Famed growth investor Cathie Wood loves investing in disruptive tech stocks, and investors love seeing what she has on her investment plate. Sometimes it’s her tried-and-true picks like Tesla And Teladoc Healthand sometimes it’s an under the radar initial public offering (IPO) stock like Tempus AI.
One stock you don’t normally see in Ark Invest’s selections is Amazon (NASDAQ: AMZN). But Cathie Wood’s investment firm bought stocks like they were going out of style last week. Let’s take a look at why Amazon looks attractive to her right now.
It’s all about artificial intelligence
This isn’t the first time Cathie Wood has bought Amazon stock. She’s held it in several of her exchange-traded funds (ETFs) for years. Her typical recent picks have been the riskier, highly disruptive kind, but Amazon caught her attention last week.
Under founder Jess Bezos, Amazon developed a mandate it calls “Day 1.” It still uses this phrase often as a guiding principle in how it approaches growth and innovation, as if it were starting fresh every day. You see this pervasive in the culture, and more recently, AI has been driving growth opportunities.
Today, e-commerce and cloud storage, Amazon’s core businesses, are mainstream enough that they wouldn’t grab Wood’s attention. But AI is a disruptive force at peak, making Amazon an attractive bet even for Wood.
Current CEO Andy Jassy said the AI business is growing “dramatically” and is already worth billions in revenue. Its position as the largest cloud computing company gives it an unparalleled dataset that it mines to create the highest standards in AI, and its customers tell it they want more flexibility at a competitive price. Even as it works with companies like Nvidia Amazon is also currently building its own AI chips, where these factors play a role.
This translates into practical services for Amazon Web Services (AWS) customers. Jassy said that “AWS has made more than twice as many machine learning and generative AI capabilities generally available over the past 18 months than all other major cloud providers combined.” He added that the work is far from done.
Amazon just got a whole lot cheaper
What smart investors tend to do well is timing. I don’t mean that you can time the market, because you can’t. But smart investors wait for opportunities and buy stocks when they’re down, when they’re bargain prices, and when they’re not in the market’s favor. Many investors are afraid to buy those kinds of stocks. Intuitively, it makes sense to buy stocks that the market likes. But stocks that are already popular with the market have almost by definition already made big gains, and the best stocks are often the counterintuitive buys, as long as you’re okay with some risk.
Cathie Wood isn’t known for her love of undervalued stocks like Warren Buffett, but it seems she couldn’t pass up the opportunity to buy Amazon shares as they plummeted after earnings. She didn’t just buy Amazon shares, she bought them on all five trading days last week, and she bought them for six of Ark Invest’s eight ETFs.
Amazon shares tumbled after its second-quarter report, largely due to two things: a slight miss on revenue estimates and sales forecasts that were below the analyst consensus average. It has since started to climb again, but is still down 9% since the earnings update.
Ark is done with its buying spree, at least for now. Is it too late to buy? Maybe Cathie Wood got Amazon for a steal, but it still looks like a steal. It’s trading at a 10-year low and well below recent averages.
In other words, having the option to buy Amazon stock at this valuation is a rare treat. I’ve focused on AI here because that’s probably what Cathie Wood sees in this opportunity. But Amazon has tons of opportunities in e-commerce, advertising, streaming, healthcare, and more, and it’s not too late to buy this eye-catching stock at rock-bottom prices.
Should You Invest $1,000 in Amazon Now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Nvidia, Teladoc Health, and Tesla. The Motley Fool has a disclosure policy.
Cathie Wood Is Buying Tons of These Hot Artificial Intelligence (AI) Stocks, and You Might Be Surprised was originally published by The Motley Fool
