Cathie Wood and ARK Fund: How to Complete the Final Piece of the 'U.S. Tech Stock' Puzzle

Market adjustments are beneficial; they keep us humble.

——Cathie Wood

Disruptive innovation is not some convoluted jargon. Simply put, it means rip and replace—tearing down the outdated and replacing it with new technology. For example, I’ve seen many idyllic-style handmade craft videos where someone spends a week making a pinewood basin. I get the appeal of tradition, but in terms of functionality and production efficiency, it can’t compare to a plastic basin. They might say, "Hey, what do you know? This wooden basin is a treasure—it outlasts its owner." To which I’d reply, "Hey, this plastic basin will outlast humanity itself." This is a dimensional downgrade in material, creating a rift that replaces the old ways—rip and replace. That’s disruptive innovation in a nutshell.

1. Get to Know Cathie Wood in Three Minutes

The trailblazer of disruptive innovation investing, Cathie Wood—affectionately called "Mamma Cathie" on WallStreetBets and "Godmother" in Hong Kong—is a 70-year-old who started as an entry-level economist at Capital Group, with a solid foundation in macroeconomic analysis. Over 18 years, she climbed the ranks from economist to analyst, then to portfolio manager and managing director (MD), reaching the pinnacle of Wall Street as the "Queen of Employees."

After hitting the ceiling as an employee, she struck out on her own, founding Ark Invest in Florida with funding from her close friend, "Korean Little Yueyue." The name "ARK" (Noah’s Ark) reflects her devout Christian faith.

As the leading lady of cutting-edge tech investing, Cathie Wood’s fund strategy has never wavered—always at the forefront of volatility. Her funds are unlike any others, with daily transparency in trades and holdings. Actively managed ETFs themselves are a form of disruptive innovation, as most ETFs before her were passively tied to indices. Her approach combines the transparency and arbitrage mechanisms of ETFs with the active management of closed-end funds. Cathie’s goal is transparency and information equality—she frequently shares her investment theses on social media, distributing buy-side research for free. This has earned her a loyal following, as investors trust her non-black-box approach. ARK funds now manage $11 billion. From Wall Street’s "Queen of Employees," she’s become its "Queen of Tech."

(Cathie Wood in her younger days)

Let’s be real—Cathie has a sharp eye for blockbuster picks: Tesla, Bitcoin, Shopify, and Square were among her earliest investments. Take Nvidia—while critics say she exited too early, what many don’t know is that Nvidia was the fourth-best-performing stock in ARK’s entire history. She bought Nvidia in 2016 and sold it in 2022 for a 10x return. Sure, she missed out on further gains, but even Warren Buffett sold McDonald’s too early (a tenbagger excluding dividends).

Missing out on bull runs isn’t the issue with ARK. The real critique is its volatility, as it avoids large-cap stocks. After a 7x surge in 2021, the Fed’s rate hikes burst the growth-stock bubble, bringing ARK back to its 2018-2020 levels. While it’s still up overall, its CAGR lags behind the relentless bulldozer that is the Nasdaq 100. High volatility defines the Tesla-Bitcoin-ARK Risk Cluster—like a promising youth with a long growth runway. ARK focuses on next-gen internet, disruptive innovation, genetic breakthroughs, and fintech—pure-play, cutting-edge tech assets:

Innovation-driven, high-growth, small-to-mid-cap, long-duration, and volatile—that’s Cathie Wood’s signature. Disruptive innovation—rip and replace—is her creed. Despite recent underperformance (small-cap innovation stocks are the hardest hit by rate hikes), ARK funds continue to see net inflows. Her investors, staunch and thick-skulled, cheer her on in YouTube comments.

2. Tech’s Narrowing Rally

Now, let’s talk about U.S. tech stocks—though all tech, their fortunes have diverged. While the Nasdaq hits new highs daily, these highs resemble a Gothic spire rather than a Pantheon dome—six or seven tech titans, like expanding nebulae, drag the S&P and Nasdaq to record highs. The anticipated "broadening rally" from rate cuts remains MIA.

The Nasdaq 100 (ETF: QQQ) is more like the "Nasdaq 7," with Microsoft, Apple, Nvidia, Google, Amazon, Broadcom, and Meta accounting for 44% of its weight. The chart below shows the historic gap between the top 25% large-caps and the bottom 75% small/mid-caps—now at extreme levels.

The VIX (above) remains low, signaling complacency (at least for large-caps)—like faith in a Gothic spire. The VIX, or "fear gauge," measures S&P 500 volatility expectations via put options. Its current lows reflect broad optimism. Are tech megacaps too cozy?

3. Trading Rate-Cut Expectations

Cathie’s funds soared 67.6% in 2023 as rate-cut hopes grew, but with expectations now delayed, ARKK is down 12% YTD. Analysts have pushed back projected cuts from July to September. Per CME FedWatch, the market prices in a 52.2% chance of a September cut vs. 12% for July.

Hard landing? Soft landing? No landing? With cooling jobs data and receding inflation, a soft landing seems likely—but it’s not here yet, leaving rate cuts in limbo. The market chants:

Federal Reserve begins cutting interest rates.

Tech giants ride the AI wave (Nvidia, Broadcom, Dell), but the broader small/mid-cap tech rally—Cathie’s domain—hasn’t materialized. It’s a seesaw: lower rates (or expectations) lift Cathie. If rate-cut hopes strengthen, long-duration assets like ARK will rebound. If you believe the U.S. economy won’t stay overheated and cuts will come, now’s the time to position for higher-beta plays—like ARK. Beyond the Nasdaq 100 and the "Magnificent Seven," ARK completes the U.S. tech mosaic.

U.S. tech’s full spectrum = Nasdaq 100 (chips + megacaps) + ARK.

4. How to Invest in Cathie Wood with RMB?

Easy—China has ARK-tracker funds like Huabao Overseas Tech LOF501312.

Huabao Overseas Tech LOF501312 directly invests in top global tech—pure-play overseas exposure: Beyond ARK’s flagship ETFs, it targets chip giants, U.S. megacaps, and the Nasdaq 100. Its top 8 holdings are all U.S. tech, with 73.04% in ARK ETFs. Focus areas include disruptive innovation, next-gen internet, genetic tech, and fintech. Per its Q1 report, it’s outperformed its benchmark by 11.67% over six months and 5.83% since inception.

Despite inverted yields and high rates, once the hiking cycle ends and inflation cools, small/mid-cap growth should rebound. ARK’s disruptive innovation funds—low overlap with the Nasdaq 100—offer broader exposure and higher beta, perfect complements to megacap tech—the final piece of the U.S. tech puzzle.

Add 501312 to your watchlist and complete the puzzle.

$Hwabao WP Overseas Technology Equity Fund(QDII-LOF)-A(501312.CN)

$Huabao Overseas Tech Stock (QDII-LOF) C(F017204)$

$Huabao Nasdaq Select Stock (QDII) A(F017436)$

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