Cathie Woods Touts Nvidia Alternatives For Tapping AI Boom
Better bets exist for tapping into exponential growth of artificial intelligence. That is a sentiment echoed by Ark Investment Management head Cathie Wood. She made the remarks at a time when most focus is on Nvidia, the tech giant developing chips for powering artificial intelligence solutions and products.
Nvidia Premium Valuation
Nvidia has been the go-to company for investors looking to generate significant returns amid the increased focus on AI. Similarly, the stock has not disappointed, having rallied by more than 200% year to date, having become a Wall Street darling. The rally has since propelled the chip giant into a trillion-dollar company, with most investors confident that the rally will persist.
Wood, through the ARK Innovation ETF fund, has missed out significantly on the significant gain registered year to date. The hedge fund manager trimmed his exposure in the chip giant early in the year on the belief that the stock was overstretched. Nevertheless, Nvidia continued rallying, breaking all kinds of records. Its 2005 gain gas already dwarfed the 37% gain for the tech-heavy index NASDAQ and the 15% gain for the S&P 500.
Thanks to the strong demand for its chips, Nvidia has turned out to be a safe bet for gaining exposure in the AI boom. Its chips are increasingly being used to power emerging AI tools, including OpenAI’s ChatGPT and Alphabet’s Bard. The rapid growth for AI services has only triggered strong demand for the chips, helping bolster its sentiments in the market.
The fact that Nvidia appears to be working on a new era of accelerated computing that can enervate as much as $1 trillion in each spending has only strengthened its sentiments in the market. The solid underlying fundamentals have only justified the premium valuation that the stock enjoys in the market.
While trying to downplay the big miss, Wood insists they are focused on other companies with significant exposure to the AI boom that most people are not talking about. According to Wood, investing in the chip giant at current valuation levels would make little sense as it has become really expensive. Consequently, they have shifted their attention to other software companies that are less obvious plays and less expensive.
UiPath Inc. and Twilio Inc. are some of the companies that ARK Investment remains bullish on amid the AI push. According to Wood, UiPath has a fantastic management team backed by a solid core business that entails automating management tasks and internal workflows. According to the hedge fund manager, the company could become a platform that all companies can build on.
Twilio is another exciting play for gaining exposure to the AI boom beyond Nvidia, as it is best known for facilitating business-to-consumer messaging. The company has already inked big business to power Uber Technologies messaging on the ride-hailing platform. The company enabled over 1 trillion messages between consumers and businesses last year, giving it access to huge troves of data. Uber has already started leveraging the troves of data at its disposal to come up with an artificial intelligence-powered chatbot. The chatbot is designed to offer recommendations to enhance its food delivery business and order placement.