by Ark Invest's Cathie Wood is known for investing in breakthrough innovations. The super investor has placed big bets on artificial intelligence (AI), which is widely recognized as one of the most disruptive and transformative technologies today.
Speaking of AI stocks, it's hard to ignore Nvidia Corp. (NASDAQ:NVDA) did. The chipmaker's shares are up 187% so far this year, and the company's valuation has surpassed 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 hold positions in the chipmaker.
In a recent interview with Bloomberg Television, Wood said that Nvidia “will do well over time”. But she sees a new group of stocks that “will benefit from the foundation that Nvidia has laid.”
The keyword is software.
“In our view, for every dollar of hardware Nvidia sells, there's software vendors, SaaS [software as a service] “So we're looking at the software vendors that are actually right where Nvidia was when we first bought it.”
The super investor then named three software companies that she believes will thrive thanks to AI. Here's a look at the trio and another company that calls them “the greatest piece of artificial intelligence.”
Cash:
UiPath Inc. (NYSE:PATH)
UiPath is a robotic process automation software company that provides automation solutions for businesses. Its AI-powered UiPath Business Automation Platform is able to understand, automate and operate end-to-end processes.
In the first quarter of 2023, the company's revenue grew 18% year over year to $289.6 million. Notably, the 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 shares plunged 70%.
Wood's Ark Innovation ETF owns 28,363,938 shares of UiPath. With a $486.73 million position, UiPath is Ark's fifth-largest holding.
Twilio Inc. (NYSE:TWLO)
With Twilio's cloud communication platform, companies can develop different communication channels and integrate them into their applications. Its application programming interfaces enable developers to seamlessly integrate voice, messaging and video, helping businesses improve customer engagement.
In the first quarter, Twilio exceeded 300,000 active customer accounts. Meanwhile, revenue rose 15% year over year to $1.01 billion.
In his recent earnings call, Jeff Lawson, Twilio co-founder and CEO, said he believes artificial intelligence “will be a key accelerator for Twilio's business over time.”
Ark Innovation ETF holds 4,771,968 shares of Twilio, an investment with a market value of $304.50 million.
Teladoc Health Inc. (NYSE:TDOC)
Wood's flagship fund also owns $300.43 million in telemedicine 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 suspended, demand for telehealth services skyrocketed.
In 2020, Teladoc drew a lot of attention from investors as its revenue surged 98%.
While the pandemic is largely in the rearview mirror, the company continues to expand its business. Teladoc's revenue rose 11% year over year in the first quarter.
However, the stock failed to sustain the upward momentum. At $25.80 per share, Teladoc is down more than 90% from its February 2021 all-time high.
“The Greatest Piece of Artificial Intelligence”
Wood's biggest bet in AI is a company not known as an AI stock — Tesla Inc. (NASDAQ:TSLA).
“We talk about Tesla all the time, it's actually the biggest artificial intelligence game,” she said.
The reason lies in the autonomous driving technology of the electric car manufacturer.
Tesla is ARKK's largest holding with a weighting of 11.59%.
Wood predicts that autonomous taxi platforms will generate $8-10 trillion in global revenue by 2030, “up from almost zero now.”
And because of Tesla's capabilities on that front, the booming autonomous taxi market could take its stock price to a whole new level.
“We think if our research is right, five years from now, 2027, it's going to be a $2,000 stock,” she said.
Considering that Tesla shares are currently trading around $257, Wood's price target implies a potential upside of over 670%.
Investing in disruptive innovation can be very lucrative – but sometimes it can feel like a roller coaster ride. For example, while Tesla shares have more than doubled year to date, they're still over 30% off their November 2021 peak.
If you don't like that kind of uncertainty, you might want to look at industries that are slowly changing and offer investors substantial cash returns — such as those that attend to basic human needs like food and shelter. For those looking to earn passive income without the volatility associated with publicly traded stocks, there are opportunities to invest in these essential service companies through the private market.
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This article by Ark Invest's Cathie Wood makes a big bet on AI with these 4 stocks — including one that could skyrocket by 670% — originally appeared on Benzinga.com
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