Topline
Famed stock picker Cathie Wood, the chief and founder of asset manager Ark Invest, said on Wednesday that software providers will be the next companies to benefit from booming interest in artificial intelligence as investors capitalize on the enthusiasm that propelled chipmaker Nvidia into the rarified cadre of companies with a $1 trillion valuation.
Key Facts
Wood, in an interview with Bloomberg TV, said Ark is looking forward to software providers as the next big beneficiaries of the wave of enthusiasm on Wall Street driven by advances in AI after Nvidia on Tuesday temporarily became one of just six public companies in the world valued at over $1 trillion.
Analysts believe Nvidia, which makes high-powered computer chips crucial to building the kinds of generative AI systems that have exploded in popularity in recent months, is one of the best positioned to benefit from the AI boom and until January Wood’s Ark Innovation Fund held a sizable position in the company.
Wood said Nvidia is likely to do well over time but defended Ark’s decision to dump its stake—the timing was unfortunate and the fund missed out on the massive Nvidia rally this year—and said it was “priced ahead of the curve.”
Ark is now “onto the next thing,” Wood said, predicting that companies providing software as a service will “generate 8 dollars in revenue” for every dollar of hardware Nvidia sells.
Wood pointed to virtual healthcare firm Teladoc Health, communication firm Twilio and automation company UiPath as three software companies that she thinks will one day swell to the size of Nvidia.
Woods funds hold stocks from all three and all three are currently a long way off their respective highs by around 80% to 90%.
Crucial Quote
Many people consider Elon Musk’s Tesla to be an auto stock, Wood said. “We don’t, we think it’s much more than that.” Tesla is actually the “biggest artificial intelligence play” around. Wood said AI will propel Tesla’s stock price to $2,000 in 2027, up from around $200 now. Driverless taxis will drive this change, Wood said, predicting autonomous taxi platforms ”will deliver $10 trillion in revenue from almost zero” by 2038 globally.
Key Background
Nvidia was originally known for making computer chips to process graphics, especially for computer games. It was later discovered that these chips were also useful for the kinds of processing needed to build many AI systems and Nvidia pivoted to serve this growing need. It eventually came to dominate the market. While its dramatic and rapid successes this year shocked many on Wall Street, there was little surprise to those familiar with the company as it was incredibly well-positioned to capitalize on the booming interest in AI applications as the leading producer of the hardware needed to make it happen. The surge in popular interest following the launch of OpenAI’s ChatGPT accelerated this and while the company has competitors, they do not seem likely to pose a major threat anytime soon. Nvidia’s stratospheric gains led a sector-wide rally, particularly for related chip firms.
Cathie Wood Says Software Stocks Are Next AI Bet After Nvidia (Bloomberg)
This Tech Stock Joins Nvidia As Analyst’s Favorite After CEO Predicts AI Revenues Will ‘At Least Double’ (Forbes)
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