The stock market has crashed, but that hasn't prompted famous investor Cathie Wood to flee. Instead, the chief executive officer of Ark Invest is shopping for bargains as many innovators -- the type of companies she favors -- have seen their valuations plunge. Wood is known for going against the crowd and making long-term bets on potential future winners.
The stock market may look like a scary place today amid the declines. President Donald Trump's tariffs on imports from countries worldwide have stirred up concerns about rising prices for consumers and higher expenses for U.S. companies. That could lead to consumers spending less -- and companies feeling the pressure on earnings. All of this has even prompted economists to say a recession may be on the way.
Yet against this backdrop, Wood continues to invest -- and so should you. And here's why.
No one knows how long this turmoil will last, but history shows that indexes always have recovered after crashes and gone on to gain -- and quality companies across industries have led the way. This means that now, while prices are down, is the time to buy and hold on for the long term, well beyond the current crisis.
Technology companies, especially those in the high-growth area of artificial intelligence (AI), look particularly cheap today. I'm going to consider two that Wood bought this week.
Image source: Getty Images.
1. Nvidia
Wood added 188,980 shares of Nvidia (NVDA +1.67%) to her flagship Ark Disruptive Innovation ETF, as the shares traded for about 21x forward earnings estimates, which is down from more than 50x earlier in the year. Nvidia is far from Wood's largest position -- it's actually No. 31 out of 37 holdings and has a weight of 0.7%. However, the company, as a major AI innovator, clearly merits a spot in this fund that's focused on disruptive technologies.
Nvidia dominates the AI chip market, sells the highest-performance chip around, and pledges to update its technology on an annual basis. The company has expanded well beyond just chips to offer customers complete AI systems, offering everything from networking to enterprise software. This has helped Nvidia's revenue soar to record levels, finishing last year at $130 billion -- and at a high level of profitability on sales, which had gross margin of more than 70%.
NASDAQ: NVDA
Key Data Points
Nvidia aims to become a force in what could be the next big thing: quantum computing. The company is building a quantum research center in Boston to integrate quantum hardware with AI supercomputers, so it's likely to benefit from a possible boom in quantum computing, too.
All of this means that even if today, Nvidia's stock is in the doldrums, the company has what it takes to continue growing over the long term in two key growth areas. That makes it a fantastic opportunity at today's levels for investors, like Wood, who seek great innovators for dirt cheap prices.
2. Amazon
Wood made a smaller purchase of Amazon (AMZN +0.26%), buying 7,520 shares, but the company already represents a much larger position for the investor. The e-commerce and cloud computing giant is Ark Disruptive Innovation's 14th largest holding, with a weight of more than 2.4%.
Though you may know Amazon best as a seller of groceries, mass merchandise, and even books and entertainment, the company's biggest profit driver is a business heavily involved in AI today. And that's the cloud business, called Amazon Web Services (AWS).
AWS offers users everything they need for their AI platforms: premiums chips from the likes of Nvidia, as well as lower-priced chips developed by AWS, a fully managed service that allows customers to tailor large language models to their needs, and a wide variety of AI apps. All of this helped AWS reach a $115 billion revenue run rate last year.
NASDAQ: AMZN
Key Data Points
Considering we're still in the early stages of AI buildout and investment and AWS is the world's biggest cloud provider, Amazon is well-positioned to benefit in the future.
Today, Amazon stock is trading for 26x forward earnings estimates, down from more than 38x a couple of months ago. Wood is seizing this bargain on a well-established company that's proven itself over time and could go on to win again over the long term.
