Ark Investment Management operates eight exchange-traded funds (ETFs) that invest primarily in innovative technology stocks. Last year, Ark CEO Cathie Wood said that software companies will be the next big opportunity in artificial intelligence (AI), predicting that they could generate $8 in revenue for every $1 spent on chips by suppliers like. Nvidia.
Ark’s ETFs reflect this attitude. Tesla Stock is the largest possession on the ship Ark Innovation ETF because Wood has called his self-driving software the biggest AI opportunity in the world. Plus, Wood recently acquired stakes in leading AI software companies like OpenAI, Anthropic and Elon Musk’s xAI through the Ark Venture Fund.
If Wood is right about AI software, some stocks could be positioned for significant gains in the coming years. That is why Amazon (NASDAQ: AMZN) AND Duolingo (NASDAQ: DUOL) may be between them.
1. Amazon: AI software is just the beginning
Amazon is one of the most versatile AI stocks investors can buy. It is weaving the technology into many of its existing businesses, from e-commerce to broadcasting, and its Amazon Web Services (AWS) cloud division is developing everything from AI chips to AI chatbots.
Amazon uses AI to power the recommendation engine on Amazon.com. It learns what products customers like to buy so it can promote more of them to drive sales. Plus, the company developed a set of AI software tools for marketers that helps them create product descriptions and create more engaging ads to increase conversions.
But Amazon Web Services (AWS) is the beating heart of Amazon’s AI ambitions. It created its own data center chips for training and mining AI models, and they’ve become popular with developers because they can cut costs by up to 50% compared to Amazon’s other infrastructure (which is powered by the latest chips expensive Nvidia, for example).
Then there’s Amazon Bedrock, where developers can access a set of ready-made large language models (LLM) in the cloud from leading enterprises like Anthropic. It also features a family of Amazon-designed LLMs called Titan. Developers can create AI applications for their businesses much faster using off-the-shelf LLMs compared to building their own, which would require significant amounts of time, data, and money.
Finally, AWS offers turnkey AI applications like the new Amazon Q, an all-in-one virtual assistant that can be tailored to fit the needs of almost any organization. It can scan, analyze and even write computer code to speed up product development, in addition to answering questions from employees on a wide range of topics.
Amazon could soon surpass a $2 trillion valuation, a milestone that only four other US tech companies have achieved. Here’s the kicker: Wall Street expects Amazon to generate a record $638 billion in revenue by 2024, which is significantly more than any of these other four companies will bring in — Apple it’s closest to the mark with estimated revenue of $386 billion in the current fiscal year.
From that perspective, Amazon stock looks cheap right now. The company is rapidly improving its profitability through cost reduction, efficiency initiatives and AI, which could be the ultimate key to unlocking a higher share price in the long term.
2. Duolingo: Language education infused with AI
Duolingo is not an enterprise software company, but its app-based language education platform will benefit from a new subscription-based revenue stream thanks to AI. Before we dive into that, let’s review his existing business.
As of the first quarter, Duolingo served 97.6 million monthly active users, up 35% from the year-ago period. It also had 7.4 million users paying a monthly subscription to accelerate their learning, and these paying users boasted an even faster growth rate of 54%. This is extremely impressive when you consider that up to 90% of the platform’s users are acquired organically (without paid advertising).
So where does AI fit into the picture? Duolingo users complete 10 billion exercises every week, which means the company collects more data than any other language education platform in the world. This is valuable when it comes to training AI models, which Duolingo has been doing since 2013 in an effort to create a learning experience that rivals human tutors.
The launch of her Max subscription last year brought her one step closer to that goal. It introduced two new AI-powered features: Explain My Answer, which gives users personalized feedback based on their mistakes in each lesson, and Roleplay, a chatbot that users can speak to in their chosen language to improve their conversational skills. These new AI features work on a combination of Duolingo’s own models and OpenAI’s latest GPT-4 models.
The company is also using AI to create learning content, which gives employees more time to work on other important initiatives like new features.
Duolingo grew its revenue 45% year over year to $167.5 million last quarter. It also turned a profit on net income of $26.9 million, proving to investors that it doesn’t need to burn truckloads of cash to deliver strong earnings growth.
The new AI-powered Duolingo Max subscription is still in the early stages of its rollout, but it’s priced higher than the company’s other paid tiers, which could drive a continuation in its results. financial strength in the future.
Should you invest $1,000 in Amazon right now?
Before you buy Amazon stock, consider this:
of Motley Fool Stock Advisor the team of analysts just identified what they believe they are Top 10 Stocks for investors to buy now… and Amazon was not one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia I made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you would have $775,568!*
Stock advisor provides investors with an easy-to-follow plan for success, including instructions for building a portfolio, regular updates from analysts, and two new stock picks each month. of Stock advisor the service has more than quadrupled return of the S&P 500 since 2002*.
See 10 shares »
*Stock Advisor returns on June 10, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Duolingo, Nvidia and Tesla. The Motley Fool has a disclosure policy.
Cathie Wood says software is the next big AI opportunity — 2 super stocks you’ll want to buy today if she’s right was originally published by The Motley Fool