The ARK Innovation ETF (ARKK) experienced a sharp 7.37% pre-market plunge on Monday, as its major holding Tesla faces mounting criticism and operational challenges. The decline comes amid growing skepticism about Cathie Wood's ambitious price targets for Tesla and concerns over the electric vehicle maker's recent performance.

Investors appear to be reacting to a critical analysis of Tesla's prospects, which directly impacts ARKK's portfolio. Tesla, a significant component of the ETF, is facing scrutiny due to its falling deliveries and inventory buildup. The company reported a 13% year-over-year decline in deliveries for the first quarter of 2025, marking its lowest delivery figure since Q2 2022. This slump in sales, coupled with growing inventory, has raised concerns about Tesla's growth trajectory and market position.

Adding to the pressure on ARKK is the criticism of Cathie Wood's bullish stance on Tesla. Wood's price target of $2,600 for Tesla within five years has been called into question, with some analysts suggesting it would result in an unrealistic $10 trillion market cap for the company. The contrasting view proposes a much lower valuation, potentially bringing Tesla's stock down by 90% to around $24. This stark difference in valuation perspectives is likely contributing to the uncertainty surrounding ARKK, given its significant exposure to Tesla.