Cathie Wood and her team at Ark Invest are known to be some of the most innovative investors. They don't always invest in mainstream stocks, but they consistently look at least five years down the road to pinpoint stocks with large upsides.
One trend that has taken the investing world by storm is artificial intelligence (AI), and Wood has been at the forefront of that move. So, what is Ark Invest's favorite AI stock? The answer may surprise you.
UiPath is a top Ark holding
The old saying "put your money where your mouth is" rings true, and fortunately, Ark Invest provides investors with a daily update on its holdings.
| Rank | Company | Portfolio Weight |
|---|---|---|
| 1 | Coinbase Global | 8.33% |
| 2 | Block (Formerly known as Square) | 6.05% |
| 3 | Tesla | 5.67% |
| 4 | Roku | 5.52% |
| 5 | UiPath (PATH 0.26%) | 5.2% |
| 6 | CRISPR Therapeutics | 4.12% |
| 7 | Robinhood Markets | 3.64% |
| 8 | Zoom Video Communications | 3.16% |
| 9 | Roblox | 3.04% |
| 10 | DraftKings | 2.84% |
Data source: Ark Invest. Weightings are as of March 19.
One thing that stands out is that Ark doesn't have large holdings of the "big name" AI stocks. Nvidia, Super Micro Computer, and Palantir Technologies are all missing from Ark's top 10.
If you examine each of these companies in the top 10, the only real AI businesses are Tesla and UiPath. While Tesla has AI aspirations and heavily utilizes the technology, it's still primarily an electric vehicle manufacturer. That leaves UiPath as Wood's top AI pick, and it's a good one.
UiPath specializes in robotic process automation (RPA), which is a software useful for anyone who wants to automate processes. While this isn't an AI technology by itself, it dovetails nicely with AI, as AI expands the amount of tasks UiPath can automate.
When a company deploys UiPath's products, it frees employees to perform tasks that require original thinking. This increases productivity and employee morale.
The usefulness of UiPath's software shows up in its financials in a big way. Its net revenue retention rate was 119% in the fourth quarter of fiscal year 2024 (ended January 2024), indicating customers spent $119 for every $100 they spent last year. With existing customers increasing their usage of UiPath's products, it shows how great of a program it is, which is likely why Wood and Ark are high on the stock.
But it's also a great buy now.
UiPath is priced much lower than its peers
UiPath's annual recurring revenue (ARR) rose 22% year over year to $1.46 billion in Q4 and the company guided for 18% ARR growth for fiscal year 2025. However, the market wanted more, and the stock dropped 8% following the earnings report.
This presents a great buying opportunity, as UiPath's long-term strategy is still positive, and short-term market sentiment shouldn't steer investors' long-term opinions.
PATH PS Ratio data by YCharts
With the stock trading at an attractive 10.5 times sales, it looks like a solid buy, especially considering that many AI-related software stocks trade for more than 20 times sales.
With UiPath succeeding in its core competency, trading at a good price for investors, and being backed by one of the most visionary tech investors, the stock looks like a fantastic buy right now.
