Famed growth investor Cathie Wood loves to invest in disruptive tech stocks, and investors love to see what's on her investing plate. Sometimes, it's her tried-and-true picks like Tesla and Teladoc Health, and sometimes it's an under-the-radar initial public offering (IPO) stock like Tempus AI.
One stock you don't usually see in Ark Invest's picks is Amazon (NASDAQ: AMZN). But Cathie Wood's investment firm was buying shares last week like they were going out of style. Let's see why Amazon might be looking 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 for years in several of her exchange-traded funds (ETFs). Her recent typical picks are the riskier, highly disruptive type, but Amazon caught her attention last week.
Under founder Jess Bezos' leadership, Amazon developed a mandate that it calls "Day 1." It still uses this phrase frequently as a guiding force in how it approaches growth and innovation, as if each day it's starting anew. You can see this in its culture everywhere, and recently, AI has been driving its growth opportunities.
Today, e-commerce and cloud storage, which are Amazon's main businesses, are so mainstream that they wouldn't catch Wood's attention. But AI is a peak disruptive force, making Amazon an attractive bet even for Wood.
Current CEO Andy Jassy said that the AI business is growing "dramatically" and already had a multibillion-dollar run rate. Its position as the largest cloud-computing company gives it an incomparable data set that it's probing to create the highest standards in AI, and its clients are telling it that they want more flexibility at a competitive price point. Even though it works with companies like Nvidia right now for AI chips, Amazon is also building its own with these factors at play.
This is translating into practical services for Amazon Web Services (AWS) customers. Jassy said that over the past 18 months, "AWS has launched more than twice as many machine learning and generative AI features into general availability than all of the other major cloud providers combined." He added that it's far from finished.
Amazon just got a lot cheaper
What smart investors usually get right is timing. I don't mean to say that you can time the market, because you can't. But savvy investors wait for opportunities and buy stocks on dips, at bargain prices, and when they're out of market favor. Many investors are scared to buy those kinds of stocks. Intuitively, it makes sense to buy stocks that the market likes. But stocks that are already well-liked by the market almost by definition have already achieved strong gains, and the best stocks are often the counterintuitive buys, as long as you're OK with some risk.
Cathie Wood isn't known for her love of undervalued stocks like Warren Buffett is, but it seems that she couldn't let go of the opportunity to buy Amazon stock as it plunged after earnings. Not only did she buy Amazon stock, she bought it on all five trading days last week, and she bought it for six of Ark Invest's eight ETFs.
Amazon stock tanked after its second-quarter report, due mainly to two things: a slight miss on revenue expectations and sales guidance below the analyst consensus average. It's since started to climb again, but it remains 9% down since the earnings update.
Ark has finished its buying spree, at least for the time being. Is it too late to buy? Maybe Cathie Wood got Amazon for a steal, but it still looks like a bargain. It's trading near its lowest valuation in 10 years and well below recent averages.
In other words, having the option to buy Amazon stock at this valuation is a rare treat. I focused on AI here, because that's what Cathie Wood is likely seeing 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 standout stock at bargain-basement prices.
Should you invest $1,000 in Amazon right 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 This Hot Artificial Intelligence (AI) Stock, and It Might Surprise You was originally published by The Motley Fool