In this article, we discuss 10 Artificial Intelligence Stocks in Cathie Wood’s Portfolio.
Cathie Wood does not need any introduction in the investment world. Her investment career spans over decades and her hedge fund, ARK Investment Management, is famous for betting on technology companies that are disrupting the industry with their innovative products and services.
Recently, Cathie Wood launched ARK Transparency Fund, maintaining a focus on the tech sector. This development comes at a time when 6 out of 8 ARK funds are in dire straits for 2021. ARK Innovation, the fund’s flagship ETF, is down 21.68% year-to-date. However, according to Wood, placing bets on disruptive innovation has been fruitful in the past as the flagship fund managed to generate average annual returns of about 40% in the past five years, as reported by Business Insider. With this return rate, Wood expects the returns to grow four times from current levels over the next five years.
Some of the prominent stocks in Cathie Wood’s portfolio are Tesla, Inc. (NASDAQ:TSLA), Twitter, Inc. (NYSE:TWTR), Shopify Inc. (NYSE:SHOP), and Spotify Technology S.A. (NYSE:SPOT).
However, in this article, we will focus on artificial intelligence stocks in ARK Investment Management’s 13F portfolio as of Q3.
Cathie Wood of ARK Investment Management
Our Methodology:
The stocks mentioned below are the companies that deploy AI technologies in their operations. For this list, we took into account ARK Investment Management’s 13F portfolio for Q3.
Artificial Intelligence Stocks in Cathie Wood’s Portfolio
10. Peloton Interactive, Inc. (NASDAQ:PTON)
Number of Hedge Fund Holders: 62
Peloton Interactive, Inc. (NASDAQ:PTON) is an American exercise equipment and media company that utilizes artificial intelligence technology to improve its customer experience. In Q3 2021, Cathie Wood’s ARK Investment Management increased its stake in the company by 3%, and now holds a stake worth roughly $150 million. Peloton Interactive, Inc. (NASDAQ:PTON) represented 0.36% of Cathie Wood’s portfolio.
The number of hedge funds having stakes in Peloton Interactive, Inc. (NASDAQ:PTON) decreased in Q3, mainly due to post-Covid decline and slow revenue growth. In the third quarter, 62 hedge funds tracked by Insider Monkey reported owning stakes in the company, down from 67 in the previous quarter. These stakes hold a consolidated value of $4.63 billion.
Recently, Deutsche Bank initiated its coverage on Peloton Interactive, Inc. (NASDAQ:PTON) with a Buy rating and a $76 price target, citing the hybrid work model post-pandemic. In Q3, the company earned $805 million in revenue, up 6.2% from the prior-year quarter.
Like Tesla, Inc. (NASDAQ:TSLA), Twitter, Inc. (NYSE:TWTR), Shopify Inc. (NYSE:SHOP), and Spotify Technology S.A. (NYSE:SPOT), Peloton Interactive, Inc. (NASDAQ:PTON) is also one of the notable stocks in Cathie Wood’s portfolio of Q3.
Carillon Tower Advisers mentioned Peloton Interactive, Inc. (NASDAQ:PTON) in its Q2 2021 investor letter. Here is what the firm has to say:
“Peloton Interactive operates a connected fitness platform offering live and on-demand classes allowing users to exercise at home. The firm’s shares were pressured in the quarter after Peloton announced a voluntary recall for both its legacy treadmill (Peloton Tread+) and its newly-launched base model treadmill (Peloton Tread). The issue surrounding the latter is somewhat troubling, as it appears it may be the result of an engineering flaw. This new treadmill offering was expected to be a key growth driver in the second half of 2021, and this development reduces our confidence in Peloton’s product pipeline. Therefore, we sold the stock.”
9. JD.com, Inc. (NASDAQ:JD)
Number of Hedge Fund Holders: 66
JD.com, Inc. (NASDAQ:JD), a Chinese e-commerce company, uses AI, big data, and robotics to connect consumers with commerce. The company’s most advanced robots work in its warehouses.
