Cathie Wood of Ark Invest is known for investing in disruptive innovation. The super investor has bet heavily on artificial intelligence (AI), which is widely regarded today as one of the most disruptive and transformative technologies.
Speaking of AI actions, it’s hard to ignore what nvidia corp. (NASDAQ:NVDA) is doing. Shares of the chip-making giant are up 187% so far this year and the company has passed the $1 trillion mark.
Ark Invest’s flagship fund Ark Innovation ETF (NYSE:ARKK) exited its position in Nvidia in January, but some of its other exchange-traded funds (ETFs) still have positions in the chipmaker.
In a recent interview with Bloomberg Television, Wood said Nvidia is “going well over time.” But he sees a new batch of stocks that “will benefit from the foundation Nvidia has laid.”
The keyword is software.
“In our view, for every dollar of hardware sold by Nvidia, the SaaS software vendors [software as a service] vendors will generate $8 in revenue,” he said. So we’re looking for software vendors that are actually right now where Nvidia was when we first bought it.
The super investor then named three software companies that he believes will thrive on AI. Here’s a look at the trio and another company she calls “the greatest AI game.”
Watch:
UiPath Inc. (NYSE:PATH)
UiPath is a robotic process automation software company that provides automation solutions for enterprises. Its AI-powered UiPath business automation platform can understand, automate, and manage end-to-end processes.
In the first quarter of 2023, the company’s revenue grew 18% year over year to $289.6 million. Notably, its dollar-based net retention rate was 122%.
The stock is up 36% year-to-date, but it hasn’t always been a hot commodity: In 2022, UiPath’s stock is down 70%.
Wood’s Ark Innovation ETF owns 28,363,938 shares of UiPath. With a position valued at $486.73 million, UiPath is Ark’s fifth-largest holding company.
Twilio Inc. (NYSE:TWLO)
Twilio’s cloud communication platform allows companies to develop and integrate various communication channels into their applications. Its application programming interfaces allow developers to seamlessly incorporate voice, messaging, and video, helping businesses improve customer engagement.
In the first quarter, Twilio surpassed 300,000 active customer accounts. Meanwhile, revenues increased 15% year over year to $1.01 billion.
In his latest earnings conference call, Twilio co-founder and CEO Jeff Lawson said he believes AI “will be a material accelerator over time for the Twilio business.”
Ark Innovation ETF holds 4,771,968 shares of Twilio, a share with a market value of $304.50 million.
Teladoc Health Inc. (NYSE:TDOC)
Wood’s flagship fund also owns $300.43 million in telehealth company Teladoc Health.
The company’s platform connects patients with healthcare professionals via video, phone and messaging.
At the height of the COVID-19 pandemic, when in-person non-emergency medical care was temporarily halted, demand for telehealth services skyrocketed.
In 2020, Teladoc attracted a lot of investor attention as its revenue increased by 98%.
While the pandemic is largely in the rearview mirror, the company continues to expand its business. Teladoc’s first quarter revenue showed an 11% year over year increase.
The stock, however, was unable to maintain its upward momentum. Trading at $25.80 a share, Teladoc is more than 90% down from its all-time high it made in February 2021.
The greatest artificial intelligence game’
Wood’s biggest bet in the AI arena is a company that isn’t known to be an AI stock Tesla Inc. (NASDAQ:TSLA).
“We always talk about Tesla, it’s actually the greatest AI game,” he said.
The reason has to do with the electric car company’s self-driving technology.
Tesla is ARKK’s largest holding with a weighting of 11.59%.
Wood predicts autonomous taxi platforms will deliver $8 trillion to $10 trillion in revenue globally in 2030 “from nearly zero right now.”
And thanks to Tesla’s capabilities on this front, the burgeoning self-driving taxi market could drive its stock price to a whole new level.
“We believe five years from now, in 2027, that will be a $2,000 stock if our research is correct,” he said.
Considering that Tesla stock is trading around $257 right now, Wood’s price target implies more than 670% upside potential.
Investing in disruptive innovations can be very lucrative, but it can feel like a roller coaster at times. For example, while Tesla shares have more than doubled year-to-date, they are still more than 30% down from their November 2021 peak.
If you don’t like this kind of uncertainty, you might want to look into slowly changing industries that provide sizable cash returns to investors such as those that meet basic human needs like food and shelter. For those looking to generate passive income without the volatility associated with publicly traded stocks, there are avenues to invest in these essential service businesses through the private market.
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This article Ark Invest’s Cathie Wood is betting big on AI with these 4 stocks, including one that could skyrocket by 670% that originally appeared on Benzinga.com
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