificial intelligence (AI), electric vehicles (EVs), and space travel. And on July 28, Ark Investment Management bought almost $40 million worth of shares of Nvidia (NASDAQ: NVDA), Tesla (NASDAQ: TSLA), and Space Exploration Technologies (NASDAQ: SPCX), as all three stocks were dropping. Was that a good move?

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One of these is not like the others

Let's start with Nvidia. Driven by its dominance in the GPU (Graphics Processing Unit) market, the company's revenue has been growing rapidly for the better part of four years. In the first quarter of its fiscal year 2027, ended April 2026, Nvidia reported revenue of $81.6 billion, up 85% year over year. The company's adjusted earnings per share (EPS) came in at $1.87, up 140% from the year-ago period.

Management is projecting $91 billion in revenue (at the midpoint) for its upcoming second quarter, representing a year-over-year increase of almost 95%. Meanwhile, the stock is trading at 25.5x forward earnings, versus an average of 22.1x for information technology stocks. But Nvidia is no average company, and given how quickly earnings are growing, its valuation looks reasonable, even assuming revenue and EPS growth slow over the next couple of years. So, the stock still looks like a buy.

What about Tesla? The company's latest financial results were mixed. Second quarter revenue increased by 26% year over year to $28.2 billion. But Tesla's adjusted EPS dropped 18% year over year to $0.33. It's also worth highlighting that the company's deliveries crushed expectations during the period, largely because of geopolitical tensions that are impacting oil prices, a dynamic that may not be a structural long-term growth driver for Tesla. Meanwhile, the stock trades at 169.5x forward earnings.

The market is expecting Tesla to impose itself in the robotaxi market. If it is successful, it will transform the business and significantly boost revenue, margins, and profits. However, there is still significant uncertainty with Tesla's robotaxi efforts. So, the stock is fairly risky and should be volatile going forward. It may be attractive to patient investors comfortable with heightened volatility.

Then, there is SpaceX, which dominates space travel and satellite-based internet connectivity. It recently posted encouraging financial results. Second quarter revenue jumped by 92% year over year to $7.8 billion. It recorded a net loss of $541 million, much lower than the $1 billion loss recorded in the prior-year quarter. But even with the company's improvements on the bottom line, the stock remains unprofitable, which is odd for a company worth $1.8 trillion.

The market is pricing SpaceX like a disruptive tech company still in its early growth stages: it trades at a price-to-sales ratio of 61.5. That may be justified, provided SpaceX's grand vision becomes reality. We are talking about making space tourism commonplace through decreased space travel costs, a massive AI business, and a telecom segment that may rival the leaders in this field. These are all potentially lucrative opportunities, but there is far too much uncertainty with the company's prospects right now to justify its valuation. The stock isn't a buy, but it may become attractive if it sinks from its current levels.

Prosper Junior Bakiny has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia and Tesla. The Motley Fool has a disclosure policy.