ARK CEO Cathie Wood says she avoided Arm’s IPO madness. this is the reason

Cathie Wood, CEO of ARK Invest, said she did not participate in Arm’s initial public offering last week because she found the British chip designer to be overvalued compared to its competitive position.

ARM, a Cambridge-based company controlled by Japanese investment giant SoftBank, listed on the Nasdaq stock exchange in New York on Thursday at an initial public offering price of $51 a share at a valuation of about $60 billion. Shares jumped nearly 25% on the first day of trading to close at $63.59.

The initial hype has since faded, as the stock suffered consecutive daily declines to end Tuesday’s trading session at $55.17.

Speaking on CNBC’s “Squawk Box Europe” on Wednesday, Wood said the recent frenzy over companies exposed to AI was justified and that “innovation is being undervalued given the enormous opportunities we see before us, which AI is very importantly catalyzing.” “.

“With regard to Arm, I think there may be too much focus on AI when it comes to Arm and perhaps not enough focus on the competitive dynamics there,” she added.

“So we didn’t participate in that IPO, and we also compare it to stocks in our portfolios. We think Arm came from a high valuation standpoint, and we see in our portfolios much lower-priced names with more exposure to AI.”

The arm declined to comment.

Top holdings in Wood’s main ARK Innovation ETF include Tesla, Shopify, UiPath, Unity, Zoom, Twilio, Coinbase, Roku, Block, and DraftKings.

After taking a hit during the last cycle of aggressive interest rate hikes by the US Federal Reserve, ARK ETFs have made a comeback this year, as investors flocked to stocks exposed to artificial intelligence. Wood said the expectation that interest rates will peak would reinforce this trend.

“The desire for innovation is moving here, and I think one reason is that many investors and analysts are starting to look at the rate hike moves that we’ve seen, which have been record-breaking in the last year or so, and to the other side.”

With inflation falling in major economies and with central banks expected to begin tapering their aggressive monetary policy tightening over the next year, Wood suggested the period ahead “should be a very good environment for innovation and global big trend strategies.”

ARK Invest on Wednesday acquired British ETF issuer Rize ETF for £5.25 million ($6.5 million), marking the company’s first venture into the European passive investing market.

Europe hasn’t had access to actual investment in the company’s U.S.-based ETFs yet, even though they account for about 25% of demand for the company’s research since ARK was created in 2014, Wood said.

“The cost of technology, especially with AI, is collapsing now, so it will be much easier to build and scale technology companies anywhere in the world,” Wood said. “This is no longer just Silicon Valley.” “We are very open about emerging technologies around the world, including Europe.”