Cathie Wood’s Ark Invest Is Selling Nvidia Stock and Buying This Artificial Intelligence (AI) Growth Stock

Ark Invest CEO Cathie Wood believes Nvidia (Nasdaq: NVDA) There will soon be a reckoning. In March, she wrote:

Without explosive growth in software revenue to justify the overbuilding of GPU capacity, we wouldn’t be surprised to see a pause in spending, exacerbating the correction in excess inventory, especially among cloud customers who account for more than half of Nvidia’s data center sales middle.

That doesn’t necessarily mean Nvidia is a bad investment. The company has dealt with supply gluts in the past, and the stock has been rebounding. But Ark Invest sees better opportunities elsewhere.As a result, Wood and her team continued to sell Nvidia stock throughout March, redeploying capital while trading desk (NASDAQ:TTD)another company poised to benefit from artificial intelligence.

Here’s what investors should know about the ad tech company.

The Trade Desk is the leading independent platform for media buyers

The Trade Desk operates the largest independent demand-side platform and is a advertising technology Software that helps media buyers plan, measure and optimize data-driven campaigns across digital pipelines.Its platform has features that management believes are industry-leading AI (artificial intelligence) and measurement capabilities, both of which help media buyers achieve greater returns on ad spend.

The Trade Desk has a particularly strong presence in connected television (CTV) and retail media, two of the fastest growing advertising channels. In fact, forrest research corp. Recently stated that The Trade Desk dominates the CTV advertising space, and Morgan Stanley It is believed that the company will “eventually become the leader in OTC retail media advertising” due to its independent business model and growing list of retail partners.

Specifically, the word “independent” means that The Trade Desk is not affiliated with any website or mobile app, so it has no reason to direct advertisers to specific ad inventory. In contrast, letterGoogle has created an advertising ecosystem rife with conflicts of interest. It sells ad-tech software to third-party media buyers and publishers, as well as its own inventory from products like Google search and YouTube.

This means Google has clear incentives to direct ad buyers to specific inventory, and the company also competes with its own customers. The result of these conflicts is that brands prefer to share data with independent players like The Trade Desk. Taking advantage of this, it embeds powerful artificial intelligence and measurement capabilities into its platform.

Specifically, The Trade Desk sources data from a wide range of leading retailers to create measurement opportunities not available on other platforms.Its partner lineup includes Walmart, Kroger, The Home Depot, Target, walgreensand Albertsonsare among the top ten retailers in the world, and the unique data of these retailers also lays the foundation for superior artificial intelligence rankings, because data is the limiting factor in training machine learning models.

The Trade Desk increased market share in the fourth quarter

The Trade Desk reported strong fourth-quarter results. Customer retention rate remained above 95% for the tenth consecutive year, revenue grew 23% to $606 million, and net income based on generally accepted accounting principles (GAAP) increased 36% to $0.19 after dilution. CEO Jeff Green “We’ve outperformed the rest of the digital advertising space over the past eight quarters,” Green told analysts. He also said the company is uniquely positioned to continue to grow market share not just in 2024 but well into the future. .

The Trade Desk launched a new platform called Kokai last June. It has a more advanced artificial intelligence engine that can synthesize signals for 13 million impressions per second, helping advertisers buy the right impressions to attract the right audience at the right time. Kokai also uses new measurement methods to enable advertisers to evaluate the performance of retail campaigns and the quality of CTV advertising.

Ultimately, Kokai should reduce friction for advertisers and improve campaign results. This value proposition should attract more media buyers to The Trade Desk and help the company capture a larger share of its advertising budget.

Trade Desk’s inventory isn’t cheap, but the prices are acceptable

Digital ad spending is expected to grow at an annual rate of 15.5% through 2030, but growth should be faster given The Trade Desk’s strong presence in the rapidly expanding CTV and retail media pipelines. The company also believes it can accelerate growth in international markets. Notably, North America currently accounts for 88% of the platform’s ad spend.

With that in mind, Wall Street analysts expect The Trade Desk’s sales to grow at an annual rate of 20% over the next five years. This consensus estimate makes the current valuation of 22.4x sales seem acceptable, although certainly not cheap. Investors should expect volatility from the company. In the short term, but also in the long term, The Trade Desk can create significant shareholder value. Now is a great time to buy a small position in this growth stock.

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Suzanne Frey is a senior executive at Alphabet and a board member of The Motley Fool. Trevor Janewin The Motley Fool holds positions at Nvidia and The Trade Desk. The Motley Fool has positions and recommendations for Alphabet, Home Depot, Nvidia, Target, The Trade Desk and Walmart. The Motley Fool recommends Kroger. Motley Fool owned disclosure policy.

Cathie Wood’s Ark Invest Is Selling Nvidia Stock and Buying This Artificial Intelligence (AI) Growth Stock Originally published by The Motley Fool

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