Cathie Wood Invested Roughly $1.4 Billion of Ark Invest's Flagship ETF in Just 3 Artificial Intelligence (AI) Stocks

Cathie Wood has made a name for herself by going all-in on tech, whether it was software stocks when they were novel, cryptocurrencies, or now artificial intelligence (AI) stocks. Her firm, Ark Invest, runs several exchange-traded funds (ETFs) that give investors access to baskets of tech and AI stocks managed by her and her team.

The largest Ark ETF is called the ARK Innovation ETF (NYSEMKT: ARKK), which had roughly $6.42 billion in assets under management as of Aug. 25. Wood and her team invested roughly $1.4 billion of this capital in just three AI-related stocks. Let's find out a bit more about these three Wood-favored stocks.

Ark Investment Management CEO Cathie Wood. Image source: Getty Images.

1. Tesla: $594.8 million

Wood and her team have long been bullish on Tesla (NASDAQ: TSLA), from its days operating primarily as an electric vehicle company to its current focus on its emerging robotaxi fleet and humanoid robots. ARK Innovation ETF's position in Tesla amounted to nearly $595 million as of this writing, or 9.26% of the fund.

While it's a bit stale at this point, Ark published a deep dive on Tesla in June 2024, assigning the stock a monster $2,600 price target in its base case for 2029, implying more than a sevenfold increase from current levels.

Much of the bullishness is based on robotaxis. By 2029, Wood and her team believe the robotaxi business will make up 63% of Ark Invest's projected $1.2 trillion of revenue for the company that year; 86% of the projected $440 billion earnings before interest, taxes, depreciation, and amortization (EBITDA); and 88% of the $8.2 trillion enterprise value. That also implies a 37% EBITDA margin.

Tesla launched robotaxis in seven markets as of late July. Management also reported on the second-quarter earnings call that unsupervised robotaxis have now driven 380,000 miles.

Still, the fleet is scaling slowly and cautiously to focus on safety, and even Tesla CEO Elon Musk noted on the earnings call that robotaxis need cellular coverage everywhere. There is also plenty of competition in the space now.

While Tesla very well could succeed with robotaxis and humanoid robots down the line, I'm still cautious on the stock while it trades at close to 198 times forward earnings.

2. Tempus AI: $401.7 million

ARK Innovation's second-largest position, accounting for 6.25% of the fund, is class A shares of Tempus AI (NASDAQ: TEM).

Tempus is leveraging AI to create more precise laboratory testing that can also be more personalized for the patient by integrating a patient's clinical data into the testing. The company has also built the Tempus platform, which it claims is one of the largest libraries of clinical and molecular oncology data in the world.

Tempus stock actually got a lift recently following the release of phase 3 trial results from a joint study conducted by Moderna and Merck, which showed that its personalized messenger ribonucleic acid (mRNA) vaccine, combined with Merck's immunotherapy Keytruda, produced better results than those who took Keytruda alone.

Tempus recently acquired Personalis, which created the genomic tumor-profiling technology that played a significant role in the development of the Merck and Moderna treatment.

AI is likely to play a big role in improving healthcare, but Tempus is another AI stock that has benefited from a lofty valuation. The company now has a $12.4 billion market cap but is still losing money.

Companies like Tempus depend heavily on big breakthroughs, so it's not uncommon these days for investors to front-run the valuation if they think the potential is there.

3. SpaceX: $377.7 million

Space Exploration Technologies (NASDAQ: SPCX) is the ETF's third-largest position, accounting for roughly 5.88% of the fund. Ark has been buying shares of SpaceX since the company's initial public offering, although it's unclear whether it participated in the IPO.

It makes complete sense that Wood bought SpaceX, given her belief in Tesla, because Musk runs both companies. SpaceX also has many businesses that Wood would be interested in from a technology standpoint, whether it's the launch business, Starlink, or the broader AI unit.

In July, Wood also told Fox Business that SpaceX "could become the most important company in history." There's also been talk that SpaceX and Tesla could eventually merge.

SpaceX's $1.89 trillion valuation is largely built on the premise of great success in the AI unit, which SpaceX has said has a $26.5 trillion total addressable market (TAM). The unit includes the social platform X, Grok Intelligence, SpaceX's data centers, a future terafab facility, and the ability to create enterprise solutions that could potentially mimic human workflows.

The bull thesis really centers on SpaceX's super-heavy-lift, fully reusable rocket, Starship, which Musk wants to eventually use to make multiple missions to space per week. Starship could be the key to enabling orbital data centers, which could take a significant share of AI compute.

If it all works out, the stock is likely to soar and become another multibagger. But remember, Starship is still in testing, and developments on the space front are likely to move slowly, so it's far from a sure thing.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck, Moderna, Tempus AI, and Tesla. The Motley Fool has a disclosure policy.