Robinhood: Why Cathie Wood is Betting Big on $HOOD

News that Cathie Wood's Ark Invest, led by the 'icon of innovation,' has bought a particular stock always generates significant market interest.

So this time, we're going to talk about 'Robinhood ($HOOD),' a stock that Cathie Wood has been steadily buying and increasing her position in. Let's dig deep into what kind of company Robinhood is, and what opportunities and risks it holds.

Mew

Master, first, I will brief you on the objective data I've collected. All discussions should be based on facts.

• Company Introduction: Robinhood Markets, Inc., founded in 2013, is an American fintech company. It gained explosive popularity among Millennial and Gen Z investors by offering commission-free trading of stocks, ETFs, options, and cryptocurrencies through its smartphone app. Its slogan is the "democratization of finance."


• Core Business Model (PFOF): "How does it make money with no commissions?" This question is key. Robinhood's main source of revenue is Payment for Order Flow (PFOF).
  
  In simple terms, Robinhood gathers stock orders from individual investors like you, Master, and passes them on to large Market Makers like Citadel Securities. In return, the Market Makers pay Robinhood a kind of rebate. This PFOF accounts for a significant portion of its total revenue.
  
  Other revenue sources include interest earned on customer deposits, subscription fees for its premium service 'Robinhood Gold,' and fees generated from cryptocurrency transactions.


• Cathie Wood's Buying Trend: The ETFs managed by Cathie Wood, such as ARK Innovation ETF (ARKK) and ARK Next Generation Internet ETF (ARKW), have been consistently purchasing Robinhood stock since late 2024. She has notably been buying the dip whenever the stock price falls, and recently in May 2025, she purchased an additional 320,000 shares, showing strong conviction in the company.


• Recent Performance and Status:
  • Earnings Improvement: In the first quarter of 2025, Robinhood announced results that beat market expectations. Revenue increased by 40% year-over-year to $618 million, and it achieved its fourth consecutive quarter of profitability, partially alleviating market doubts about its profitability.
  • Crypto's Resurgence: The biggest driver of this earnings improvement was a surge in cryptocurrency trading volume. As the crypto market revitalized following the approval of spot Bitcoin ETFs, Robinhood's crypto trading revenue exploded by 232% year-over-year.
  • Active Users: Monthly Active Users (MAU) stood at approximately 13.7 million, returning to an upward trend.

This is the core data surrounding Robinhood at present. Let's begin the main discussion based on this data.

Kurumi

Myu-tan's data is just thrilling! I got goosebumps when I saw that crypto revenue jumped 232%! My Lord, Kurumi-chan can 100% understand why Cathie Wood is buying Robinhood! This is like buying the future itself!

First, its evolution into a next-gen financial super-app!

My Lord, Robinhood is no longer just a 'free stock trading app'! It introduced the first-ever 24-hour stock trading system in the U.S., so now people can wake up in the middle of the night and buy Apple stock! Its IRA (Individual Retirement Account) service attracted billions of dollars in assets right after launch, and the upcoming 'Robinhood Card' will let you earn points as stock or Bitcoin every time you use it! What does this all mean? It's a devilishly ambitious plan to become the 'YouTube of Finance,' where you handle all your financial needs—trading, investing, retirement, and spending—in one single app!

Second, the biggest beneficiary of the resurgent crypto market!

Mika-pi will surely nitpick about volatility, but that's precisely where the opportunity lies! For the younger generation, crypto isn't just an investment asset; it's a 'culture.' And the easiest, most convenient place for them to buy crypto is Robinhood. As new Bitcoins emerge and the market grows, Robinhood will act as the gateway, raking in enormous transaction revenues!

Third, expansion into the global market!
It recently launched its crypto trading services successfully in the UK and plans to expand across Europe. This means its 13.7 million U.S. users are just the beginning. If Gen Z from all over the world starts investing through Robinhood, today's valuation will look incredibly cheap! Cathie Wood must have bet on this enormous growth potential!

💖 Kurumi's Heart-o-Meter: 90/100

Innovation always comes with risk, but its fruits are sweeter than you can imagine! You're investing in the future winner of finance!

Mikael

Hold on, Kurumi. I heard your passionate speech. But why do you fail to mention the shadow lurking behind that dazzling growth story—a shadow that could be fatal?

Human, I have a duty to protect your assets. Let's face reality with a clear head.

First, the regulatory risk, which is like a ticking time bomb.

Mew explained PFOF, Robinhood's core revenue model, correct? That is its Achilles' heel. The chair of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, has long been sharpening his knives against the PFOF model, stating it 'creates a conflict of interest and doesn't guarantee the best execution price for retail investors.'

If the SEC were to pass a rule that bans PFOF entirely or regulates it strictly, the very foundation of Robinhood's business model would crumble. It could literally face an existential crisis. It's fine to believe in Cathie Wood, but shouldn't you also consider the SEC's blade?

Second, its unstable dependency on cryptocurrency.

Kurumi spoke of the surge in crypto volume as if it were a festival, but to put it another way, it means Robinhood's earnings will plummet as soon as the crypto market enters a downturn. Entrusting a company's fate to such a volatile asset is a very dangerous gamble. It can hardly be considered a stable revenue structure.

Third, the ongoing legal battle.

Just last month, Robinhood received a 'Wells Notice' from the SEC regarding its crypto business. This is like a final warning before a formal lawsuit is filed. The SEC believes Robinhood has been selling unregistered securities (cryptocurrencies) to investors. This means the years-long legal battle that Ripple endured could be replayed with Robinhood. A prolonged lawsuit is a poison that eats away at a company's growth engine.

Finally, the issue of trust from the 'buy button removal' incident during the GameStop (GME) saga in 2021 remains a potential risk. It is difficult to fully recover trust once it has been broken.

🚨 Mikael's Risk Score: 85/100

It wears the fancy clothes of innovation, but hides the sharp blades of regulation and litigation underneath. Extreme caution is required.