Acknowledging the company’s competent management in supply chain and logistics infrastructure, Macquarie resumed its coverage on JD.com, Inc. (NASDAQ:JD) in December, with an Outperform rating and a $112 price target. In its Q3 report, the company posted an EPS of $0.49, beating consensus by $0.17. ARK Investment Management started investing in JD.com, Inc. (NASDAQ:JD) during Q1 of 2018 with a $47,100 worth of stake. In Q3 2021, the company represented 0.41% of Cathie Wood’s portfolio.
Tiger Global Management LLC held the largest stake in JD.com, Inc. (NASDAQ:JD) in Q3, worth roughly $3.7 billion. Overall, 66 hedge funds tracked by Insider Monkey held positions in the company, compared with 76 in the previous quarter. These stakes are valued at over $9.05 billion.
Argosy Investors mentioned JD.com, Inc. (NASDAQ:JD) in its Q3 2021 investor letter. Here is what the firm has to say:
“We sold JD as a result of the furor over Chinese stocks during the quarter. We had been concerned about China’s lack of respect for investor rights for some time, and Beijing has become significantly more aggressive in asserting itself of late. In addition, the legal structure Chinese companies use to come public in the U.S., a Cayman Islands shell corporation leaves American investors with an unsure path to recovering value should these companies cease to trade on U.S. exchanges. Because of the uncertainty, we exited our position in JD completely. We still love JD’s long-term prospects, but we cannot estimate the legal/regulatory risk associated with these companies anymore. More broadly, we are freeing up cash for some other positions we already own which have declined in this market, and after additional review, remain attractive.”
8. CareDx, Inc (NASDAQ:CDNA)
Number of Hedge Fund Holders: 29
CareDx, Inc (NASDAQ:CDNA) is an American precision medicine company. Earlier this year, the company, along with its partner Organx, announced the development of advanced analytics and AI technologies to improve organ transplant outcomes.
As per Insider Monkey’s data for Q3, 29 hedge funds tracked by Insider Monkey were bullish on CareDx, Inc (NASDAQ:CDNA), up from 28 in the previous quarter. These stakes are valued at roughly $638 million.
As of Q3, ARK Investment Management holds over 3.4 million shares in CareDx, Inc (NASDAQ:CDNA), which represents 0.51% of the hedge fund’s 13F portfolio. In Q3, the company posted an EPS of $0.07, beating the estimates by $0.05. Moreover, CareDx, Inc (NASDAQ:CDNA) earned $75.5 million in revenues, up 41.6% from the prior-year quarter. As the company modestly topped analysts’ estimates in Q3, Raymond James, recently, set a $90 price target on CareDx, Inc (NASDAQ:CDNA), while maintaining a Strong Buy rating on the shares.
In addition to Tesla, Inc. (NASDAQ:TSLA), Twitter, Inc. (NYSE:TWTR) and Shopify Inc. (NYSE:SHOP), CareDx, Inc (NASDAQ:CDNA) is a notable growth stock in Cathie Wood’s portfolio.
Baron Funds published its Q3 2021 investor letter in November and mentioned CareDx, Inc (NASDAQ:CDNA) in it. Here is what the firm has to say:
“CareDx, Inc. provides transplant testing and ancillary services. The company reported strong second quarter earnings (it beat and raised full-year guidance), driven by its kidney and heart transplant tests. It also is moving forward with studies on more transplant tests (liver, stem cell/bone marrow transplant, cell transplant, and lung). We believe the weak share price performance was related to noise surrounding a competitor’s heart transplant test study that purported to be more accurate than CareDx’s test. While the headline number looks better for the competitor, it is important to note that CareDx’s Heart Care combination test, which includes both donor-derived DNA and gene expression testing, is comparable to the competitor’s accuracy. Also, while the full publication has not yet been released, it appears that the competitor’s testing results are from retrospective (looking back) as opposed to prospective (blind and forward looking) patient results. So, this may not be a fully “apples-to apples” comparison. The same competitor has previously had similar test data and a competitive product launch in kidney (by far the largest revenue producer for CareDx) but has still failed to garner meaningful share. CareDx has proven itself to be a terrific long-term partner to its customers, providing not only tests, but services to transplant centers and their patients which creates brand stickiness, and therefore competitive advantage beyond pure testing. We are not concerned by the short-term dip in the share price as CareDx still has significant market opportunity in kidney, heart, and all of its pipeline products.”
