Missed the Nvidia Boom? Software AI Plays to Watch

Cathie Woods Turns To AI Software Plays After Missing Out on Nvidia

The frenzy around artificial intelligence stocks is far from over. While the focus has been on companies developing chips that will help harness the technology’s full potential, software providers are on course to be some of the biggest beneficiaries. Ark Investment Management CEO and founder Cathie Wood believes software providers will spearhead the next rally in the market.

NVIDIA Blockbuster AI Rally

The sentiments come on Nvidia stock rallying by more than 160% year to date, with its market cap nearing the $1 trillion milestone. The explosive rally comes on investors ramping up positions on the stock, having emerged that the company’s graphic processing unit is in high demand for use in enabling and powering artificial intelligence solutions.

While Nvidia has outperformed the market, Wood’s Ark Innovation ETF cut its exposure in the stock at the start of the year. Likewise, it ended up losing out on the blockbuster rally that saw the stock briefly cross the $1 trillion mark in market cap. In defense of the mistake, Woods insist they cut their exposure to concerns of Chip’s industry boom-bust cycle.

Software AI Plays to Watch

Likewise, she now sees stocks of companies offering services powered by AI as the next in line to post blockbuster moves as the one at Nvidia. According to Woods, most of the software providers are exactly where Nvidia was before it exploded early in the year. UiPath Inc, Twilio Inc, and Teladoc Health are some of the stocks that prolific investors are closely watching.

Woods Is also bullish about Tesla stock which she insists is one of the biggest artificial intelligence plays. The ARK CEO expects the stock valuation to reach over $2,000 per share by 2027 on leveraging artificial intelligence technology to enhance its autonomous technology.

The strong bullish thesis on software stocks stems from a strong belief that for every hardware that Nvidia will sell, software providers with exposure to AI are expected to generate up to $8 in revenue. Autonomous taxi platforms are some of the biggest plays expected to benefit from the AI revolution, which Woods believes will deliver over $10 trillion in revenue by 2038.

Woods’ increased focus on software AI plays comes as a surprise given that tech giants have been some of the best plays around revolutionary technology. Investors are increasingly turning their attention to the likes of Google, Microsoft and Amazon as some of the companies expected to use the technology to strengthen their competitive edge.

Tech stock AI Rally

Microsoft has already tapped into OpenAI AI-powered chatbot ChatGPT and integrated it into its search engine. The stock is already up by more than 40% for the year as Wall Street remains optimistic about AI helping strengthen Bing’s search prospects against Google.

Alphabet’s Google is also betting big on AI, having already unveiled Bard, a counter to ChatGPT, as it looks to extend its monopoly on the search business. On the other hand, Amazon is looking to use artificial intelligence technology to enhance its logistics and supply network as it looks to enhance same-day and next-day delivery.

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