News:
Since October 8, 2025, Cathie Wood’s ARK Innovation ETF ($ARKK) has declined by over -25%.
Source: Bloomberg, Hedgeye
Trend:
ARKK is one of the most recognizable thematic ETFs of the past decade. Managed by Cathie Wood, the fund targets “disruptive innovation,” with exposure to AI, genomics, fintech, and other emerging technologies. It surged during the pandemic-era bull market, when low interest rates and abundant liquidity fueled a wave of speculative growth investing. It also did well last summer and fall.
ARKK’s strategy works in the right conditions. When capital is cheap and growth is accelerating, these types of firms can drive outsized returns. But that regime has ended.
The portfolio currently has a negative return on equity, which is a polite way of saying that its companies are, on average, losing money. Current cash burn is offset by long-duration revenue flows—in effect, by scaled-up bonanzas that make all owners rich sometime in the distant future.
The income growth of major technology firms peaked at the start of Q4 2025, just as ARKK began to decline. As we enter “Quad 3” in the Hedgeye Risk framework (with inflation accelerating and growth decelerating), the worst performing sectors are typically Technology, Consumer Discretionary, and Financials, as well as the more speculative portions of Healthcare. These exposures comprise 81% of the ARKK portfolio.
ARRK’s current holdings span everything from gene-editing firms like CRISPR Therapeutics AG (CRSP) to flying taxi startups like Archer Aviation Inc. (ACHR). These are precisely the types of assets that struggle when the geopolitical outlook darkens, major economies slow, and financial conditions threaten to tighten.
The fund is now commingling illiquid assets in a liquid vehicle with its investment in OpenAI at an $850B valuation (~30x+ revenue for a cash-burning company).
In this market environment, ARKK has become a basket of everything likely to underperform.
In Practice:
The Hedgeye Fourth Turning ETF ($HEFT) is short the ARK Innovation ETF (ARKK).