ARKK is having a rough start to 2026. After closing 2025 with a 35.49% return that crushed the S&P 500, Cathie Wood’s flagship innovation fund has stumbled 9.58% lower year-to-date as of early February. The pullback has been swift and concentrated, driven by weakness in the fund’s largest holdings and a broader repricing of growth stocks after an exceptional 2025 run.
We think ARKK is a long-term winner from here, but it’s worth diving into the portfolio to understand what’s going on.
Tesla Drives the Pain
Tesla remains ARKK’s largest position at 11.12% of the portfolio, and the stock’s struggles have directly impacted fund performance. TSLA is down 7.18% year-to-date through February 13, closing at $417.44. The company reported $0.50 in Q4 2025 earnings on January 28, 2026, beating estimates but showing a 60.6% year-over-year decline in quarterly earnings growth. Revenue fell 3.1% year-over-year to $94.83 billion on a trailing twelve-month basis.
The operational challenges are mounting. Tesla dropped out of China’s top 10 NEV automakers in January 2026, posting its lowest monthly sales since November 2022. BYD now commands 15.8% of the Chinese NEV market while Tesla struggles to maintain share. Leadership changes have added to investor concerns, with Raj Jegannathan exiting and the company pivoting harder toward robotaxis and AI despite cooling EV demand.
The stock reflects expectations that the autonomous vehicle and robotics bets will eventually pay off. Polymarket prediction markets show crowd sentiment pricing 71% probability Tesla closes above $400 by February 27, but only 49% probability of clearing $420. The market is pricing in significant uncertainty around the Cybercab production ramp, which Musk warned will be “agonizingly slow” when production begins in April 2026.
Crypto Exposure Gets Crushed
Coinbase, ARKK’s 3.55% position, has been another major detractor. The stock crashed 27.34% year-to-date through February 13 to $164.32, down from $226.14 at year-end. The one-month decline of 35.78% reflects both crypto market weakness and the company’s Q4 2025 earnings miss on February 12. Polymarket prediction markets correctly anticipated the miss, with the crowd pricing the probability of beating consensus EPS of $0.61 down to near zero in the days before the announcement.
The technical damage is severe. COIN’s RSI bottomed at 14.39 on February 5, an extreme oversold reading that has since recovered to 37.12 on February 13. Three consecutive daily prediction markets resolved to “Down” on January 29, January 30, and February 4, indicating sustained selling pressure. The current February 17 directional market prices 62% probability of an up day, suggesting some stabilization but far from a confirmed reversal.
Cathie Wood has been buying the dip aggressively. She added $26.1 million in Coinbase shares on December 23, 2025, despite earlier net selling in the position. The fund has also increased stakes in crypto infrastructure plays Circle Internet Group and Bullish, adding $15.56 million and $10.2 million respectively in November 2025. The bet is that crypto infrastructure will outperform pure exchange plays as the sector matures, but the near-term pain has been substantial.
Palantir and Shopify Show Divergence
Not every ARKK holding is struggling. Palantir, the fund’s 3.19% position, delivered $0.25 in Q4 2025 earnings on February 2, 2026, beating estimates of $0.23 by 8.70%. The company has beaten or met analyst expectations in six of the last eight quarters, with full-year 2025 EPS growing 78.6% year-over-year from $0.14 to $0.25. Yet the stock is down 26.07% year-to-date through February 13 to $131.41, giving back gains from its late 2025 run.
Insider selling has been notable. CEO Alexander Karp disposed of 359,325 Class A shares on November 20-21, 2025 following a major RSU conversion event. Director Alexander Moore sold 71,308 shares between December 1, 2025 and February 2, 2026 at prices ranging from $147.45 to $178.44. Polymarket prediction markets show 27.85% implied probability PLTR closes above $140 by February 27, with probability dropping sharply above $150.
Shopify has held up better, down 29.99% year-to-date to $112.70, but still representing a significant drag on the 4.31% position. The company reported strong Q4 2025 results with revenue of $11.56 billion on a trailing basis, up 30.6% year-over-year, and authorized a $2 billion buyback. The stock trades at 119x trailing earnings but 60x forward earnings, reflecting expectations for continued margin expansion. Analyst consensus sits at $163.60, implying 45% upside if the e-commerce platform can maintain its growth trajectory.
Wood’s Strategic Pivot
Cathie Wood is reshaping ARKK in real time. Healthcare is now the fund’s largest sector allocation at 22.8%, ahead of Information Technology at 20.0%. The fund has been increasing stakes in AI-powered precision medicine plays like Tempus AI, which sits at 5.23% of the portfolio despite being down 37.97% over the past year. CRISPR Therapeutics, the 3.55% position, represents a bet on gene-editing commercialization following the approval of CASGEVY for sickle cell disease and beta-thalassemia.
The fund’s concentration remains extreme. The top 10 holdings account for 52.4% of assets, with the top 5 representing 27.4%. This concentration amplifies both gains and losses, as the current drawdown demonstrates. ARKK’s expense ratio of 0.75% remains high relative to passive alternatives, but Wood’s active management approach has historically delivered differentiated returns during innovation cycles.
The question for investors is whether this pullback represents a buying opportunity or the start of a deeper correction. ARKK’s 2025 outperformance came after years of underperformance, with the fund still down significantly from its 2021 peak. The current technical setup shows oversold conditions that could support a bounce, but the fundamental challenges facing key holdings like Tesla and Coinbase suggest the path forward remains uncertain.
Wood’s conviction in disruptive innovation has been tested before, and her willingness to add to positions during weakness indicates she views current prices as attractive entry points for long-term investors willing to stomach volatility.
We’re long-term believers in ARKK and certainly think they’re on the right side of bets of what’s coming.
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