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Is Software The Next Frontier in AI? Which Stocks Stand To Profit

Analyst Team trader
Updated 13 Jun 2024

Investment visionary Cathie Wood, the head of Ark Investment Management, is placing a bold bet on the transformative potential of artificial intelligence within the software industry. Guided by her investment philosophy that focuses on innovative technology stocks, Wood's insights have positioned her as a leading figure amongst investment strategists.

Ark Investment Management, known for its eight exchange-traded funds (ETFs) built around cutting-edge technology, has been channelling its resources into AI-driven software ventures. Recognising the burgeoning dynamics between artificial intelligence and software, Wood has identified this sector as an unrivalled opportunity in the expanding tech landscape.

Taking note of Ark's recent significant investments such as OpenAI (Microsoft), Anthropic, and xAI (Elon Musk), it's clear that AI software stands at the core of the company's strategic direction. Moreover, Tesla (NASDAQ:TSLA), with its pioneering work in autonomous self-driving software, remains the largest holding in the Ark Innovation ETF.


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Another company turning heads is Palo Alto Networks (NASDAQ: PANW), which has seen its relevance skyrocket amidst a drastic increase in cyber threats. Leveraging AI to power cybersecurity solutions, Palo Alto Networks ensures rapid threat detection and efficient incident response. A remarkable 15% revenue growth to $2.0 billion in the latest quarter underscores the company's robust market position. With an emphasis on platformisation, the goal is to engage customers that promise a higher lifetime value. Aiming to hit $15 billion in annual recurring revenue by fiscal 2030, Palo Alto Networks is already revolutionizing cybersecurity, allowing customers to access its products for free until their existing contracts expire.

C3.ai (NYSE: AI), established in 2009, is another innovator in the space, offering over 40 AI applications across diverse industries. The recent quarter witnessed the company's customer engagements surge by 70%, with revenues climbing to $86.6 million. A pivotal shift to consumption-based revenue has propelled C3.ai's growth, further bolstered by a robust balance sheet boasting $750 million in cash reserves.

For investors with a long-term view, companies like Palo Alto Networks and C3.ai present attractive opportunities in the realm of AI. The continuously evolving market, driven by unparalleled advancements in AI, has the potential to yield significant returns for those willing to invest in the companies at the forefront of this revolution. As the AI landscape matures, the wisdom in Cathie Wood's focus on software as the next big AI opportunity cannot be underestimated.

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The AskTraders Analyst Team features experts in technical and fundamental analysis, as well as traders specializing in stocks, forex, and cryptocurrency.