Back before Tesla (TSLA) traded as high as it did, ARK Invest ETF (ARKK) built a big position. The conviction to bet on the disruptive innovation of Tesla paid off. ARK earned its early investors a strong return.
During the pandemic in early 2020, the Federal Reserve cut interest rates and assisted markets with quantitative easing. The government issued stimulus checks to offset the impact of the lockdown. The combination sent technology stocks and Tesla shares to new heights.
Those days are over.
ARKK now has too much Tesla stock at a 6.4% allocation. It holds 6.39% allocated in Roku (ROKU), a streaming service hardware device. Roku is highly vulnerable to increasing competition. Consumers who bought a television will not need a Roku device. In addition, Amazon’s s (AMZN) Fire TV Stick is just as compelling.
Streaming services firms are also struggling from a decline in advertising. This could pressure Roku’s prospects in the next year.
Block (SQ), a fintech, will have higher competition as credit cards fight for market share. Visa (V) and Mastercard (MA) have a bigger network of merchants to grow. Wary of Block, consumers will go back to their credit cards.
ARKK stock is in danger of falling to new lows. Beware of this ETF.
