Cathie Wood's Top 3 Artificial Intelligence (AI) Stocks for 2023: Are They Wise Investments for 2025?

Cathie Wood's Top 3 Artificial Intelligence (AI) Stocks for 2023: Are They Wise Investments for 2025?

Cathie Wood didn't hop on the artificial intelligence (AI) trend late. Her Ark Innovation ETF has been backing AI for over a decade now. The ETF places AI at the pinnacle of disruptive innovations set to provide robust long-term growth.

AI has proven profitable for Wood and several of her Ark Invest funds in 2024. Here are her top three AI stocks for the year.

1. Palantir Technologies

Palantir Technologies (PLTR -3.72%) currently holds the fifth-largest spot on the Ark Innovation ETF. However, it tops Wood's list of favorite AI stocks in 2024. Palantir's share price has seen a staggering 380% increase with just a few days left in 2024.

Several factors played a role in Palantir's impressive performance in 2024. First, the company consistently delivered solid revenue growth in each reported quarter. CEO Alex Karp shared his enthusiasm for the ongoing U.S.-led AI revolution in a letter to shareholders, "The world is in the midst of an AI revolution, and we're right in the thick of it."

Palantir's addition to the S&P 500 in September provided a nice boost, followed by its inclusion in the high-flying Nasdaq-100 index. Furthermore, the incoming Trump administration's focus on improving government efficiency, immigration enforcement, and national security was seen as positive news for Palantir, which counts the U.S. government as its major client.

2. Nvidia

Wood initially sold a significant portion of her stake in Nvidia (NVDA -2.09%) in 2022 and 2023. Yet, the chipmaker remains in two of her ETFs – the Ark Autonomous Technology & Robotics ETF and the Ark Next Generation Internet ETF.

The stock has surged more than 180% in 2024 thanks to robust demand for its graphics processing units (GPUs). AI has fuelled Nvidia's growth, as its GPUs are highly sought after for training and deploying advanced language models.

However, Nvidia believes that its success extends beyond AI. CEO Jensen Huang argues that there's a significant shift towards accelerated computing over traditional general-purpose computing. While AI is a critical component of this trend, it's not the only factor driving growth.

3. Tesla

No stock is as closely associated with Cathie Wood as Tesla (TSLA -4.95%). She believes that Tesla is a top AI stock and holds the largest stakes in the Ark Innovation ETF, Ark Autonomous Technology & Robotics ETF, and Ark Next Generation Internet ETF.

Tesla has been another impressive performer for Wood in 2024. The stock has soared more than 80% since early November.

The close association between Tesla and the U.S. presidential election is not a coincidence. Tesla CEO Elon Musk is a strong supporter of President-elect Trump and was appointed to co-head the Department of Government Efficiency advisory team. While Musk's relationship with Trump could potentially benefit Tesla, some investors remain hopeful about the electric vehicle maker's prospects for the near future.

Are these AI stocks promising picks for 2025?

Whether these top AI stocks for 2024 will continue to shine in 2025 is a matter of debate. While some analysts believe Palantir and Tesla's gains might slow down, most are bullish about Nvidia.

All three stocks have the potential to see further growth in 2025. However, my biggest concern for Palantir lies in its valuation, which is currently trading at 172 times forward earnings. Tesla's forward earnings multiple isn't much better, standing at 135. The anticipated launch of Tesla's new robotaxi service could, however, serve as a significant catalyst.

My gut feeling is that Nvidia might outperform its peers in 2025. Solid sales numbers for its new Blackwell GPUs are expected, making it a promising investment opportunity.

In light of Cathie Wood's successful ventures with AI-focused stocks, she has decided to allocate more funds towards finance and investing in this sector for 2025.

With Palantir Technologies, Nvidia, and Tesla posting impressive growth in 2024, Wood believes that these AI stocks hold promising potential for further growth in 2025, despite concerns about their high valuations.

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