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Cathie Wood, the CEO and CIO of ARK Investment Management, is one of the most widely followed names in the investing industry. Known for her bold and disruptive bets on companies such as Tesla (TSLA), Block (SQ), and Robinhood (HOOD) long before they became mainstream darlings, Wood's investment style is unconventional, to say the least.
Wood now manages billions of dollars, headlined by her flagship ETF, the Ark Innovation ETF (ARKK), which now has assets under management (AUM) of about $5.7 billion. Consequently, any move by this maverick investor is noteworthy for market participants, especially when it involves one of her favorite stocks.
Recently, media reports emerged that Wood unloaded Tesla stock worth $22.22 million following its historic post-earnings rally. However, Tesla continues to occupy a prominent position in Wood's portfolio, and it would be safe to assume her bullish long-term thesis is still intact.
So, where is Wood deploying fresh capital instead? Simple: More tech stocks - and mega-cap tech stocks, to be precise. With Magnificent Seven names dominating the spotlight today in the thick of earnings season, here's a look at what the maverick investor is buying.
#1. Amazon
Founded in 1994, Amazon (AMZN) is a tech behemoth with interests spanning e-commerce, cloud services, artificial intelligence (AI) and streaming. Founded by one of the world's richest people, Jeff Bezos, Amazon is also one of the most valuable companies in the world, commanding a gargantuan market cap of $2 trillion.
Notably, AMZN stock is up 22.9% on a YTD basis, and accounts for 1.16% of Wood's flagship Ark Innovation ETF.
Slated to report its Q3 earnings after the market closes tonight, Amazon reported its sixth consecutive quarterly earnings beat in Q2. EPS almost doubled to $1.26 from the prior year's figure of $0.65, while also coming in higher than the consensus estimate of $1.03. Total net sales for the quarter came in at $148 billion, up 10.1% from the year-ago period.
Over the past 10 years, the company has grown its revenue and earnings at impressive CAGRs of 22.14% and 73.38%, respectively.
Cash flow activities from operations also remained solid, with Amazon reporting net cash from operating activities of $25.3 billion, compared to $16.5 billion in the year-ago period. The company closed the quarter with a sizeable cash balance of $71.2 billion, much higher than its long-term debt levels of $54.9 billion.
So, Wood's bet on Amazon, like Tesla, is built on a solid balance sheet. But what else would drive a “disruption”-minded investor like Wood to the e-commerce stock?
Amazon remains a dominant player in multiple high-growth markets, particularly through Amazon Web Services (AWS), which not only drives Amazon's profitability but also holds a strong 31% market share in cloud infrastructure, competing with Microsoft's (MSFT) 25% and Alphabet's (GOOGL) Google Cloud's 11%. AWS is Amazon’s most profitable division, with its Q2 2024 revenue at $26.3 billion, a 19% year-over-year growth that, while comprising 17.8% of overall sales, accounted for 63.3% of Amazon’s operating income.
In AI, Amazon is building a vertically integrated ecosystem to streamline services for AI model developers through offerings like Amazon Bedrock, which provides streamlined access to hardware, software, and data. Further bolstering this ecosystem are Amazon Q, a generative AI assistant, and Amazon's custom-designed AI chips, Trainium and Inferentia. These chips offer cost-effective alternatives to Nvidia’s (NVDA) H100, allowing Amazon to maintain competitive operating costs and reduce dependency on third-party suppliers.
As for Amazon Prime Video, the world’s second-largest streaming platform has over 200 million subscribers, and Amazon’s advertising platform ranks among the largest globally, trailing only Alphabet and Meta. Amazon's share of the overall digital advertising market has also grown to 13.9%, compared to 10.7% in 2021, underscoring its broadening influence across multiple sectors.
Analysts are overwhelmingly bullish about Amazon stock, with a consensus rating of “Strong Buy” and a mean target price of $226.50. This denotes an upside potential of about 21.7% from current levels. Out of 48 analysts covering the stock, 44 have a “Strong Buy” rating, 3 have a “Moderate Buy” rating, and 1 has a “Hold” rating.
#2. AMD
Next up on Wood's shopping list was Advanced Micro Devices (AMD), or AMD. Founded in 1969 and headquartered in Santa Clara, AMD is a behemoth of the semiconductor industry, commanding a market cap of $240.5 billion. The company is one of the world's largest suppliers of microprocessors and related technologies for the computing and graphics industries. AMD's products are used in a wide range of applications, including personal computers, servers, workstations, embedded systems, and gaming consoles.
Although the stock has been an underperformer in 2024, down 1.2% so far, AMD is up an impressive 309.5% in the past five years. AMD stock has a 1.40% weight in the Ark Innovation ETF.
Though the shares sold off in response to a light Q4 forecast, AMD's results for the third quarter beat estimates on both revenue and earnings. Revenues for the latest quarter reached $6.8 billion, up 18% overall as core data center segment revenues surged a whopping 122% year over year to $3.5 billion. Earnings increased by 31% from the prior year to $0.92, on an adjusted basis, edging past the consensus estimate.
Net cash from operating activities came in at $628 million, up 49.2% from the previous year as the company exited the quarter with a cash balance of about $4 billion. The company had no short-term debt on its books.
AMD's data center segment is expected to continue robust growth, driven by high demand for its AMD Instinct GPUs and 4th Gen EPYC CPUs. The recent launch of the Instinct MI325X and its MI300X GPU—targeted at AI workloads—positions AMD as a strong contender against Nvidia's H100 in the AI acceleration market. CEO Lisa Su highlighted strong customer and partner interest for the MI325X, with production shipments slated to start imminently. Management also forecast the AI GPU market reaching $500 billion by 2028, indicating significant long-term growth potential.
