Many of the most famous names on Wall Street are actively looking to capitalize on the fast-growing artificial intelligence (AI) industry. Cathie Wood, the CEO of Ark Investment Management, is perhaps one of the most bullish on AI. Most of the firm’s top 10 holdings — when aggregated across its entire family of ETFs — are companies whose prospects are increasingly tied to AI. And five of them make up about 30.4% of Ark Investment’s portfolio: Tesla (TSLA 0.48%), Space Exploration Technologies (SPCX 0.59%), Alphabet (GOOG +3.60%) (GOOGL +3.15%), Advanced Micro Devices (AMD 3.40%), and Amazon (AMZN +2.97%). Is Cathie Wood right to be betting big on these AI companies?
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Banking on Elon Musk
Given Ark Investment’s focus on innovative platforms, it’s not surprising that the firm holds shares in companies led by Elon Musk, a leader in pushing disruptive technological innovation. Tesla is Ark Investment’s largest holding, with SpaceX not too far behind at number four. They account for 9.73% and 4.28% of the firm’s holdings, respectively, as of writing. AI is central to both companies’ prospects.
Take Tesla. The electric vehicle (EV) maker is no longer valued as just a car company. Its two biggest opportunities, robotaxis and humanoid robots, can’t get off the ground without AI. We could say something similar about SpaceX. Though it made its name by pioneering reusable rockets and slashing the cost of space travel — and currently generates most of its operating profits from its satellite-powered internet connectivity business — the company’s own regulatory filings argue that AI represents the vast majority of its total addressable market.
Today’s Change
(-0.48%) $-1.90
Current Price
$394.28
Key Data Points
Market Cap
Day’s Range
$390.73 – $406.55
52wk Range
$297.82 – $498.83
Volume
2M
Avg Vol
50.9M
Gross Margin
19.07%
But is either one of these Musk-led publicly traded corporations a buy? On the one hand, they have mouthwatering opportunities ahead. At scale, Tesla’s fleet of robotaxis could be highly profitable. Similarly, as SpaceX expands its internet connectivity business and moves ahead with its next-gen, fully reusable rocket, Starship, the company could see revenue and earnings grow significantly.
That said, Tesla and SpaceX sport valuations that suggest some of that success is already baked into their stock prices. That’s especially true of SpaceX, a company worth $1.8 trillion despite not being profitable. I wouldn’t invest in SpaceX at current levels, but Tesla, although still somewhat risky, looks much more attractive, especially for investors comfortable with volatility.
Space Exploration Technologies
Today’s Change
(-0.59%) $-0.81
Current Price
$135.27
Key Data Points
Market Cap
Day’s Range
$132.15 – $139.34
52wk Range
$132.15 – $225.64
Volume
58M
Avg Vol
141M
Doubling down on the hyperscalers
Alphabet and Amazon make up 4.71% and 3.6% of Ark Investment’s portfolio, respectively. Both companies are already capitalizing on AI. Alphabet has incorporated AI overviews and AI mode into its search engine, leading to increased engagement. It also offers a suite of cloud-based AI tools that are helping drive strong sales growth. Alphabet is doubling down. The company plans to spend between $180 billion and $190 billion on capex this year, largely to fund its AI-related ambitions.
The company also has several growth opportunities beyond AI and cloud computing. Alphabet’s core digital advertising business is still one of the largest in the world, and it is cashing in on the rise of the streaming industry. It is also building a robotaxi service through its subsidiary, Waymo. Alphabet looks like a great bet to capitalize on the AI industry.
Today’s Change
(3.60%) $12.88
Current Price
$370.21
Key Data Points
Market Cap
Day’s Range
$355.67 – $372.14
52wk Range
$181.50 – $404.47
Volume
20.3M
Avg Vol
21.5M
Gross Margin
60.43%
Dividend Yield
0.23%
We could say the same about Amazon. The company’s cloud business is seeing strong momentum — with sales growth accelerating in recent quarters — partly thanks to AI. The company is also implementing AI-powered initiatives across the business that could help it cut expenses and boost profits. Amazon’s business is significantly diversified. It has footprints in healthcare, streaming, digital advertising, and more. Further, the tech leader boasts a moat from several sources, including switching costs, network effects, and a strong brand name. Given all these factors, Amazon could deliver outstanding long-term returns.
Today’s Change
(2.97%) $7.36
Current Price
$254.85
Key Data Points
Market Cap
Day’s Range
$249.69 – $256.47
52wk Range
$196.00 – $278.56
Volume
2.2M
Avg Vol
49.4M
Gross Margin
50.60%
Riding the agentic AI boom
AMD is a leading player in the CPU (Central Processing Unit) market. While it also has footprints in the GPU (Graphics Processing Unit) industry, and has somewhat benefited from the fact that GPUs are the workhorse of AI training, it has mostly played second fiddle (at best) to Nvidia (NVDA +0.29%), by far the undisputed GPU leader. Things may be about to change, given that agentic AI could be the next wave in the industry. AI agents can plan and execute tasks autonomously, helping companies become much more productive by automating tasks while reducing expenses.
Today’s Change
(-3.40%) $-18.61
Current Price
$529.52
Key Data Points
Market Cap
Day’s Range
$509.63 – $558.89
52wk Range
$149.22 – $584.73
Volume
957.6K
Avg Vol
36.4M
Gross Margin
47.09%
Since AI agents run on CPUs, there is a large opportunity for AMD to capitalize on this as demand for its products increases significantly over the next few years. AMD will face some competition, but it has been a CPU leader for decades, boasts a moat thanks to switching costs, and has arguably performed better than its main competitor, Intel (INTC 4.43%), in recent years. AMD makes up 8.10% of Ark Invest’s combined portfolio. In my view, the firm is right to be bullish on the company’s prospects.
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