Cathie Wood Just Made a Startling AI Move. Should You Follow?

Cathie Wood, founder and chief executive of Ark Invest, is known for making bold moves. The top investor seeks out innovative companies, particularly when they're trading for bargain prices -- and this means she often goes against the crowd, buying a stock when it's out of favor or not on most investors' radar screens. And this means that when a generally popular tech stock falls, Wood is often there to pick it up.

But in recent days, Wood has made a startling move concerning artificial intelligence (AI) stocks -- one that Wood-watchers may not have expected. Let's check out this investing giant's latest trades and consider if we should follow her lead.

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Buying AI stocks on the dip

It's important to note that, though Wood doesn't follow the crowd, she has still been a big investor in the popular area of AI in recent years. But Wood hasn't piled into stocks on the rise; instead, she's opted to pick up AI stocks on the dip or even when certain names have stagnated.

Wood's strategy is a long-term one. She aims to get in on promising companies early along their innovation path and hold on for a number of years to benefit as they develop their technologies and ideally become revenue-generating machines. So Wood isn't particularly concerned about short-term disturbances since she sticks with her investments for the long haul.

Now, let's consider the moves Wood made just last week, amid declines in AI stocks. They concern her flagship fund, Ark Innovation, as well as several other Ark funds. Wood and her team sold shares of six of today's most prominent AI leaders on March 26.

In the Ark Innovation fund alone, Wood sold:

• 4,189 Alphabet shares
• 5,707 Broadcom shares
• 15,696 Taiwan Semiconductor Manufacturing shares
• 28,927 Advanced Micro Devices shares
• 120,936 Nvidia shares
• 60,348 Meta Platforms shares

Wood also reduced her positions in some of these players in other funds. She didn't close out any of these positions, though, and in Ark Innovation, AMD still is among her top 10 holdings -- with a 4% weighting in the fund, AMD remains a key bet. All of the other stocks mentioned above each account for 1.3% or less of Ark Innovation.

Does this mean Wood is following at least part of the crowd and rotating out of AI -- and that you should follow? Not necessarily.

Looking for innovation

Wood is always on the lookout for innovation, and after holding bigger positions in AI market giants for a time, she might be freeing up some cash to invest in other AI opportunities amid the current market decline. Wood loves bargain hunting, and today, with the innovation-heavy Nasdaq in correction territory, she may be seeking to add to or reinforce other AI stocks that have suffered. For example, on March 30, Wood lifted her CoreWeave holding, buying 41,830 shares. CoreWeave specializes in cloud capacity for AI workloads, so Wood's investment here clearly shows she still believes in the AI story.

So, how should you invest in AI stocks right now? As always, you should first take a long-term view, and that means aim to hold onto any stock that you buy for at least five years. This allows time for the stock to recover from any tough times -- whether they happen to be today or at some point down the road -- and go on to grow.

Consider your comfort with risk

As for specific AI stock picks, the decision depends on your risk tolerance. If you don't mind some risk, you might follow Wood into a stock like CoreWeave. It has tremendous potential and has been delivering triple-digit revenue growth -- but it is a highly leveraged player, depending on debt to operate and grow, and this element adds risk.

If you're a more cautious investor, however, you might opt for one of the AI leaders that Wood recently sold, given their track records of earnings growth and strength that began well before the AI boom. They offer you exposure to the AI story and a certain level of stability, too.

All of this means that it's a great idea to consider the moves of famous investors like Wood -- whether they're unsurprising or completely startling -- but before following, it's key to consider your own investment strategy and priorities.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.