By
Godfrey Benjamin
April 18th, 2024
Wood’s Ark Innovation ETF has dropped more than 10% from its peak in early February, while the Nasdaq 100 Stock Index has climbed up by 12% in the same time frame.
Cathie Wood, the renowned founder and CEO of ARK Invest is making headlines for stating that software stocks are the next big bet in the Artificial Intelligence (AI) world, following the success of Nvidia Corporation (NASDAQ: NVDA). During an interview with Bloomberg TV, Wood noted that while Nvidia is likely to perform well in the long run, her focus has switched to identifying the next great market opportunity.
Wood’s focus on software stocks as potential giants in the AI sector has led her to identify key companies she believes have the potential to match the success of Nvidia. Among these companies, she specifically mentions UiPath Inc (NYSE: PATH), Twilio Inc (NYSE: TWLO), and Teladoc Health Inc (NYSE: TDOC) as notable examples.
Typically, Wood’s investment strategy frequently entails picking firms that have undergone large losses from past highs yet have tremendous long-term growth potential. In this regard, UiPath witnessed a rise in its share price after going public in 2021, hitting over $85 per share. However, since then, the stock has plunged nearly 80% from its peak.
Similarly, Twilio also saw a significant drop in its share price, declining around 85% from its peak in 2021. In addition, Teladoc Health also saw a more than 90% drop from its high in 2021.
Wood’s investment funds currently hold all three of these stocks, signaling her confidence in their growth prospects. She sees tremendous potential in software providers and Software-as-a-Service (SaaS) companies, emphasizing that for every dollar of hardware that NVIDIA sells, these software companies can generate eight dollars in revenue.
Cathie Wood Stays Positive Despite Decline in Ark Innovation ETF
Notably, Wood’s Ark Innovation ETF has dropped more than 10% from its peak in early February, while the Nasdaq 100 Stock Index has climbed up by 12% in the same time frame.
Despite this recent underperformance, Wood remains optimistic about certain investments, including Tesla Inc (NASDAQ: TSLA), which she considers the “biggest artificial intelligence play”.
Wood reiterated her belief that Tesla’s stock price has the potential to reach $2,000 by 2027, emphasizing the importance of the company’s autonomous technology in driving this growth. She sees Tesla not merely as an automaker but as a company at the forefront of artificial intelligence and self-driving vehicles.
Wood’s positive attitude toward Tesla is predicated on her forecast that autonomous taxi systems will earn approximately $10 trillion in revenue globally by 2038, starting from a nearly non-existent revenue base. She sees Tesla as a vital participant in this field and anticipates the firm capitalizing on the future rise of autonomous technology.
Interestingly, Wood’s decision to reduce her holdings in Nvidia through her flagship ARK Innovation ETF in January proved to be a missed opportunity as the chipmaker experienced a significant rally, briefly reaching a market valuation of over $1 trillion. Wood, however, has defended her decision, explaining her concerns about the boom-bust cycle of the computer-chip industry and stating that NVIDIA was “priced ahead of the curve”.