Ark Invest, led by Cathie Wood, divests in Nvidia and shifts focus to Artificial Intelligence (AI) growth stock in latest move

Ark Invest, led by Cathie Wood, divests in Nvidia and shifts focus to Artificial Intelligence (AI) growth stock in latest move

Cathie Wood, CEO of Ark Invest, believes Nvidia (NASDAQ:NVDA) may soon have to be held accountable. In March, she wrote:

Without an explosion in software revenue to justify overbuilding GPU capacity, we wouldn’t be surprised to see a pause in spending, compounding a correction in excess inventory, particularly among cloud customers who account for more than half of center sales data from Nvidia.

This doesn’t necessarily mean that Nvidia is a bad investment. The company has faced supply shortages in the past and the stock has always rebounded. But Ark Invest sees better opportunities elsewhere. Wood and his team therefore continued to sell Nvidia shares throughout March, while redeploying capital into The exchange office (NASDAQ:TTD)another business that could benefit from artificial intelligence.

Here’s what investors should know about the ad tech company.

The Trade Desk is the first independent platform for media buyers

The Trade Desk operates the largest independent demand-side platform, a type of advertising technology software that helps media buyers plan, measure and optimize data-driven campaigns across digital channels. Its platform showcases what management considers to be industry leaders artificial intelligence (AI) and measurement capabilities, both of which help media buyers achieve better returns on their ad spend.

The Trade Desk has a strong presence in the connected television (CTV) and retail media sectors, two of the fastest growing advertising channels. Actually, Forrester Search recently said The Trade Desk dominates CTV’s advertising space, and Morgan Stanley believes the company “will ultimately be a leader in off-site retail media advertising” thanks to its independent business model and growing list of retail partners.

To be more specific, the term independent means that The Trade Desk is not affiliated with any website or mobile application, so it has no reason to direct advertisers to specific inventory. By comparing, AlphabetGoogle has built an advertising ecosystem filled with conflicts of interest. It sells ad tech software to third-party media buyers and publishers, while simultaneously selling its own inventory from properties such as Google Search and YouTube.

This means that Google has a clear incentive to direct ad buyers to specific inventory, and the company is also competing with its own customers. The result of these conflicts is that brands are more willing to share data with an independent player like The Trade Desk. The company has used this advantage to integrate its platform with strong AI and measurement capabilities.

Specifically, The Trade Desk sources data from many major retailers to create measurement opportunities not available on other platforms. Its range of partners includes Walmart, Hooks, Home deposit, Target, WalgreensAnd Albertson, all of which are among the ten largest retailers in the world. The unique data from these retailers also lays the foundation for superior AI, simply because data is a limiting factor in training machine learning models.

The Trade Desk gained market share in the fourth quarter

The Trade Desk reported strong fourth quarter results. Customer retention remained above 95% for the tenth consecutive year, revenue increased 23% to $606 million, and generally accepted accounting principles (GAAP) net income increased from 36% to 0. $19 per diluted share. CEO Jeff Green told analysts: “We have outperformed the rest of the digital advertising space over the last eight quarters. » He also said that the company is in a unique position to continue to gain market share not only in 2024, but also into the future.

The Trade Desk launched a new platform called Kokai last June. It features a more advanced AI engine that synthesizes signals across 13 million impressions per second to help advertisers buy the right impression and reach the right audience at the right time. Kokai also integrates new measurement features that allow advertisers to evaluate the performance of retail campaigns and the quality of CTV ads.

Ultimately, Kokai should reduce friction and improve campaign results for advertisers. This value proposition should attract more media buyers to The Trade Desk and help the company capture a greater share of advertising budgets.

Trade Desk stock isn’t cheap, but the price is tolerable

Digital ad spending is expected to grow 15.5% annually through 2030, but The Trade Desk is expected to grow faster given its strong presence on CTV and growing retail media channels. The company also believes it can accelerate its growth in international markets. This is notable as North America currently accounts for 88% of ad spend on the platform.

With that in mind, Wall Street analysts expect The Trade Desk to grow sales by 20% annually over the next five years. This consensus estimate makes the current valuation of 22.4 times sales seem tolerable, but certainly not cheap. Investors should expect short-term volatility, but The Trade Desk could create significant shareholder value in the long term. Now is a good time to buy a small position in this growth stock.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Trevor Jennevine holds positions in Nvidia and The Trade Desk. The Motley Fool holds positions and recommends Alphabet, Home Depot, Nvidia, Target, The Trade Desk and Walmart. The Motley Fool recommends Kroger. The Motley Fool has a disclosure policy.

Cathie Wood’s Ark Invest Sells Nvidia Stock, Buys This Artificial Intelligence (AI) Growth Stock was originally published by The Motley Fool

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