7. DocuSign, Inc. (NASDAQ:DOCU)
Number of Hedge Fund Holders: 51
An American e-signature company, DocuSign, Inc. (NASDAQ:DOCU) uses a proven combination of AI technologies, such as machine learning and natural language processing, to offer a digital signature product for electronic agreements. Recently, owing to the company’s solid recovery post-pandemic, Oppenheimer set a $250 price target on DocuSign, Inc. (NASDAQ:DOCU), while maintaining an Overweight rating on the shares.
In Q3 2021, the company accounted for 1.12% of Cathie Wood’s portfolio, as her hedge fund holds a stake worth roughly $469 million. In Q3, DocuSign, Inc. (NASDAQ:DOCU) posted an EPS of $0.58, beating the estimates by $0.12.
At the end of Q3 2021, 51 hedge funds in Insider Monkey’s database reported holding stakes in DocuSign, Inc. (NASDAQ:DOCU), down from 58 in the previous quarter. The total value of these stakes is over $4.23 billion. Among these hedge funds, Tiger Global Management LLC was the company’s leading shareholder in Q3, holding a stake worth $1.88 billion.
Carillon Tower Advisers mentioned DocuSign, Inc. (NASDAQ:DOCU) in its Q2 2021 investor letter. Here is what the firm has to say:
“DocuSign provides electronic signature solutions. The firm reported an excellent quarter and investors have appreciated the strong growth combined with the excellent margins the company has posted. DocuSign has a long runway of growth ahead and we believe that it remains in a favorable position to continue gaining market share from traditional manual and paper-based signature solutions.”
6. Twitter, Inc. (NYSE:TWTR)
Number of Hedge Fund Holders: 94
Twitter, Inc. (NYSE:TWTR), an American microblogging and social networking service, uses an AI algorithm to increase engagement on its tweets. In Q3 2021, the hedge fund interest in Twitter, Inc. (NYSE:TWTR) spiked, as 94 hedge funds tracked by Insider Monkey were bullish on the company, up from 89 in the previous quarter. These stakes hold a consolidated value of over $6.3 billion, compared with $6 billion in the previous quarter.
ARK Investment Management bought 1.1 million shares of Twitter, Inc. (NYSE:TWTR) in Q3, taking the total to 13.7 million shares. This marks the hedge fund’s biggest one-day purchase of the company since July. Twitter, Inc. (NYSE:TWTR), currently, accounts for 1.99% of Cathie Wood’s portfolio. In Q3, the company reported revenue of $1.28 billion, while its advertising revenue stood at $1.14 billion, presenting a 37% and 41% year-over-year growth, respectively.
Recently, Morgan Stanley appreciated Twitter, Inc. (NYSE:TWTR) for its strong marketing business and raised its price target to $62, which implies a 31% upside. The firm kept an Equal Weight rating on the shares. Along with ARK Investment Management, Lone Pine Capital was also one of the company’s leading shareholders, owning a stake worth $1.3 billion.
Twitter, Inc. (NYSE:TWTR) is also favored by investors and analysts like Tesla, Inc. (NASDAQ:TSLA), Shopify Inc. (NYSE:SHOP), and Spotify Technology S.A. (NYSE:SPOT).
