Ark Invest’s Renato Leggi says the firm wants to invest in software names related to artificial intelligence. While investors have been very much focused on Nvidia, which makes advanced graphics processing units (GPUs) used for AI processes, Ark Invest wants to “focus on that piece that no one’s really paying attention to,” said Leggi, client portfolio manager at the firm. “We see that for every dollar spent on AI hardware like Nvidia GPUs, $8 could be pulled through in terms of AI software,” he told CNBC’s ” Squawk Box Asia ” on Wednesday. “You can sell GPUs all you want, but obviously you need to create value using them in terms of AI training models and products. So … we’re trying to uncover who were best positioned to be the beneficiaries of that,” Leggi added. Ark Invest’s flagship Ark Innovation ETF (ARKK) exited its position in Nvidia entirely in early January. ‘Huge’ beneficiaries Leggi named two AI software stocks that Ark is “focused on”: Communication platform software firm Twilio and virtual health-care company Teladoc . Twilio accounts for 4.11% of the ARK Next Generation Internet ETF, and 4.04% of the ARK Innovation ETF, where it’s in the top 10 holdings. “It has data on trillions of interactions between businesses and consumers. So we think that the company is going to be a huge beneficiary of the AI software movement,” Leggi said. Teladoc is another example of a big beneficiary, he said. “They have the best shot at becoming the backbone of the healthcare information in the U.S.,” he said. “Doctors on TelaDoc see electronic health records of patients. Now the company is gathering information at a rapid pace. They have that proprietary data, and … TelaDoc models could be in the future giving doctors recommendations on the best course of treatment,” he added. Teladoc makes up 3.17% of the ARK Next Generation Internet ETF and 3.68% of the ARK Innovation ETF. Picking stocks through the ‘lens’ of A.I. Leggi looks for three main things when assessing stocks through the “lens” of artificial intelligence. They are: domain expertise and a “visionary” management team; good distribution; and proprietary data, the client portfolio manager told CNBC’s ” Squawk Box Asia ” on Wednesday. Many of the companies in Ark Invest’s funds are “across the board in innovation,” not just AI. “They’re thinking about very large opportunity that is out there that maybe the Street isn’t even focused on yet,” Leggi said. When it comes to distribution, he said, the network effect is very important as it’s essential to be able to distribute a product or service once it’s delivered — in a very short span of time. Proprietary data is the third and “probably most critically important” element, according to Leggi. “That can be used to train AI models and to improve products and services. And so you want to cut costs, you want to increase productivity, and that’s extremely important and that is definitely something that a lot of our companies have is that proprietary data that can get them to the next level,” he said.
This story originally appeared on CNBC