Overall, AMD has been growing at a healthy clip over the past 10 years, with revenues and earnings compounding at CAGRs of 15.29% and 43.30%, respectively. Moreover, analysts are forecasting industry-beating growth in revenue and earnings for AMD, as well. While forward revenue growth for the chip specialist is pegged at 11.69%, earnings are expected to surge by 60.27%, compared to the sector medians of 6% and 7.64%, respectively.
AMD's data center products are gaining traction with major cloud providers, including Microsoft and Google, who are now deploying its 4th-gen EPYC CPUs. The company is also positioned to capitalize on the ongoing supply shortages of Nvidia's Blackwell GPUs, which remain fully booked for the coming year, creating a window for AMD's expanded presence in the AI accelerator market.
The recent acquisition of Silo AI marks a strategic move to reinforce AMD's position in AI, as Silo AI has been instrumental in scaling large language model training on LUMI, Europe’s fastest supercomputer powered by AMD Instinct MI250X GPUs. Notably, Silo AI’s client base includes Nvidia, highlighting the strength of AMD’s AI solution capabilities. The acquisition also adds a new revenue stream, with deployed AI solutions now complementing AMD's hardware offerings.
Additionally, AMD’s software ecosystem has improved significantly through its ROCm open-source platform, which has seen a 2.4x gain in AI inferencing and a 1.8x boost in training performance over the last 10 months. With compatibility for AI frameworks like PyTorch and TensorFlow, ROCm has made AMD’s offerings more accessible and attractive to customers seeking versatile AI solutions.
Beyond data centers and AI, AMD leads in gaming console processors, with an 83% market share. The company’s advancements in chiplet architecture and 3D stacking technologies further diversify its portfolio, reinforcing AMD’s position as a formidable player in the semiconductor landscape.
Given the company's rapidly expanding AI credentials and diversified semiconductor portfolio, it's no surprise that analysts have deemed AMD stock a “Strong Buy,” with a mean target price of $193.06. This indicates an expected upside potential of about 34% from current levels.
Out of 37 analysts covering the stock, 30 have a “Strong Buy” rating, 1 has a “Moderate Buy,” and 6 have a “Hold” rating.
#3. Meta Platforms
We conclude our list of recent Wood picks with Mark Zuckerberg-led Meta Platforms (META), in focus today after last night's earnings. Founded two decades ago as Facebook, Meta is a global leader in social media and virtual reality technology. It rebranded itself in 2021 as “Meta” to reflect its broader focus on building a “metaverse” beyond social media.
Valued at a massive market cap of $1.5 trillion, Meta stock has been a stark outperformer this year, gaining 60% - even in light of today's 4.6% pullback. Further, the stock also offers a dividend yield of 0.25%.
META currently accounts for 2.61% in the Ark Innovation ETF.
While investors are responding negatively today to plans for increased AI capex - the kind of reaction that's nothing new for the company - Meta's results for the third quarter were impressive, with both revenue and earnings surpassing estimates. Revenues for the quarter came in at $40.6 billion, up 19% from the previous year, while earnings soared by 37% to $6.03 per share, outpacing the consensus estimate of $5.29.
Net cash from operating activities in Q3 came in at about $25 billion, with the company closing the quarter with a cash balance of $45 billion, much higher than its short-term debt levels of about $2 billion.
The company's user count, or family daily active people, totaled 3.29 million during the third quarter, which represents a growth of 5% compared to one year earlier. The fact that META was able to add around 150 million new active people to its social media platforms over the last year, even though META is already so large, is impressive.
Over the past 10 years, Meta has grown its revenues and earnings at CAGRs of 31.07% and 35.97%, respectively. Going forward, analysts are projecting the company to deliver forward revenue and earnings growth rates of 16.60% and 42.08%, respectively.
Meta has made significant advancements in AI and wearable technology, positioning itself as a leader in both fields. In July 2024, the company launched the Llama 3.1 405B, a cutting-edge openly available AI foundation model. Internal evaluations suggest that Llama 3.1 is competitive with top models such as GPT-4, GPT-4o, and Claude 3.5 Sonnet. This competitive edge was further bolstered in October when Meta introduced lightweight quantized Llama models, enabling developers to run AI applications directly on smartphones. The Llama 3.2 1B and 3B models are compressed versions that enhance accessibility for mobile app developers.
Meta has built a robust AI ecosystem around its Llama models, forging partnerships with major hyper-scalers like Amazon, Microsoft, Alphabet, Nvidia, and Databricks. This allows enterprise customers to leverage Llama for their AI training and inference tasks within public or hybrid cloud infrastructures. The models are designed to seamlessly integrate with various GPUs, servers, and software platforms. Furthermore, Meta's AI capabilities enhance its advertising business, providing marketers with more targeted marketing experiences and improving user engagement on its social networking platforms.
In addition to its AI initiatives, Meta has made notable strides in the wearables market. The new AI-enhanced Ray-Ban glasses offer hands-free content capture and integrate with popular apps like Spotify (SPOT), increasing user engagement and potentially boosting advertising revenue. Despite facing reported losses of about $55 billion in its Reality Labs segment since 2019, Meta is investing heavily in the development of smart eyewear, aiming to disrupt consumer technology and make augmented reality (AR) more practical in everyday life. Early indicators of success include reports of the glasses selling out and becoming the top-selling product in approximately 60% of Ray-Ban stores across Europe, the Middle East, and Africa.
By focusing on both AI and wearable technology, Meta is strategically positioning itself to capitalize on emerging trends in consumer technology and enhance user experiences across its platforms.
Analysts have deemed META stock a “Strong Buy,” with a mean target price of $624.17 - reflecting expected upside potential of about 10.5% from current levels. Out of 48 analysts covering the stock, 41 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, 4 have a “Hold” rating, and 2 have “Strong Sell” ratings.
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