Greenwood Investors LLC mentioned Twitter, Inc. (NYSE:TWTR) in its Q3 2021 investor letter. Here is what the firm has to say:
“Being entrepreneurial, by definition, means taking the path untraveled, and heading into the unknown with daring boldness. Offense playbooks, by design, must take competition by surprise. Coming from a humble place with brands and companies that were ridiculed by competitors, when Sergio put medium-term plans out to the market, they were not timid. He would always aim higher than anyone, especially his competitors, believed he and his team could reach. And while not every target was always achieved, the formidable results speak for themselves.
This past earnings season, as Twitter was the only social media company to deliver on guidance while also confirming the quarter ahead to be at least as good, the stock sold off materially as its monetizable daily active user (MDAU) targets in the medium-term were called into question. While founder Jack Dorsey is clearly unafraid to look foolish to the public, or even in front of congress, he also manages multiple businesses at the same time. Competitors openly make fun of him. But his team is exceptionally loyal to him, and they have set out very ambitious targets for themselves over the next few years. The recent sell-off in Twitter shares was like deja vu all over again, as I reminisced about the Fiat capital markets day in 2014, fittingly on Twitter in this tweet thread. With its product and revenue servers rebuilt, it can now innovate and launch new ad formats faster than ever before. We look forward to the Twitter team pressing its offense strategy as a major peer loses focus on its core business.”
5. Twilio Inc. (NYSE:TWLO)
Number of Hedge Fund Holders: 96
Twilio Inc. (NYSE:TWLO) is an American cloud communications platform that uses AI algorithms to recommend relevant information and responses.
ARK Investment Management started building its position in Twilio Inc. (NYSE:TWLO) during the fourth quarter of 2016. In Q3 2021, the hedge fund held a $1.03 billion worth of stake in the company, which accounted for 2.48% of its 13F portfolio. Recently, Twilio Inc. (NYSE:TWLO) launched a $50 million investment fund that would pursue different organizations to explore new avenues of customer engagement. On December 9, Barclays upgraded Twilio Inc. (NYSE:TWLO) to Overweight, while maintaining a $375 price target, which implies a 35% upside.
At the end of Q3 2021, 96 hedge funds tracked by Insider Monkey held stakes in Twilio Inc. (NYSE:TWLO), compared with 98 in the previous quarter. The total value of these stakes is over $6.36 billion. Besides ARK Investment, SCGE Management was one of the company’s leading shareholders in Q3, holding roughly 2.8 million shares.
RiverPark Funds mentioned Twilio Inc. (NYSE:TWLO) in its Q3 2021 investor letter. Here is what the firm has to say:
“TWLO shares were also a top detractor for the quarter. Just like after 1Q, despite another quarterly beat in 2Q, management guidance–which we believe to be conservative–disappointed some investors. Second quarter revenue of $669 million was up 67% year over year, significantly exceeding management’s guidance of 47%-50% revenue growth. Management guided 3Q21 revenue to 50%-52% revenue growth, which was ahead of expectations, but due to continued investment also guided to a non-GAAP operating loss of $25 million-$30 million, which was below the Street’s forecast of a $12 million loss.
The COVID crisis has accelerated the adoption of the company’s cloud-based, integrated communications platform that allows companies in a wide range of businesses to embed digital communications capabilities (video, chat, voice, SMS, fax, and email) into their customer facing applications without needing to build back-end infrastructure and interfaces. Twilio’s total addressable market is now greater than $40 billion, which should grow by 50% over the next few years, providing a strong secular tailwind for the company. We expect the company’s gross margin to continue to expand from 54% in the second quarter toward management’s long-term goal of 60%-65%, and, as the company grows to scale, we expect its non-GAAP operating margin to expand to 25%.”
4. Spotify Technology S.A. (NYSE:SPOT)
Number of Hedge Fund Holders: 48
Spotify Technology S.A. (NYSE:SPOT) is a Swedish advertisement streaming and media services provider whose primary AI algorithm recommends new music through a process called collaborative filtering. As streaming already represents 83% of the recorded music sales in the U.S., Benchmark initiated its coverage on Spotify Technology S.A. (NYSE:SPOT) with a Buy rating and a $300 price target.
