ARK CEO Cathie Wood says she avoided the Arm IPO frenzy. Here's why

cnbc.com:

ARK Invest CEO Cathie Wood said she did not participate in Arm's blockbuster initial public offering last week because she finds the British chip designer was overvalued relative to its competitive position.

Arm, the Cambridge-based company controlled by Japanese investment giant SoftBank, listed on New York's Nasdaq on Thursday at an IPO price of $51 a share for a valuation of almost $60 billion. Shares jumped almost 25% on the first day of trading to close at $63.59.

The initial buzz has since fizzled, with the stock suffering successive daily declines to end the Tuesday trade session at $55.17.

Speaking on CNBC's «Squawk Box Europe» on Wednesday, Wood said the recent frenzy around AI-exposed companies was justified and that «innovation is undervalued given the enormous opportunities that we see ahead, catalyzed very importantly by artificial intelligence.»

«As far as Arm, I think there might be a little bit too much emphasis on AI when it comes to Arm and maybe not enough focus on the competitive dynamics out there,» she added.

«So we did not participate in that IPO, and we also compare it to the stocks in our portfolios. Arm came out, we think, from a valuation point of view on the high side, and we see within our portfolios much lower priced names with much more exposure to AI.»

Arm declined to comment.

The top holdings in Wood's flagship ARK Innovation ETF include Tesla, Shopify, UiPath, Unity, Zoom, Twilio, Coinbase, Roku, Block and DraftKings.

After taking a beating during the recent cycle of aggressive interest rate hikes from the U.S. Federal Reserve, the ARK ETF resurged this year, as investors flocked to stocks with AI exposure. Wood said that the anticipation of interest rates peaking would further this