Cathie Wood didn't jump on the artificial intelligence (AI) bandwagon. Her Ark Innovation ETF has been invested in AI for more than a decade. The exchange-traded fund (ETF) lists AI at the top of the list of disruptive innovations that should deliver strong long-term growth.
AI has made Wood and several of her Ark Invest funds a lot of money in 2024. Here are her three best AI stocks this year.
1. Palantir Technologies
Palantir Technologies (PLTR -3.41%) currently ranks as the Ark Innovation ETF's fifth-largest holding. However, the AI and data analytics software company ranks as Wood's No. 1 AI stock of the year by far. Palantir's share price has skyrocketed nearly 380% with only a few days left in 2024.
Several factors accounted for Palantir's tremendous performance this year. First, the company delivered solid and continually accelerating revenue growth in each reported quarter. CEO Alex Karp wrote to shareholders in November, "The world is in the midst of a U.S.-driven AI revolution that is reshaping industries and economies, and we are at the center of it."
Palantir's addition to the S&P 500 in September provided a nice spark, too. More recently, the stock was named as one of three tech stocks being added to the high-flying Nasdaq-100 index.
Politics played a part in Palantir's momentum as well. Many investors viewed the incoming Trump administration's focus on driving efficiencies in government, immigration enforcement, and national security as great news for Palantir, which counts the U.S. government as its biggest customer.
2. Nvidia
Wood famously (or infamously) sold much of her stake in Nvidia (NVDA -2.22%) in 2022 and 2023. However, the chipmaker remains a holding for two of her ETFs -- the Ark Autonomous Technology & Robotics ETF and the Ark Next Generation Internet ETF.
She's probably glad Ark Invest held on to some shares of Nvidia. The stock has soared more than 180% in 2024 thanks to tremendous demand for its graphics processing units (GPUs). It's no surprise that AI is a massive tailwind for Nvidia. The company's GPUs are the gold standard for training and deploying large language models (LLMs).
However, Nvidia believes that its success is due to more than just AI. CEO Jensen Huang argues a major shift from general-purpose computing to accelerated computing is underway. While AI is part of this trend, it would happen even if there wasn't surging demand for AI.
3. Tesla
No stock is more synonymous with Cathie Wood than Tesla (TSLA -3.33%). She views the electric vehicle maker as a top AI stock. It's certainly her top AI holding, ranking as the largest position for the Ark Innovation ETF, Ark Autonomous Technology & Robotics ETF, and Ark Next Generation Internet ETF.
Tesla has also been a big winner for Wood this year. The stock has vaulted more than 80% higher with all of the gains coming since early November.
It's no coincidence that the U.S. presidential election occurred around the time Tesla's share price took off. Tesla CEO Elon Musk is a major supporter of President-elect Donald Trump and was named by Trump to co-lead the Department of Government Efficiency advisory team. Many investors appear to believe that Musk's relationship with Trump could bode well for Tesla's prospects over the next few years.
Are these AI stocks good picks for 2025?
Whether or not these three top AI stocks for Wood this year are good picks for 2025 depends on whom you ask. Many Wall Street analysts think Palantir's and Tesla's runs could grind to a screeching halt. However, most analysts are bullish about Nvidia.
I think it's possible that all three stocks could rise further in the new year. My biggest concern with Palantir is that its valuation is frothy with shares trading at 172 times forward earnings. Tesla looks pricey as well with a forward earnings multiple of 135, although the company's anticipated launch of a new robotaxi service could provide a nice catalyst.
My hunch is that Wall Street has it right about the best of the group. I agree with analysts that Nvidia should have plenty of room to run in 2025 as sales numbers come in for its new Blackwell GPUs.
