On the latest episode of Wall Street Insights, Cathie Wood, the financial mastermind behind Ark Invest, shared her unique perspective on the evolving world of AI technology stocks. This episode, aired on Friday, presented a captivating dive into Wood’s analytical thought process, unraveled in the course of a rich discussion with the host.
Reflecting on her firm’s journey with Nvidia Corp. (NASDAQ:NVDA), Wood unfolded the tale of Ark’s investment journey. The firm’s initial tryst with AI research came to light while contemplating the potential of autonomous vehicles in the distant year of 2014. Back then, Nvidia was trading at a humble $5 (split-adjusted), only to rocket to a staggering $450 in recent years.
Ark’s relationship with Nvidia was characterized by consistent support, as the firm continued purchasing the stock till it peaked in the $300-$400 bracket. However, sensing impending inventory issues, Ark made the tough call to sell their Nvidia stocks from their primary Ark Innovation ETF (NYSE:ARKK) portfolio.
As the market underwent its share of turbulence, Wood revealed that Ark made a strategic re-entry into Nvidia in the fourth quarter, during a significant drop in the stock’s price. This was followed by a sharp upswing this year, fueled by the ChatGPT phenomenon. Nevertheless, Wood voiced her concerns about the lukewarm performance of Ark’s other AI-driven stocks.
The episode moved to a comparison between Nvidia and cloud communication software services behemoth, Twilio, Inc. (NYSE:TWLO). Wood drew attention to Nvidia’s valuation, trading at 25 times revenue, in stark contrast to Twilio’s two times revenue, despite being an equally potent beneficiary of AI. This propelled Ark to shift gears and make the tough decision to sell Nvidia, labeling it as a valuation judgment.
Expressing her satisfaction at Nvidia’s performance from $5 to $350-$400, Wood acknowledged that the stock remained part of their more specialized portfolios. Speaking about Nvidia, she enthused about its immense potential in the AI sector, but also highlighted that it was priced accordingly.
Wood threw light on a lesser-known fact about Twilio, emphasizing its crucial role in powering Uber’s communication network. She marveled at Twilio’s handling of nearly a trillion consumer-business interactions per annum.
Turning to the future, Wood highlighted the factors that could determine the next AI victors – visionary leadership, a strong distribution network, a global presence, and proprietary data. She singled out Twilio’s unique position, possessing invaluable data on business-to-consumer communications unmatched by any other.
Wood concluded with a bold prediction, proclaiming that the real beneficiaries of the AI revolution would be companies armed with proprietary data.
The week ended with Nvidia’s stock price down by 1.10% at $454.69, while Twilio suffered a 3.80% loss to close at $66.89.
