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

Cathie Wood is CEO and Chief Investment Officer of Ark Invest, an asset management firm focused on disruptive innovation. Wood and her team manage multiple thematic index funds that offer exposure to technologies such as artificial intelligence (AI).

Ark sold its in Nvidia Throughout February, the sell-off continued into March. This may seem strange to readers, considering that Nvidia chips are the gold standard for artificial intelligence infrastructure. But Nvidia stock has soared 260% in the past year, so it appears Ark is taking profits and reinvesting capital into other artificial intelligence companies.

For example, Wood and her team have been buying Tesla (NASDAQ: TSLA) March. Here’s what investors should know about the electric vehicle maker.

Tesla remains the market leader in pure electric vehicles

Tesla’s fourth-quarter financial results were disappointing, with revenue rising only 3% year-on-year to $25.1 billion. Operating profit margin Shrinking nearly 800 basis points, Non-GAAP Net profit fell 39% to $2.5 billion. The company also expects vehicle production growth to slow this year as it prepares for its next-generation low-cost vehicle platform. But there’s some good news for shareholders.

Tesla’s disappointing financial performance can be attributed to macroeconomic headwinds. The company has cut prices throughout the year to offset weak demand caused by high interest rates. These price cuts hampered revenue growth and slashed profit margins. But revenue growth and profitability should improve as interest rates start to fall, which is likely to happen later this year.

In addition, Tesla still led the industry in pure electric vehicle sales last year, accounting for 19.1% of the market, up from 18.2% in 2022. That means the company is well-positioned as electric vehicles continue to replace internal combustion engines. Grand View Research says electric vehicle sales will grow 15% annually through 2030.

Finally, Tesla plans to produce a next-generation car by the end of 2025, which can support market share growth. Management said the car will be assembled using new manufacturing techniques that can reduce production costs by 50%. In turn, the company will be able to sell these new cars at much lower prices than existing models, possibly as low as $25,000, meaning more consumers will be able to afford Teslas.

Tesla could become leader in self-driving car technology

very similar apple As it monetizes its devices through add-ons such as cloud storage, Tesla hopes to monetize its vehicles through adjacent software and services. For example, the company recently opened up its Supercharging network to third-party automakers. Wedbush Securities analyst Dan Ives believes paid charging could generate $10 in revenue, with annual revenue reaching $1 billion to $20 billion by 2030.

Likewise, Tesla is selling Full Self-Driving (FSD) beta subscriptions in some regions, and demand should increase as the product gets closer to true self-driving. Tesla also plans to monetize FSD through transactions and mobility (robotaxi) services in the future. Morgan Stanley Analyst Adam Jonas believes that by 2030, annual revenue from FSD software and mobile services will reach $70 billion.

Tesla is already the leader in self-driving technology. Its Dojo supercomputer is designed specifically for training artificial intelligence (AI) vision systems, and is reportedly six times more powerful than GPU alternatives. Tesla also has 50 times more driving data than its nearest competitor. This combination gives the company important advantages.

Specifically, Tesla should be able to train its AI models more efficiently than its peers, meaning FSD could outperform other self-driving platforms. Data from Ark Invest supports this theory. Teslas are involved in a crash approximately once every 3.2 million miles in FSD mode, making them 16 times safer than the national average (one crash every 192,000 miles) and six times safer than Waymo self-driving cars (one crash every 476,000 miles) mile collision).

Tesla has not provided a specific timetable for entering mobile services, but in April 2022, CEO Musk said that the company hopes to achieve mass production of dedicated robotaxis in 2024. Recently, Musk told CNBC that FSD software and autonomous driving sharing services can increase gross profit margins to 70% from 18% last year.

Tesla stock trades at reasonable valuation (for some investors)

Wall Street expects Tesla’s sales to grow 16% annually over the next five years, but that number includes a wide range of estimates given the uncertainty surrounding its FSD technology. For example, Morgan Stanley’s Adam Jonas believes Tesla’s sales can grow 19% annually. Over the next seven years, Ark Invest’s Cathie Wood believes sales will grow 60% annually until 2027.

The difference between these estimates makes life difficult for investors. The stock currently trades at 6.3 times sales, which is an acceptable valuation if Wall Street consensus is correct, a fair valuation if Morgan Stanley is correct, and a very cheap valuation if Ark Invest is correct. . correct. With this in mind, investors who think Tesla can meaningfully monetize FSD should consider buying some shares today.

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Trevor Janewin Has parts from Nvidia and Tesla. The Motley Fool owns and recommends parts of Apple, Nvidia and Tesla. Motley Fool owned disclosure policy.

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

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