Cathie Wood says she is becoming highly confident in Tesla

Cathie Wood, chief executive officer and chief investment officer of ARK Investment Management LLC on Wednesday said she has growing confidence in Tesla. To support her growing confidence in the electric automaker, she said ARK Invest remains bullish on Tesla as it continues to buy up its shares.

“Our confidence in Tesla has grown as we’ve done research on what ride sharing potentially could add. It could limit the risks significantly, it’s a much more profitable business than electric vehicles,” Wood told CNBC in an interview, on Wednesday.

“Even though there is some debate at Tesla whether or not they should launch a human drive ride-hailing network, it would be a very good bridge we think to their autonomous strategy and we think they will decide to do that.”

According to FactSet, Ark Invest, through its flagship fund – Ark Innovation – has generated $5.3 billion in inflows this year. The ETF is up almost 20% this year alone, after hitting an impressive 150% in 2020. Electric vehicle maker Tesla is Ark Innovation’s largest holding, accounting for more than 8.5% of the ETF’s total holdings.

ARK Invest, which trades under the ticker ARKK, trades every day, and the updates show the buying in Tesla, Wood said. Shares of Tesla were down more than 2% on Wednesday. In the last one month, Tesla shares are down 5% but remain up 386% in the last 12 months.

Ark’s confidence in Tesla is linked to the strong probability of having an increase in demand for successful autonomous vehicles and eventually, Ark’s price target will become a reality.

“As time goes on and we learn about their artificial intelligence expertise, the 30 billion miles they have collected of real-world driving data, no one comes close not even, I think Google might be at 30 million, compared to 30 billion and we know that in the AI world and autonomous is AI that the company with the most data and the best quality data will win,” Wood said.

Another attraction for Wood to Tesla is the fact that Tesla boss Elon Musk is a big fan of digital currency. Wood is also a longtime bitcoin supporter, making big bets on Grayscale Bitcoin Trust.

Wood added that she had anticipated that more institutions and big companies will integrate bitcoin into their systems this year, but Tesla’s quick move towards bitcoin came off a bit as a surprise. “I don’t think we ever thought there would be broad based substitution of bitcoin for cash on corporate balance sheets.” Therefore, Tesla’s move is very reassuring that companies are ready to embrace innovation and find other ways to “diversify some of their cash.”

“We have been expecting institutions to start moving into Bitcoin and other crypto assets, but primarily Bitcoin, the most secure of the blockchains … if you buy some Bitcoin, you will further diversify your portfolio and increase your returns with lower risk.”

Tesla not only bought $1.5 billion worth of bitcoin which represents 8% of the EV maker’s cash, but also said that the company will soon start accepting payments in bitcoin. The company said that investing in bitcoin is a way to increase “flexibility to further diversify and maximize returns” on its cash.

ARK Invest’s ETFs are all concentrated around “disruptive innovation”. It has more than $58 billion assets under management.