According to Insider Monkey’s data for Q3, 48 hedge funds tracked by Insider Monkey reported owning stakes in Spotify Technology S.A. (NYSE:SPOT), the same as in the previous quarter. These stakes hold a consolidated value of over $3.03 billion.
ARK Investment Management holds 4.6 million shares in Spotify Technology S.A. (NYSE:SPOT) in Q3, valued at over $1 billion. The company accounted for 2.49% of Cathie Wood’s portfolio. In Q3, the company reported solid growth of 75% in its advertisement revenue at 323 million euros.
Baron Funds mentioned Spotify Technology S.A. (NYSE:SPOT) in its Q3 2021 investor letter. Here is what the firm has to say:
“Spotify Technology S.A. is a leading digital music service available in 178 international markets, offering on-demand audio streaming through paid premium subscriptions as well as a free ad-supported model. Shares were down as engagement declined while economies reopened and pandemic restrictions were lifted. We continue to view Spotify as a long-term winner in music streaming with potential to go from 158 million paying subscribers today to over 250 million in four years, driven by its scalable core music product as well as its growing library of spoken word content.”
3. Shopify Inc. (NYSE:SHOP)
A Canadian multinational e-commerce company, Shopify Inc. (NYSE:SHOP) utilizes store AI analytics that provides insights into customers’ activities while optimizing opportunities in one place. ARK Investment Management made its first investment of $242,000 in the company during the second quarter of 2017. In Q3 2021, the hedge fund held $1.25 billion worth of shares in Shopify Inc. (NYSE:SHOP), which accounted for 3% of its 13F portfolio.
On November 30, Shopify Inc. (NYSE:SHOP) reported record merchant sales of $6.3 billion globally, driven by Black Friday consumer spending. The sales experienced a 23% growth from the same period last year. As of the close of December 10, Shopify Inc. (NYSE:SHOP)’s year-to-date returns came in at 33.8%, while the stock surged 37.99% in the past year. As the company’s payment business grew by 46% year-over-year, Oppenheimer reiterated its Buy rating on Shopify Inc. (NYSE:SHOP), with a $1,700 price target.
As per Insider Monkey’s Q3 data, 73 hedge funds tracked by Insider Monkey reported owning stakes in Shopify Inc. (NYSE:SHOP), down from 85 in the previous quarter. The consolidated value of these stakes is over $11.4 billion. Lone Pine Capital held a roughly $2 billion worth of stake in Ottawa-based company, becoming its largest stakeholder in Q3.
ClearBridge Investments mentioned Shopify Inc. (NYSE:SHOP) in its Q2 2021 investor letter. Here is what they said:
“Shopify (is one of the) companies that have become go-to platforms for small and medium size businesses (SMBs) engaged in e-commerce and social media marketing, rebounded strongly in the quarter after being caught in the selloff among high-multiple growth names since Vaccine Monday. These and the portfolio’s other disruptors had thrived through the first part of the pandemic, leading us to trim positions into strength and reallocate cash into more attractively priced evolving opportunities and steady compounders that had been overly punished by lockdowns and a drop in economic activity.”
2. UiPath Inc. (NYSE:PATH)
Number of Hedge Fund Holders: 27
UiPath Inc. (NYSE:PATH), an American software company, has built AI into every part of the UiPath platform to discover automation opportunities.
In its recently announced Q3 earnings, UiPath Inc. (NYSE:PATH) posted an EPS of $0.00, beating the estimates by $0.04. Moreover, the company reported a 58% year-over-year growth in its annualized renewal run-rate (ARR) at $818.4 million. Citing the company’s solid growth potential, recently, Truist set a $75 price target on UiPath Inc. (NYSE:PATH), while keeping a Buy rating on the shares.
ARK Investment Management remained bullish on UiPath Inc. (NYSE:PATH) in Q3, as the hedge fund increased its stake in the company by 102%, which accounted for 3.02% of its 13F portfolio.
