In a surprising twist for the financial technology sector, Cathie Wood's ARK Blockchain & Fintech Innovation ETF (ARKF) posted a stellar 29% return in 2025, dramatically outperforming its peers. This success came not from traditional payment or crypto stocks, but by strategically expanding its definition of fintech to include artificial intelligence and streaming technology giants.
The Winning Strategy: AI Over Traditional Fintech
The fund's impressive performance was powered by significant holdings in companies like Palantir Technologies Inc., which surged an astonishing 135% last year, and streaming platform Roku Inc., which gained 46%. This approach helped cushion the fund against severe downturns in core fintech areas. Notably, Bitcoin ended 2025 down 7%, and crypto exchange Coinbase Global Inc. fell 9%.
Dan White, associate portfolio manager at ARK Investment Management, explained the strategy. "It is a lot of different plays here and we're balancing the portfolio," he said. "With Roku and Palantir, while they don't look like traditional flavors of fintech, they certainly have an important role in the ecosystem." The fund's success hinged on pivoting away from a pure-play fintech bet to follow market momentum, particularly towards AI-linked technology companies.
A Year of Divergence: AI Thrives, Payments Struggle
The year 2025 highlighted a sharp split in the market. While ARKF and other adaptable funds gained, those tied closely to digital payments and crypto faced headwinds. The Global X FinTech ETF and Siren NexGen Economy ETF fell by single digits. In contrast, the Fidelity Crypto Industry and Digital Payments ETF, VanEck Digital Transformation ETF, and iShares Blockchain and Tech ETF all achieved double-digit gains, often by including crypto miners benefiting from AI.
On the payments front, the story was bleak. Fiserv Inc. plummeted 67% after an October crash. Industry leaders PayPal Holdings Inc., Block Inc., and Global Payments Inc. each lost roughly 25% to a third of their value. Adyen NV and Toast Inc. saw single-digit declines. This divergence underscores a broader market shift where investors showed little patience for hyper-competitive, low-margin fintech segments.
"In fintech, you see hyper-competition," said Ram Ahluwalia, CEO of Lumida. "Everyone's trying to be everything to everyone, and that competition is the enemy of profit and returns." He expressed pessimism about the industry's performance in 2026.
Crypto's Volatile Path and ARK's Selective Wins
Despite initial optimism following Donald Trump's return to the White House in January 2025, which promised a more innovation-friendly regime, crypto faced a tough year. A market rout in October spurred a broader downturn. "Crypto in general front-ran the narrative," noted Eric Balchunas of Bloomberg Intelligence, referencing Bitcoin's 123% gain in 2024. "You just can't pull that off every year."
However, crypto-miners leveraging AI demand, like Hut 8 Corp. (up 124%) and Riot Platforms Inc. (up 24%), fared well. ARKF also found winners within fintech, such as Robinhood Markets Inc. (up 204%) and Shopify Inc. (up 51%). The fund manager added to these positions after profit-taking from Circle Internet Group's June IPO; the stablecoin issuer ended the year up 156% but fell 70% from its post-listing peak.
Despite the fund's success, Cathie Wood faces challenges in sustaining investor interest. ARKF flows were largely flat in 2025, aside from a brief $600 million influx in September. The volatile history of her flagship ARK Innovation ETF has made retail investors cautious about recommitting to the firm's strategies.
