After enduring years of turbulence, Cathie Wood’s flagship fund is making headlines again. The ARK Innovation ETF (ARKK) — the centrepiece of Wood’s disruptive-innovation strategy — has climbed an impressive 87% over the past year, far outpacing most mutual funds and ETFs tracked by the American Association of Individual Investors. The rebound has been powered largely by a renewed wave of enthusiasm for artificial intelligence.

AI Leads the Charge

ARKK’s performance is being lifted by several AI-driven holdings, including Palantir Technologies, Advanced Micro Devices, Tempus AI, and Tesla — still the fund’s single largest position.

Wood calls Tesla “the largest AI project on earth,” citing the automaker’s progress toward autonomous driving and its vision of a global robotaxi network. “The reasoning models are astounding people in terms of how much more they can do if you give them time,” she told Forbes, adding that she sees no evidence that AI performance is plateauing.

Rising Again After Painful Years

This is not Wood’s first time in the spotlight. Back in 2020, ARKK skyrocketed 157%, earning her a reputation as one of Wall Street’s most visionary stock pickers. But that fame quickly turned into scrutiny when the fund lost 14% in 2021 and plunged 67% in 2022 as high-growth technology names collapsed under rising interest rates.

Even after tripling from its 2022 lows, ARKK still trades about 42% below its all-time high from February 2021. Assets under management have fallen from roughly $17 billion at the end of 2020 to about $8.3 billion today, showing that many investors didn’t stick around during the downturn.

Still, Wood has dismissed comparisons to the speculative boom that fuelled her earlier run. “The companies investing in AI are some of the most profitable in the world,” she said, suggesting this rally is rooted in stronger fundamentals than the pandemic-era surge.

Why 2025 Feels Different

Several trends have converged to put ARKK back in the conversation:

• AI is no longer a niche theme. It’s now central to nearly every industry, from chipmakers to software firms and healthcare startups.

• Investor confidence has returned. ARKK has seen billions in inflows this year, according to ETF data providers, as retail and institutional investors reposition around the AI revolution.

• Valuations are more reasonable. Many of ARKK’s holdings are generating real revenue and profits from AI-based products and services — a major shift from the pre-2022 growth narrative.

Risks Still Lurking

Despite the optimism, ARKK remains one of the most volatile funds on the market. Its concentrated portfolio can amplify both gains and losses. Analysts note that a few missteps — especially from Tesla or Palantir — could quickly erase months of progress.

Moreover, with markets again pricing in aggressive expectations for AI growth, some experts warn that a correction could be inevitable if economic conditions tighten or investor sentiment turns cautious.

The Bottom Line

Cathie Wood has built her career betting early on transformational technologies — sometimes too early. This year, however, the timing seems to be on her side. Whether ARKK’s AI-fuelled resurgence marks the start of a lasting comeback or another short-lived rally will depend on whether the technology lives up to its promise.

For now, the disruptive-innovation pioneer is once again outperforming the market — and proving that even after years of scepticism, her bold conviction in the future of AI is still very much alive.