Cathie Wood Says Software Is the Next Big AI Opportunity — 2 Supercharged Stocks You’ll Regret Buying If She’s Right | The Motley Fool

Last year, Ark Investment Management CEO Cathie Wood said software companies would be the next big opportunity in artificial intelligence (AI), predicting they would eventually generate $8 in revenue for every $1 spent on chips from leading suppliers like Nvidia.

Ark runs several funds (private and publicly traded) that reflect this position. Through the Ark Venture Fund, Wood has invested in private AI software companies like OpenAI, Anthropic, and Elon Musk’s xAI. Additionally, You’re here is the largest stake in the flagship Ark Innovation Exchange Traded Fundwhich Wood says represents the world’s biggest AI opportunity with its self-driving software.

If Wood is right about AI software, the list of winners could be long in the coming years. Here’s why Crowd strike (CRWD -1.75%) And Meta-platforms (META 1.12%) could be two of the greatest.

1. CrowdStrike: A Leader in AI-Driven Cybersecurity

CrowdStrike is one of the world’s top cybersecurity companies. In fact, its stock is just 14% short of eclipsing the current industry leader’s $104 billion valuation, Palo Alto NetworksCrowdStrike’s success comes from its unique, lightweight security architecture and its use of AI to autonomously thwart attacks.

CrowdStrike’s AI models make more than 180 million indicator of attack decisions every second. In other words, they’re constantly analyzing attackers’ motivations and intentions to determine what kind of threat they pose. These models are trained on more than 2 trillion security events every day, and that number is growing as more customers join CrowdStrike, solidifying the company’s AI advantage over its competitors.

All of this happens in the cloud. By using CrowdStrike, companies don’t need to install bulky programs on every device in their organization. Instead, they install a lightweight, cloud-connected sensor that takes up minimal processing power compared to traditional cybersecurity software.

Since its inception, CrowdStrike has taken a platform approach to cybersecurity, which contrasts with industry standards where different vendors specialize in specific segments like cloud security, identity protection, and endpoint security. CrowdStrike covers all areas with its 28 modules, and while not every organization needs the full suite, 65% of customers were using five or more modules in the first quarter of fiscal 2025 (ended April 30).

According to a CrowdStrike-sponsored study conducted by International Data Corporation, organizations can save $6 for every $1 invested by consolidating their cybersecurity needs onto a single platform. So not only are they getting best-in-class protection, switching to CrowdStrike makes financial sense.

CrowdStrike ended the first quarter with record annual recurring revenue of $3.6 billion, but management estimates that number will grow 177% to $10 billion over the next five to seven years. That estimate may even be conservative given the rapid pace of AI advancement, which will not only enhance CrowdStrike’s protection capabilities but also create new threats that will drive more cybersecurity spending in the enterprise sector.

2. Meta Platforms: A social media giant turned AI developer

Meta Platforms is home to leading social networks like Facebook, Instagram, and WhatsApp, which serve 3.2 billion people every day. The company already uses AI to curate each user’s content feeds on Facebook and Instagram to ensure they see the posts that are most relevant to them. This led to an increase in engagement on both platforms last year, providing Meta with more opportunities to generate ad revenue.

But the company may have an even bigger opportunity in AI with its extended language model (LLM) called Llama. It’s the world’s largest open-source model, allowing developers to use it for free to build their own AI applications, allowing Meta to outsource its testing to make improvements more quickly. That’s important because Llama is key to building new AI features for Meta’s existing platforms.

Last year, for example, the company launched a chatbot called Meta AI that users can access via 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 make restaurant and travel recommendations, or even offer gift ideas. Meta AI is currently powered by Llama 3, but the company is already training its next-generation model, which should offer even greater capabilities.

Eventually, every business using Meta’s applications could have its own custom Meta AI chatbot that can handle incoming customer queries and potentially even process sales. This should create new opportunities for Meta to generate revenue.

Here’s the best part about Meta stock: It’s cheap. Based on the company’s trailing-12-month earnings per share of $17.41, it’s trading at a price-to-earnings (P/E) ratio of 28.9. That’s a 9.4% discount to Meta stock’s P/E ratio of 31.9. Nasdaq-100 hint.

In 2025, Wall Street estimates that Meta will generate $21.59 in profits, putting its forward price-to-earnings ratio at just 23.3. That implies that Meta stock will need to rise 36.9% by the end of next year to trade in line with the broader tech sector.

If Cathie Wood is right about AI software, Meta stock could be an even better deal today than the numbers above suggest, as there could be entirely new AI monetization opportunities ahead as this story unfolds.