Last year, Cathie Wood, CEO of Ark Investment Management, also known as "Miss Wood," stated that software companies would be the next major opportunity for artificial intelligence (AI), and that for every $1 they spend on chips from leading suppliers such as Nvidia, they could generate $8 in revenue.

Ark Investment Management operates several funds (including private funds and exchange-traded funds) that reflect this stance. Through the Ark Venture Fund, Wood invests in private AI software companies such as OpenAI, Anthropic, and Elon Musk's xAI. In addition, Tesla is the largest holding in Ark's flagship fund - the Ark Innovation ETF - because of its autonomous driving software, which Wood calls the biggest AI opportunity in the world.

If Wood's predictions about AI software are correct, there may be a long string of winners in the coming years. Here's why CrowdStrike (NASDAQ:CRWD) and Meta Platforms (NASDAQ:META) might be two of the biggest winners. #technology# #2024macrooutlook# #2024investmentstrategy#

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CrowdStrike: AI-driven network security leader

CrowdStrike is one of the world's best network security companies. In fact, its stock only needs to rise another 14% to surpass current industry leader Palo Alto Networks' $104 billion valuation. CrowdStrike's success stems from its unique lightweight security architecture and its ability to rely on AI to automatically defend against attacks.

All of this is done in the cloud. By using CrowdStrike, companies don't have to install heavy programs on every device in their organization. Instead, they only need to install a lightweight sensor that connects to the cloud and requires the least amount of processing power compared to traditional network security software.

CrowdStrike has taken a platform-based approach to network security since its inception, which contrasts with industry conventions where different suppliers typically focus on specific areas such as cloud security, identity protection, and endpoint security. CrowdStrike covers all bases with its 28 modules, and although not every enterprise needs the entire suite, as of the most recent fiscal first quarter of 2025 ending April 30, 65% of customers used five or more modules.

According to a study by the International Data Corporation sponsored by CrowdStrike, for every dollar invested by a business on the CrowdStrike platform, they save six dollars. As a result, they not only get the best protection, but the financial case to switch to CrowdStrike is also clear.

CrowdStrike's annual recurring revenue hit a record $3.6 billion at the end of the first quarter, but management believes that number will surge 177% to $10 billion within the next five to seven years. Given the rapid development of AI, this estimate may be conservative, which will not only enhance CrowdStrike's protection capabilities, but also create new threats and drive more cybersecurity spending by enterprise departments.

(Image source: finance.yahoo)

2. Meta Platforms: From social media giant to AI developer

Meta Platforms has leading social networks such as Facebook, Instagram, and WhatsApp serving 3.2 billion people daily. The company has been using AI to curate the content each user sees on Facebook and Instagram to ensure they see the most relevant posts. Last year, this boosted engagement on both platforms, providing Meta with more advertising revenue opportunities.

But the company may have even bigger AI opportunities with its large language model (LLM) Llama. Llama is the world's largest open-source model, so developers can use it for free to build their own AI applications, allowing Meta to iterate faster through crowdsourced testing. This is important because Llama is the key to creating new AI features for Meta's existing platforms.

For example, the company launched a chatbot called Meta AI last year, which can be accessed through Facebook, Instagram, Messenger, and WhatsApp. It can answer complex questions and generate images like most chatbots, but it can also be added to group chats to provide restaurant and travel recommendations, and even gift suggestions. Meta AI is currently supported by Llama3, but the company is already training its next-generation model, which is expected to offer even better features.

Ultimately, every business that uses a Meta application could have its own personalized Meta AI-style chatbot capable of handling customer queries and potentially even sales. This will create new revenue opportunities for Meta.

The best part about Meta's stock is that it's cheap. Based on its earnings per share of $17.41 over the past 12 months, its P/E ratio is 28.9. That's 9.4% lower than the Nasdaq 100 Index's P/E of 31.9.

Wall Street expects Meta's EPS to reach $21.59 by 2025, which would give it a forward PE ratio of only 23.3. This means Meta's stocks will need to rise 36.9% by the end of next year to be consistent with the broader technology industry.

If Kathy Wood's predictions about AI software are correct, Meta's stocks could be even more attractive today than the numbers above suggest, as new AI monetization opportunities may emerge as the story unfolds. (Source: finance.yahoo) (Source: finance.yahoo)

(Image source: finance.yahoo)