“Software Stocks to Ride AI Wave Next, According to Cathie Wood: Three Competitors to Nvidia Identified”

Topline: Cathie Wood, founder and chief of asset management firm Ark Invest, recently declared that software providers will be the next ones to benefit from booming interest in artificial intelligence. Investors want to ride the enthusiasm that propelled chipmaker Nvidia into the rarified group of companies with a $1 trillion valuation.

Ark Invest’s Emphasis on Software Providers

The Enthusiasm on Wall Street Driven by AI Advancements

Wood, in an interview with Bloomberg TV, expressed that Ark Invest is searching for software providers as the next big beneficiaries of the wave of enthusiasm on Wall Street driven by advances in AI after Nvidia temporarily became one of the six public companies in the world valued at over $1 trillion. While Nvidia makes high-powered computer chips essential to building the kinds of generative AI systems that have exploded in popularity in recent months, analysts believe that it is best positioned to benefit from the AI boom. Until January 2021, Wood’s Ark Innovation Fund held a sizable position in Nvidia. Wood said Nvidia is likely to do well over time but voiced concern over its valuation. Thus, Ark Invest is now considering other options with Wood predicting that software companies offering “software as a service” will generate eight dollars in revenue for each dollar of hardware Nvidia sells.

The Next Big Thing in the Industry

Software Providers Will Benefit from the AI Boom

Wood pointed to communication firm Twilio, virtual healthcare company Teladoc Health, and automation company UiPath as three software companies that she thinks will one day swell to the size of Nvidia. All three are currently a long way off their respective highs by around 80% to 90%. Software providers will be the next ones to benefit from booming interest in artificial intelligence, as investors capitalize on the enthusiasm that propelled chipmaker Nvidia into the rarified cadre of companies with a $1 trillion valuation. According to Wood, AI will propel Tesla’s stock price to $2,000 in 2027 from around $200 now. Driverless taxis will drive this change, Wood said, predicting that autonomous taxi platforms “will deliver $10 trillion in revenue from almost zero” by 2038 globally.

Key Background

The Rise of Nvidia

Nvidia was originally known for making computer chips to process graphics, particularly for computer games. Later, it was discovered that these chips were also useful for the kinds of processors needed to build many AI systems, and Nvidia pivoted to serve this growing need. It eventually came to dominate the market. Hence, its rapid successes this year, particularly in the AI sector, shocked many on Wall Street, as it was incredibly well-positioned to capitalize on the booming interest in AI applications as the leading producer of the hardware needed to make it happen. While the company has competitors, they are unlikely to pose a major threat anytime soon. Nvidia’s stratospheric gains led to sector-wide rally, particularly for related chip firms.

Crucial Quote

Wood said, “We don’t, we think it’s much more than that,” regarding Elon Musk’s Tesla as an auto stock. Tesla is actually the biggest artificial intelligence play around.

Further Reading

For more information on the topic, you can read these resources:

Cathie Wood Says Software Stocks Are Next AI Bet After Nvidia (Bloomberg)

This Tech Stock Joins Nvidia As Analyst’s Favorite After CEO Predicts AI Revenues Will ‘At Least Double’ (Forbes)

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