Despite technology shares driving markets to record highs this year, there is plenty of room for more gains to come from stocks tied to Artificial Intelligence.
That was one of the main takeaways of a wide-ranging interview on BNN Bloomberg Wednesday with Cathie Wood, the CEO and founder of Ark Invest and Kevin Prins, managing director and head of distribution of BMO ETFs.
Wood, known for her high-profile calls on disruptive technologies and for investing in up-and-coming companies said that even though the broader market is the most concentrated on a few names as it has been since the 1930s, current price multiples can be justified “by the big surprises in growth investors have seen associated with AI in particular.”
Wood’s main fund no longer has a stake in major technology names like Nvidia, Microsoft and Taiwan Semiconductors, preferring smaller names in the AI space as better values right now. Not having a stake in those high-flying large-cap names has contributed to her fund’s lagging the Nasdaq this year, but she says that the fund’s exposure to smaller AI names represents a better value that could soon be poised to take off.
“If rates come down, then what we will see is a broadening out of the market where maybe the mega caps mark time and the rest of the market catches up,” she said.
Big bet on Tesla
While ARK isn’t invested in many of the so-called Magnificent Seven companies, the funds are big believers in one of them: Tesla.
The electric car maker is ARK’s biggest single holding, with 15 per cent of the flagship ETF invested in it. That’s based on Wood’s bet that autonomous driving will be a major part of Tesla’s future.
“The autonomous taxi network opportunity and the entire ecosystem around it will generate in the next five to 10 years US$8 to $10 trillion in revenue,” and half of it will go to Tesla.
In recent months concerns have risen that the AI hype may be overdone, but Wood doesn’t share that view. Calling generative AI “the biggest technology platform shift in history” and she says Canada is at the forefront of the AI revolution.
“I am in a land that really understands artificial intelligence, a lot of wonderful talent is here in Canada. So much that many of our companies have divisions in Canada for that reason,” she said.
Bullish on Shopify
Wood, who previously told BNN Bloomberg about her bullish case for Shopify back in 2022, reiterated why her firm continues to invest in this Canadian tech darling.
“Shopify really started the social commerce revolution. It is enabling companies like Meta Platforms with Facebook and Instagram and also TikTok to move into commerce”
She added that the social commerce revolution will turbocharge online shopping from 15 per cent today to half of total commerce one day soon.
How to play it in Canada
ARK’s funds are based in the U.S. but BMO offers versions of all of ARK’s funds that trade in Canada, in Canadian dollars.
“The key thing for Canadians is that it makes sense for them. In a lot of cases they invest in The United States, at a currency conversion cost [but] BMO can give these investors an institutional access,” Prins said, adding that the BMO ARK funds are more tax efficient for Canadians too.
