Nov 11, 2021
Cathie Wood believes that she’s found the next big thing in investing — and has the data to back it up.
“We were assuming that in the next 10 years, artificial intelligence would deliver, in the enterprise software space, a market cap opportunity of $30 trillion,” the star stockpicker said at a Milken Institute conference last month. “Our new number is $80 trillion.”
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"We think that is the big new frontier.”
Wood knows a thing or two about investing in the frontier of technology.
Despite recent turbulence, her flagship fund ARK Innovation ETF has delivered a total return of 472% over the last five years, substantially outperforming the S&P 500 over the same period. So it’s probably a good idea to follow Wood’s lead and at least take look at the AI space.
Here are three attractive AI plays in today’s market — one of them could be worth purchasing with some of your spare change.
Nvidia (NVDA)
Nvidia’s graphics processing units have long been a favorite among video game enthusiasts. But the company’s capabilities extend far beyond the gaming market.
For instance, its “system on a chip” solutions are widely used in mobile computing and automotive markets.
The Santa Clara-based chipmaker believes it can play a crucial role in driving enterprise adoption of AI as well.
“[W]e’re ready to democratize AI, and we’re ready to make this thing usable by every enterprise customer,” said Nvidia’s head of enterprise computing Manuvir Das earlier this year.
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Business, in general, is firing on all cylinders at Nvidia. In Q2 of its fiscal 2022, revenue surged 68% year over year and 15% sequentially.
Unsurprisingly, the stock has been a market darling. Nvidia shares are up 124% in 2021 and are now priced at over $300.
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Alphabet (GOOGL)
Google’s parent company Alphabet is a massive tech conglomerate commanding a market of nearly $2 trillion.
And it’s not going to miss out on AI.
In fact, AI is already deeply integrated into the company’s product lineup. Whenever you search for something in Google, AI tries to find out exactly what you’re searching for and deliver results based on what it knows about you.
Alphabet also owns autonomous driving technology company Waymo. Last year, Waymo launched its fully automated, robo-taxi service in Phoenix.
Most recently, Alphabet announced the creation of a new subsidiary — Isomorphic Laboratories — which will use AI methods for drug delivery. It’s built off of the work done by Alphabet’s AI subsidiary DeepMind.
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After a nearly 70% climb year to date, Google now trades at over $2,900 per share.
But you’d don’t have to start big. These days, you can build your own AI portfolio just by using digital nickels and dimes.
C3.ai (AI)
With a market cap of $4.9 billion, C3.ai is small potatoes compared to Nvidia and Alphabet. But if you believe in Wood’s AI market projections, this stock shouldn’t be ignored.
The company is so focused on the technology that it not only has AI in its name, but has also claimed “AI” as its stock symbol.
C3.ai is an enterprise AI software provider, generating the bulk of its money from subscriptions sold to businesses from a wide range of industries.
And subscriptions translate into recurring revenue — something that should make any investor smile.
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In Q1 of its fiscal 2022, the company’s subscription revenue rose 29% year over year to $46.1 million. Total revenue came in at $52.4 million, also up 29%.
At quarter-end, C3.ai’s total enterprise AI customer count stood at 98, representing an 85% increase year over year.
The stock’s performance, though, has been less than rosy. C3.ai shares are down more than 65% in 2021, giving contrarian tech traders something to think about.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
AI or art?
There are a lot of players in the AI arena and only time will tell which ones will be the ultimate winners. So always do your due diligence.
Now, if you’d rather not get involved in the stock market at the moment, you might want to check out an overlooked asset that has very little correlation with the S&P 500: fine art.
Contemporary artwork has already outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.
Investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultra-rich, like Wood.
But with a new investing platform, you can invest in iconic artworks, too, just like Jeff Bezos and Bill Gates do.
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Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.
