Cathie Wood says memes like GameStop are not Ark Invest’s thing – but she does not want to criticize retailers for going after them

Cathie Wood, CEO and Investment Manager at ARK Invest, on a purple background with the Ark Invest logos patterned behind her.
Cathie Wood, Founder and CEO of Ark Invest.

  • Meme stocks like GameStop and AMC do not fit with Ark Invest’s focus on disruptive innovation, Cathie Wood said.
  • But the star investor will not criticize retail investors for their decision-making by buying these shares, she told Time.
  • “That’s what makes a market. We all take calculated risks,” she said in an interview released Sunday.
  • Sign up for our daily newsletter, 10 things before the opening clock here.

The Reddit army behind last year’s meme stock craze has been denounced for trying to bully Wall Street – but do not count star-studded voter Cathie Wood as one of their critics.

Ark Invest’s CEO justified the behavior of amateur investors who teamed up to go after hedge funds that had bet on their preferred stocks.

“Meme stocks are not our kind of stocks,” Wood said Time Magazine, in an interview published Sunday. “But I kept an eye on the calculated risks that people who bought these shares took.”

“What they did was ask, ‘Hey, what stocks are the most shorted out there? Maybe those people are wrong,'” she said.

In January 2021, retailers collaborated on Reddit forums like WallStreetBets to raise the price GameStop, AMC, and other heavily shorted stocks, for the purpose of making profits as hedge funds covered their short positions. Video game retailer GameStop, the center of the saga, rose 2,000% in just a few days.

They largely believed that a combination of fee-free trading platforms, easily accessible margin and enough allies with the same vision could beat the funds that dominate Wall Street. Their coordinated movements had an impact as their trades ran losses of billions of dollars across shortseller hedge funds.

But some industry experts have described this trading strategy as very speculative, saying it creates one new type of casino. They claim that many meme stock investors do not have real depth and experience in the markets.

But Wood suggested that everyone take risks and decide their own investment strategy.

“We tend to base all our investment decisions on our research,” she said, probably referring to Ark’s trading plan. “Some people base their investment decisions on techniques.”

“These people simply took a look at how incredibly short these stocks were, all of the same kind of hedge funds. I would not criticize that.”

Some notable hedge funds affected by the short squeezes, such as Gabe Plotkins Melvin Capital, sought additional funds. Others signaled abnormal losses to their investors due to movements in the heavily shorted stocks. A year later, Wall Street remain careful of the power of retailers.

Ark funds – whose disruptive innovation investment strategy has faltered recently – are investing in five major disruptive technology themes, including artificial intelligence and blockchain. The company’s research, which is publicly available, are targeted techno-pessimists.

Wood explained that this is done to expose retail investors to the opportunities that investing in innovation provides.

“We wanted to bring transparency and democratization to investing in innovation; we consider ourselves the closest you will find to a venture capital firm in the public stock markets,” she said.

Read more: JEFFERIES: Buy these 25 growth stocks that have been hit hard in the recent divestment and are far from their latest highs, but which have the potential for big comebacks

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