Apart from Cathie Wood’s hedge fund, Alkeon Capital Management was one of the prominent stakeholders of UiPath Inc. (NYSE:PATH) in Q3, holding over 12.5 million shares. Overall, the number of hedge funds tracked by Insider Monkey having stakes in UiPath Inc. (NYSE:PATH) decreased to 27, from 46 in the previous quarter. However, the total value of these stakes stood at $3.62 billion in Q3, up from $3.45 billion in the preceding quarter.
ClearBridge Investments released its Q2 2021 investor letter and mentioned UiPath Inc. (NYSE: PATH) in it. Here is what the firm has to say:
“We participated in the IPO of UiPath, a developer of software for robotic process automation that uses AI, natural language processing and design to streamline complex processes across a variety of technology environments. The company is an industry leader with a superior solution for leveraging software to optimize workloads. Organizations around the world are beginning to understand the power of automation, with momentum picking up toward fully automating business processes, a $60 billion market today that could grow to $200 billion or more by 2030. UiPath has a unique pricing model, broad partner ecosystem and thoughtful management team supporting one of the strongest growth profiles in technology. Risks we are watching include a partial cloud transition ahead and increased competition from larger software platforms over time.”
1. Teladoc Health, Inc. (NYSE:TDOC)
Number of Hedge Fund Holders: 40
Teladoc Health, Inc. (NYSE:TDOC) is a multinational telemedicine company that also offers AI and analytics platform services. Recently, Baird showed confidence in the healthcare tech and sees upside potential in Teladoc Health, Inc. (NYSE:TDOC), mainly due to the new Omicron Covid-19 variant. The firm set a $110 price target on the stock while maintaining a Neutral rating on the shares.
As of Q3, Teladoc Health, Inc. (NYSE:TDOC) was the second-largest holding of ARK Investment Management. Currently, the hedge fund holds roughly 16.5 million shares in the company, valued at $2.08 billion. Teladoc Health, Inc. (NYSE:TDOC) represented 5.01% of Cathie Wood’s portfolio. In Q3, the company reported revenue of $521.6 million, up 80.6% from the prior-year quarter.
Of the 867 hedge funds tracked by Insider Monkey, 40 hedge funds held stakes in Teladoc Health, Inc. (NYSE:TDOC), compared with 43 in the previous quarter. These stakes have a total value of over $2.8 billion.
Luca Capital mentioned Teladoc Health, Inc. (NYSE:TDOC) in its Q3 2021 investor letter. Here is what the firm has to say:
“As bullish as we are on the future of telemedicine though, we acquiesce that it can be difficult to build a durable moat. Although telemedicine is very scalable and an easy sell (everyone is a potential customer), the service itself is a commodity with little pricing power and low switching costs. However, scale is a significant advantage as a larger network of providers confers lower connection times and wider coverage. In addition, different areas of the country have varying access to care at any given time, but since regulations now allow providers to see patients across all states, we can better match doctors with patients under a national network, similar to “load balancing” in computing. Since Teladoc is international too, there also exists an opportunity to see patients across international borders. These are just a handful of reasons why we do not believe off-the-shelf consumer products like Zoom or Twilio will eventually replace the core telemedicine providers. They’re not integrated, not on-demand, limited to local physician supply, not accessible at the point-of-care via carts or other hospital equipment, and there’s nothing like Livongo to give the providers a continuous picture of patient health. Teladoc also allows whitelabelling, which enables health systems to take advantage of Teladoc’s additional provider supply while retaining the brand their patients have come to know and trust. However, while this incentivizes health systems to go with specialized platforms like Teladoc or Amwell, it’s making it more difficult for end-consumers to differentiate the major telemedicine providers at the product-level.”
You can also take a look at 10 Best Stocks Under $10 in Cathie Wood’s Portfolio and Cathie Wood Stock Portfolio: 10 Newest Stock Picks This Year
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Disclosure. None. 10 Artificial Intelligence Stocks in Cathie Wood’s Portfolio is originally published on Insider Monkey.
