It may be a surprise to hear that Cathie Wood’s ARK line of funds hasn’t boomed as much as many of the tech sector’s heavyweights. This is especially true when compared to the so-called Magnificent Seven) on the back of this AI frenzy. However, there are still some top AI stocks that you should grab.
The glory days for the ARK Innovation Fund (NYSEARCA:ARKK), as well as the rest of the ETF roster, are over. However, as interest rates look to retreat and generative AI continues to heat up, questions linger as to whether ARKK will eventually be one of the arcs lifted by the rising AI tides that have already lifted many boats.
While I wouldn’t get my hopes up for another 2020-esque melt-up for the ARK funds, I do think that Cathie Wood will have a lot to prove over the coming years as she looks to bet on some of the less-obvious AI plays that could be next in line for a robust rally. Let’s check out three recent Cathie Wood buys that could help reinvigorate the ARK funds.
Tesla (TSLA)
Cathie Wood has been a big fan of Tesla (NASDAQ:TSLA) stock for quite some time now. It is easily one of the top AI stocks to grab. It’s still one of her flagship fund’s largest holdings. However, it did fall from top spot in the ARKK to second. Forthermore, though many investors have turned against the stock amid its latest plunge, Wood doesn’t seem to be following the herd. It’s no longer in the Magnificent Seven, according to some pundits.
Indeed, Wood has been a true contrarian lately. She has been scooping up shares of Tesla on weakness as others look to rid their portfolios of this stock.
Reportedly, the ARK Innovation Fund purchased just north of 65,500 TSLA shares last Thursday. This marked yet another helping of the stock in recent weeks. Down around 57% from its highs, Tesla still needs to innovate on AI to justify its frothy 40.8 times trailing price-to-earnings (P/E) multiple.
With a good position in the self-driving race, I’d argue there’s a chance that Tesla stock may prove a bargain. Moreover, if Tesla stock can catch a break, look for ARKK to start making up for lost time!
Reddit (RDDT)
Reddit (NASDAQ:RDDT) is another buzzy IPO that’s caught the market world by storm. The home of popular internet forum WallStreetBets has itself become a meme stock of late. Shares have been blasting off out of the gate since going live on the Nasdaq. Cathie Wood was reportedly a buyer of RDDT stock on its very first day. Crazey enough, this is one of the top AI stocks to buy.
Though the social-media stock has been a wild mover, I do think that over the long term Wood will look smart to have bet on Reddit. The stock surged to around $65 per share only to shed around 25% in the following two sessions. I have no idea if it’ll help power ARKK’s rebound or just add to its already-elevated volatility.
Regardless, Reddit seems like an intriguing source for large language models (LLMs). This is especially true given its human take on a broad range of subjects. Did you know that Perplexity AI has the option to select Reddit as a “focus” for its AI-powered searches?
In that regard, Reddit does, in fact, have a moat. However, whether the stock’s a great buy at over nine times price-to-sales (P/S) remains to be seen.
Palantir (PLTR)
Palantir (NASDAQ:PLTR) is another AI kingpin that may have what it takes to outperform the Magnificent Seven on AI. Cathie Wood reportedly increased her position in the big data firm late last year as shares retreated to finish 2023. Easily, Palantir is one of the top AI stocks.
The company’s mere $50.9 billion market cap makes it a relative lightweight compared to the mega-cap tech titans that have been hogging the headlines with AI news of late. Still, the smaller market cap may allow Palantir more room to run if it gets generative AI right over the long run.
The company has been winning new government contracts while advancing its commercial offering, which could experience significant growth as the hardware-driven AI boom transforms into a software one.
Indeed, Wood seems to be searching for less obvious, high-potential AI plays that have the strength to hit back at the tech industry’s behemoths. Palantir seems to fit the bill.
On the date of publication, Joey Frenette did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
