Tech Stocks Weaken Amid Inflation Concerns
ARK ETF Returns to November Levels of Last Year
[Asia Economy Reporter Kim Suhwan] Cathie Wood, CEO of ARK Investment, who gained fame last year by earning a 148% return on investment through the ARK Innovation (ARKK) Exchange-Traded Fund (ETF) and was nicknamed the "Money Tree," is struggling to avoid setbacks.
On the 11th (local time), the ARKK ETF closed at $106.12 on the New York Stock Exchange. This marks the lowest point in six months since it recorded $106.14 on November 24 last year, representing a decline of about 32% from the high in February.
The decline in ARKK is attributed to the recent consecutive drops in technology stocks. Given ARKK's focus on investing in innovative companies, it is inevitably heavily influenced by fluctuations in tech stocks.
Following the visible economic recovery after the COVID-19 pandemic in the U.S., concerns about inflation have emerged, and rising U.S. Treasury yields have led to weakness in technology stocks. Tesla, a representative stock of ARKK, has been on a downward trend since reaching its high at the end of January, falling about 30% so far.
Another major component of ARKK, the medical technology company Teladoc, has plummeted 50% since hitting its peak on February 8.
As ARKK’s major stocks continue to show weakness day after day, investors are reportedly withdrawing funds. Bloomberg reported, "Investors have pulled $500 million out of ARKK just this month."
Amid concerns that inflation will become a reality, value stocks, which are expected to benefit the most from economic recovery, are receiving more attention than tech stocks. Therefore, it is anticipated that the weakness in tech-related stocks, including ARKK, will continue. Bloomberg stated, "Investors are now clearly reluctant to invest in companies holding unproven technologies," adding, "The perception that innovative tech stocks are overvalued is spreading."
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