Ark Invest’s Cathie Wood is betting big on AI with these 4 stocks – including one that could skyrocket 670%

Cathie Wood of Ark Invest is known for investing in disruptive innovation. The super investor bet big on artificial intelligence (AI), which is widely regarded as one of the most disruptive and transformative technologies today.

Speaking of AI actions, it’s hard to ignore this Nvidia Corp. (NASDAQ:NVDA) did. Shares of the chipmaker giant have jumped 187% so far this year, and the company has surpassed $1 trillion in valuation.

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 “will do well over time.” But she sees a new group of actions that will “benefit from the foundations that Nvidia has laid.”

The key word is software.

“In our view, for every hardware dollar sold by Nvidia, software vendors, SaaS [software as a service] will generate $8 in revenue,” she said. “So we’re looking to software vendors that are currently where Nvidia was when we first bought it.”

The super investor went on to name three software companies that she believes will thrive on AI. Here’s a look at the trio and another company she calls “the greatest piece of artificial intelligence.”

Check:

UiPath Inc. (NYSE: PATH)

UiPath is a robotic process automation software company that provides business automation solutions. Its AI-powered business automation platform UiPath is able to understand, automate and operate end-to-end processes.

In the first quarter of 2023, the company’s revenue increased 18% year over year to $289.6 million. Notably, its net dollar retention rate was 122%.

The stock has jumped 36% since the start of the year, but it hasn’t always been a flagship: in 2022, UiPath shares have fallen 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.

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 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.

During his most recent earnings conference call, Twilio co-founder and CEO Jeff Lawson said he believes artificial intelligence “will be a significant accelerator over time for Twilio’s business.”

Ark Innovation ETF owns 4,771,968 shares of Twilio, a stake with a market value of $304.50 million.

Teladoc Health Inc. (NYSE:TDOC)

Wood’s flagship fund also holds $300.43 million from 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 non-emergency in-person medical care was temporarily halted, demand for telehealth services skyrocketed.

In 2020, Teladoc attracted a lot of investor attention as its revenue soared 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 sustain the upward momentum. Trading at $25.80 per share, Teladoc is down more than 90% from its all-time high reached in February 2021.

“The Greatest Artificial Intelligence Game”

Wood’s biggest AI bet is a company not known to be an AI stock – Tesla Inc. (NASDAQ: TSLA).

“We talk about Tesla all the time, it’s actually the biggest game in artificial intelligence,” she 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 expects self-driving taxi platforms to generate between $8 trillion and $10 trillion in revenue worldwide in 2030 “compared to almost zero now.”

And thanks to Tesla’s capabilities on this front, the booming self-driving taxi market could take its stock price to a whole new level.

“We think five years from now, in 2027, it will be a $2,000 stock if our research is correct,” she said.

Considering Tesla shares are currently trading at 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. For example, while Tesla shares have more than doubled since the start of the year, they are still down more than 30% from their peak in November 2021.
If you don’t like that kind of uncertainty, you might want to look into slow-moving industries that offer huge cash returns to investors, like 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 ways to invest in these essential service businesses through the private market.