ARKK: Wood Is Selling A Rosy Outlook For 2026 And I'm Not Buying It

Summary ARK Innovation ETF (ARKK) remains a 'Sell' as it underperforms the S&P 500, down over 6% YTD versus S&P's ~2%. ARKK's high turnover (43%) and concentrated bets in Tesla, gene editing, and crypto increase portfolio risk beyond typical ETFs. Despite Cathie Wood's bullish AI and crypto outlook, I see near-term macro risks, especially from Middle East tensions and inflation. I continue to favor dollar cost averaging into VOO for broad exposure, recommending direct Tesla or crypto holdings for risk-tolerant investors. Despite having some solid results in 2025, in my last article I noted I was skeptical ARK Innovation ETF ( ARKK ) could continue to generate market-beating results and thus I gave the ETF a “Sell” rating. So far I’ve been correct as the ETF is down nearly 15% since that article was published while the S&P 500 ( VOO ) is just slightly down. YTD ARKK is down over 6% while S&P 500 is down nearly 2%. Let’s review ARKK’s current holdings and I’ll discuss where I see the fund going next. Fund Structure For investors unfamiliar, Cathie Wood (the Chief Investment Officer) and her team at ARKK focus on “disruptive innovation.” This disruptive innovation includes themes such as, artificial intelligence, robotics & automation, fintech, cryptocurrency and DNA and genomics technologies. ARKK is a diverse ETF with exposure to six market sectors. In my September article the ETF had allocated 23% of their capital to Health Care, 21% to Technology and 17% to Financials. As you can see from the below pie graph the allocation to Health Care and Technology has increased, making up over 50% of the total pie, while exposure to the Financials sector has declined: Seeking Alpha You can see that allocation changes in the fund’s top ten holdings as ARKK has increased their exposure to healthcare especially the AI healthcare and gene editing spaces with increases in their CRISPR Therapeutics AG (CRSP), Beam Therapeutics Inc. (BEAM), and Tempus AI, Inc. ( TEM ) positions: Seeking Alpha Conversely, you can see ARKK has decreased their exposure to crypto related plays such as Coinbase Global, Inc. (COIN), Robinhood Markets, Inc. ( HOOD ) and BitMine Immersion Technologies, Inc. (BMNR). Cryptocurrency remains a central theme to ARKK’s strategy and overall I’d agree with crypto bulls that Bitcoin and Ethereum will be higher by the time we get to 2030. However, I do think it was rather ill-advised to load up on BitMine after Tom Lee’s Chairman announcement and the company’s strategic decision to become an Ethereum acquirer. This goes back to one of my original issues with ARKK which is the fund’s wishy-washy decision making and lack of conviction to hold winners (for example Nvidia). For fun, let’s go back to my original ARKK article , which I published in the summer of 2024. Here were the company’s top ten holdings: Seeking Alpha Six of top ten holdings remain but Wood dumped UiPath, Inc. ( PATH ) and Zoom Communications, Inc. (ZOOM) entirely from the ETF while substantially cutting their allocation to Block, Inc. (XYZ). While most may say that’s expected or normal (and it is to a degree) I’d like to next illustrate how this turnover is above the norm and makes this ETF especially risky. Risk and Fund Turnover As you can see below this ETF remains very risky as ARKK has a turnover percentage of 43% which is higher than the sector median for all ETFs as you can see below: Seeking Alpha Furthermore, ARKK’s annualized volatility is greater than the ETF median as is the percentage of assets allocated to the fund’s top ten holdings. However, that percentage has come down as it was over 58% back in September. However, that figure is still significant and too high for me especially when you consider the large allocation to Tesla, Inc. (TSLA). Also for long-term investors I continue to believe it’s worthwhile to pay attention to fees. ARKK has an expense ratio of 0.75% which is higher than the median for all ETFs as you can see below: Seeking Alpha ARKK’s Economy Outlook Every year Cathie Wood and her team provide their “Big Ideas” to investors. I always like to take a look as I find it interesting even if I’m not particularly enamored with the ideas. Wood also provided her outlook on the 2026 economy which thus far has been a mostly a swing and a miss. In her outlook Wood stated the U.S economy is a “coiled spring” ready to break out thanks to AI. Wood went on to say: What once was the cap in spending seems to have become a floor now that the AI, robotics, energy storage, blockchain technology, and multiomics sequencing platforms are ready for prime time. After the tech and telecom bubble of the nineties, a 20-year peaking process around $70 billion has given way to what could become the most powerful capital spending cycle in history, as illustrated below. In our view, an AI bubble is years away! She’s been right about the capex spend at least as tech giants like Meta Platforms, Inc. ( META ) and Amazon.com , Inc. ( AMZN ) noted they expect heavy spending in fiscal year 2026. But, stating this will be the most powerful capital spending cycle in history is both bold and reckless in my opinion. Wood goes on to say that even if the market has a high valuation it’s going to go down like it did in the mid 1990s. The ARKK team believes given the productivity acceleration from AI and automation this will lead to real GDP growth and declining inflation so she thinks the same thing will play out in this cycle but likely in a more dramatic fashion.She talks about the consumer stating, Meanwhile, lower taxes on tips, overtime, and social security should hand US consumers significant refunds this quarter, potentially driving real disposable income growth up from ~2% at an annual rate during the second half of 2025 to ~8.3% this quarter. Clearly, she’s been wrong about this point. Yet, most wouldn’t have predicted the Middle East tensions rising so rapidly and thus pushing oil prices much higher . Consumer sentiment is falling as Americans brace for extended high gas prices. Wood thinks AI can help “shorten” wars but I majorly doubt it, considering tensions have been raging on in that region continuously it feels like. I’m more of the mindset consumers should buckle as I’d expect elevated prices at least until the summer. If I’m correct, this would surely mean there will be inflationary pressures which have trickle down effects on household spending so I don’t see a sharp rebound in consumer sentiment like Wood expects. Lastly, Wood remains bullish on bitcoin stating, ...Bitcoin should be a good source of diversification for asset allocators looking for higher returns per unit of risk during the years ahead. The cryptocurrency gains under President Trump were wiped out last month and many banks and analysts such as Citigroup having been lowering their price predictions on bitcoin and Ethereum citing the slow legislative progress. I’d wager Congress’s attention will stay on the Middle East and perhaps turn to consumers if oil prices remain high or continue to rise as Americans will surely make their voices heard. With mid-term elections coming up I’d foresee affordability being one (if not the top issue) for voters so until these Middle East tensions get resolved I struggle to see Congress passing any pro-cryptocurrency legislation. My Two Cents Overall, I’m not too bullish on the near term prospects of the United States economy, that is until the Middle East conflict is resolved or at least becomes less volatile. I’d venture to guess any sort of cryptocurrency legislation won’t pass until late 2026 given this conflict followed by Congress pivoting to focus on mid-terms. ARKK is far more risky given the type of holdings, and the heavy allocation to Tesla, gene editing stocks and cryptocurrency. So what am I doing, I’m going to continue dollar cost averaging into VOO as that’s been the better play for investors over the last five years as you can see below: Data by YCharts For investors with more risk tolerance or those who are Tesla or crypto bulls, I'd recommend just buying those assets directly than through this ETF. I'd suggest investors be wary of ARKK as I'd expect many of these risky allocations to under perform in this unpredictable time.