Ark Invest CEO Cathie Wood believes: Nvidia (NASDAQ:NVDA) It may be liquidated soon. In March she wrote:
Absent a big enough explosion in software revenue to justify overbuilding GPU capacity, spending will pause, especially among cloud customers, who account for more than half of Nvidia’s data center sales, and overstock corrections will worsen. It’s not surprising.
That doesn’t necessarily mean Nvidia is a bad investment. The company has overcome oversupply in the past, and its stock price has always recovered. But Ark Invest believes there are better opportunities elsewhere. So Wood and her team continued selling NVIDIA stock throughout March, reallocating capital. trade desk (NASDAQ:TTD)another company that stands to benefit from artificial intelligence.
Here’s what investors need to know about ad tech companies.
The Trade Desk is the leading independent platform for media buyers
Trade Desk operates the largest independent demand-side platform, a type of ad tech software that helps media buyers plan, measure and optimize data-driven campaigns across digital channels. Its platform features artificial intelligence (AI) and measurement capabilities that management believes are industry-leading, both of which help media buyers realize greater returns from their ad spend.
Trade Desk has a particularly strong presence in connected TV (CTV) and retail media, two of the fastest growing advertising channels. in fact, forrester research We recently mentioned that The Trade Desk is dominating the CTV ad space. morgan stanley believes the company will “eventually become the leader in off-site retail media advertising” due to its independent business model and growing list of retail partners.
To elaborate, the term independent means The Trade Desk is not affiliated with any website or mobile app, so there is no reason to drive advertisers to any particular inventory. By comparison, alphabetGoogle has built an advertising ecosystem rife with conflicts of interest. The company sells its ad tech software to third-party media buyers and publishers, as well as its own inventory from services such as Google Search and YouTube.
That means Google has a clear incentive to drive ad buyers to specific inventory, and it’s also competing with its own customers. As a result of these conflicts, brands have become more willing to share data with independent players like The Trade Desk. The company has taken advantage of that by building robust AI and measurement capabilities into its platform.
Specifically, The Trade Desk sources data from many leading retailers to create measurement opportunities not available on other platforms. The lineup of partners includes: walmart, kroger, home depot, the goal, walgreensand albertsons, all of which rank among the world’s 10 largest retailers. Unique data from these retailers is also the foundation of good AI, as data is the limiting factor in training machine learning models.
Trade Desk Gains Market Share in Q4
The Trade Desk reported strong results in the fourth quarter. Customer retention rate maintained above 95% for 10 consecutive years, revenue increased 23% to $606 million, and generally accepted accounting principles (GAAP) net income increased 36% to 0.19 per diluted share. It became a dollar. “We’ve outperformed other digital advertising sectors for the last eight quarters,” CEO Jeff Green told analysts. He also said the company is uniquely positioned to continue expanding its market share not only in 2024 but well into the future.
The Trade Desk launched a new platform called Kokai last June. It features a more advanced AI engine that synthesizes signals across 13 million impressions per second to help advertisers buy the right impressions and reach the right audience at the right time. Kokai also incorporates new measurement capabilities that allow advertisers to evaluate the performance of their retail campaigns and the quality of their CTV ads.
Ultimately, Kokai should reduce friction and improve campaign performance for advertisers. This value proposition will attract more media buyers to his The Trade Desk, allowing the company to capture a larger portion of its advertising budget.
Trade Desk stock isn’t cheap, but it’s an acceptable price.
Digital ad spend is expected to grow at 15.5% annually through 2030, and The Trade Desk should grow even faster given its strong presence in rapidly expanding CTV and retail media channels. The company also believes it can accelerate growth in international markets. This is notable since North America currently accounts for 88% of the platform’s ad spend.
With this in mind, Wall Street analysts expect The Trade Desk’s revenue to grow 20% annually over the next five years. Based on this consensus estimate, the current valuation of 22.4 times sales looks acceptable, but not cheap. While investors should expect some volatility in the short term, The Trade Desk has the potential to generate significant shareholder value over the long term. Now is a good time to buy a small position in this growth stock.
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Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions at Nvidia and The Trade Desk. The Motley Fool has positions in and recommends Alphabet, Home Depot, Nvidia, Target, The Trade Desk, and Walmart. The Motley Fool recommends Kroger. The Motley Fool has a disclosure policy.
Cathie Wood’s Ark Investments is selling Nvidia stock and buying this artificial intelligence (AI) growth stock Originally published by The Motley Fool
