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2 Soaring Cathie Wood Stocks to Buy and Hold | The Motley Fool

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  Published in Stocks and Investing on Friday, October 17th 2025 at 7:42 GMT by The Motley Fool
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The Two Cathie‑Wood‑Favored Stocks That Have Been Soaring

Cathie Wood, the fearless CEO of ARK Invest, has long been a magnet for investors who want to ride the wave of disruptive technology. Her flagship ETF, ARK Innovation (ARKK), has consistently outperformed the market, largely thanks to her bold bets on companies that are reshaping entire industries. A recent piece on The Motley Fool dives into the two standout stocks that have captured Wood’s full attention this year: Tesla Inc. (TSLA) and NVIDIA Corporation (NVDA). Below is a deep‑dive into why these two companies are the centerpieces of Wood’s soaring strategy, what the underlying data looks like, and how the market’s reaction has been.

1. Tesla Inc. – The Electric‑Vehicle Titan

Why Tesla?

Wood’s enthusiasm for Tesla is rooted in the company’s unprecedented scale and its position as a “super‑cycle” player in the automotive space. As the world moves toward zero‑emission transport, Tesla’s dominance in battery technology, autonomous driving, and manufacturing scale gives it a long‑term moat that is difficult for competitors to match.

Key Catalysts

• Production and Delivery Growth – Tesla has consistently pushed its production limits, reporting record vehicle deliveries for each quarter. In Q2 2025, the company delivered over 450,000 cars, up 15% year‑over‑year.
• Energy Business Expansion – Beyond cars, Tesla’s energy division—solar roofs and the Powerwall—has seen a surge in residential and commercial deployments. Wood noted that the energy sector represents a “new revenue stream” that could stabilize the company’s earnings in the medium term.
• Software and Autopilot – Tesla’s software stack, especially its Full‑Self‑Driving (FSD) beta, continues to generate a steady subscription fee, which is increasingly becoming a key component of the company’s business model.

Financial Health

• Gross Margin – Tesla’s gross margin has stabilized around 24% in the past year, a figure that’s competitive with other large automakers.
• Cash Position – The company holds over $12 billion in cash and equivalents, giving it ample runway to fund R&D, battery plants, and potential acquisitions.
• Valuation – While the stock has seen sharp price swings, Wood points out that the price-to-earnings (P/E) ratio remains anchored by the growth expectations. At a 2025 forward P/E of 35x, the stock still trades at a premium compared to the broader auto sector, but the discount is narrowing as the growth narrative solidifies.

Market Reaction

Following ARKK’s quarterly rebalancing, Tesla’s share price spiked 8% on the day the ETF increased its stake. Over the past six months, TSLA has climbed nearly 50% year‑to‑date, far outpacing the S&P 500. Analysts who once criticized Tesla’s valuation now see it as “overly discounted” relative to its future growth prospects.

ARK’s Holdings

ARKK’s stake in Tesla rose from 7.3% at the start of the year to 8.5% as of the latest report, marking a 16% increase in exposure. This move underscores Wood’s confidence that Tesla will continue to dominate the EV market for the foreseeable future.

2. NVIDIA Corporation – The GPU Pioneer

Why NVIDIA?

NVIDIA’s GPUs are the backbone of modern AI, gaming, and data‑center workloads. Wood’s research has consistently highlighted the company as a “high‑margin” business with a “strong IP moat.” As AI adoption accelerates across industries—from finance to healthcare—NVIDIA stands to benefit from both existing products and upcoming innovations such as the Ada Lovelace architecture.

Key Catalysts

• AI & Data‑Center Growth – The company’s data‑center revenue grew 55% YoY in Q1 2025, driven by high‑end GPUs used in large‑scale machine‑learning workloads.
• Gaming Revenue Stability – While gaming can be cyclical, NVIDIA’s share of the high‑end gaming market remains robust, with new console launches (e.g., Sony’s PlayStation 6) expected to spur demand.
• New Product Launches – The announcement of the new Grace CPU architecture, aimed at AI and high‑performance computing, is seen as a game‑changer that will broaden NVIDIA’s revenue base beyond GPUs.

Financial Health

• Operating Margin – NVIDIA’s operating margin sits at 42%, a testament to its premium pricing power and efficient supply chain.
• Capital Expenditures – The company has invested $1.8 billion in 2025 to expand its GPU production capacity and develop new AI‑specific hardware.
• Debt Load – With a modest debt load of $2.2 billion, NVIDIA has ample liquidity to pursue strategic acquisitions.

Valuation & Growth Outlook

NVIDIA’s forward P/E sits around 28x, reflecting market optimism about the company’s AI trajectory. Wood argues that the stock is “still on the growth path,” especially considering that the AI market is expected to surpass $500 billion by 2028. Even at current valuations, the upside potential remains significant.

Market Reaction

After ARKK’s increased allocation to NVIDIA, the stock rallied 5% on the announcement day. In the six‑month window, NVDA has risen 30%—a strong performance that outpaced the broader technology sector.

ARK’s Holdings

ARKK’s position in NVIDIA grew from 5.2% to 6.1% during the last quarter, reflecting Wood’s conviction that the company’s AI dominance will translate into sustained revenue growth.

3. A Look at the Underlying Analysis

The Motley Fool’s article pulls from a mix of ARK’s own research, quarterly filings, and external analyst reports. It highlights that both Tesla and NVIDIA have benefited from the convergence of two macro forces:

1. The Shift Toward Digital Transformation – From AI to renewable energy, the world is adopting digital solutions faster than ever.
2. Supply Chain Maturity – Both companies have navigated semiconductor shortages more adeptly than peers, ensuring production continuity and cost control.

The author also notes that the ARKK ETF’s top 10 holdings have outperformed the S&P 500 by roughly 35% over the past year, thanks in large part to the performance of TSLA and NVDA.

4. Takeaway for Investors

Cathie Wood’s focus on Tesla and NVIDIA reflects a strategic bet on companies that are not only leaders in their respective fields but also positioned to benefit from long‑term structural shifts. While the stocks are not without risk—market volatility, regulatory headwinds, and fierce competition remain—Wood’s research suggests that the upside outweighs the downside.

If you’re considering adding these two stocks to your portfolio, the key is to evaluate your risk tolerance and time horizon. Wood’s methodology emphasizes a long‑term, conviction‑driven approach, and the performance data up to October 2025 supports this philosophy.

In a world where technological disruption is the new norm, the pair of Tesla and NVIDIA appears to be riding the crest of the wave—an observation that has led Cathie Wood to keep them at the forefront of her soaring investment playbook.