Some called it the “Cathie Wood sell-off.”  

At the open Tuesday, the top names owned by Ark Investment Management were the biggest decliners in the market. 

Shares of Palantir, Tesla, Roku, Square, Paypal, Teladoc, Baidu, Zillow, Shopify and Spotify were all down big, in many cases by double-digits.  All were major holdings in funds like her flagship Ark Innovation ETF (ARKK) and Next Generation Internet ETF (ARKW).

Shortly after the open, her flagship Ark Innovation Fund was down 11%. By 10 a.m. ET, a half-hour after opening, it had already traded more than 8 million shares, a full day’s volume.  By midday, it had traded 30 million shares.

And then, a half hour after opening, the selling let up. The fund was last down about 6% and 11% for the week.

“It was like a mini-panic,” Alec Young from Tactical Alpha told me.  “The market is getting concerned that the Fed is risking getting behind the curve on inflation.  The market is pricing in more inflation, which means lower prices for tech stocks.”

The market stopped dropping as Federal Reserve Chair Jay Powell’s congressional testimony was released.  Powell repeatedly emphasized he does not expect inflation to rise to troublesome levels:  “Monetary policy is accommodative and needs to continue to be accommodative,” he said.

Still, the damage had already been done.  Fear of higher rates may have been an initial catalyst, but now, as Peter Tchir from Academy Securities told me, “People are very aware they are long a lot of stocks at very high valuations.”

“The frothiness is now the catalyst, not rates,” he told me. As for the current mania with everything Cathie Wood and Ark Investments, Tchir on Tuesday penned a piece called “Noah’s Arkk?” for clients, telling me, “Too many people are on that boat.  A lot of people, I think, have bet more than their risk appetite is comfortable with.”

Ark Innovation is off about 15% from its recent high.

“I don’t think this is over, I think this may be the start of an unwind.  Everyone assumed these are super-safe companies.  Her management style has been to double-down on her bets, and a lot of this is starting to feel a little evangelical.  People now view those funds as can’t lose, and that’s where you get into trouble,” said Tchir.

All of the ten top holdings in Ark Innovation were underperforming the Nasdaq on Tuesday.

Wood did not respond to a request for comments on Tuesday’s trading, but in an interview on CNBC last week, she made it clear that on days or weeks when her favorite stocks were down notably, she was often a buyer: “We are considered a liquidity  provider, which means when people are selling, we will be buying and when people are buying, and these are investors in retail and institutional, we are likely to be taking profits,” she said.

As for the worries about interest rates, she also made it clear that a sharp upturn would undoubtedly hurt her portfolio: “I do believe that if the rate were to take a sharp turn up that we would, we would see a valuation reset, and our portfolios would be prime candidates for that valuation reset.”