With a Beat and Raise Quarter and Advanced AI, Jim Cramer Says Netflix, Inc. (NASDAQ:NFLX) is Leading the Charge
We recently compiled a list of the 15 AI News Investors Should Not Miss. In this article, we are going to take a look at where Netflix, Inc. (NASDAQ:NFLX) stands against the other AI news investors should not miss.
According to Ark Invest, an investment manager focused on disruptive technologies, artificial intelligence breakthroughs are expected to increase the share of the global equity market associated with disruptive innovation from 16% to 60% by 2030. With inflation transitioning to deflation in several sectors, the firm believes that five innovation platforms, namely robotics, energy storage, AI, blockchain, and multi-OMIC (biological analysis) sequencing will be profoundly impacting macroeconomic metrics over the next few years.
“Interest rates are likely to surprise on the low side of expectations, broadening the equity rally from a narrow subset of stocks and reinforcing the need for diversified AI investments.” -Catherine Wood, CEO and CIO
Read more about these developments by accessing 30 Most Important AI Stocks According to BlackRock and Beyond the Tech Giants: 35 Non-Tech AI Opportunities.
One of the firm's ETFs with the investment theme of next-generation internet outperformed broad-based global equity indices in the third quarter, benefiting from its holdings in companies involved in innovative technologies. The year-to-date performance of the fund is 16.81%, outperforming its category by 1.59 percentage points year-to-date.
In light of this trend, joining CNBC’s “The Exchange”, technology reporter Kate Rooney revealed how Wall Street is trying to cash in on the AI craze using AI itself. According to Rooney, the new world of generative AI is starting an “arms race for hedge funds”. Modern versions of AI today are better than human traders in ways more than one. They learn from mistakes and get smarter along the way, and they ultimately require minimal human intervention. Combining this with the rise of OpenAI and Anthropic, these “off-the-shelf” models tend to be cheaper.
Moreover, while human traders may be capable, they often succumb to emotions and tend to make mistakes. This is why Intelligent Alpha CEO Doug Clinton believes that a “lack of emotion” is actually the edge or “superpower” of AI. That said, the program revealed how hedge funds are now looking into AI to “get ahead of the markets”, where their use of AI will ultimately help them improve decision-making in the field. Companies like OpenAI and Anthropic, which have raised significant capital along the way, ultimately need enterprise clients to scale, and Wall Street is an ideal fit due to its reliance on data and analysis.
Intelligent Alpha has launched a first-of-its-kind ETF named after famed stock trader Jesse Livermore. The ETF uses OpenAI’s ChatGPT, Anthropic’s Claude, and Google’s Gemini to construct a global equity portfolio. As per Clinton, firms that get on board with AI could gain an edge with a price tag of millions of dollars.
“What it does is it adds some intelligence to indexes, which are just definitionally sort of a set of rules that can’t be smart. And they also take that emotion out of the active side where human beings are still making decisions, but we get caught up. You know, we make mistakes and sometimes those compound. And so I think by fixing those two issues, AI has the potential to really capture a lot of value in terms of assets flowing to these new AI-powered funds.” - Intelligent Alpha CEO
Read more about these developments by accessing 10 Unsexy AI Stocks According to Goldman Sachs and 10 Buzzing AI Stocks According to Goldman Sachs.
Methodology
For this article, we selected AI stocks by combing through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 103
Netflix, Inc. (NASDAQ:NFLX) is an American subscription video-on-demand over-the-top streaming service with 283 million paid memberships in over 190 countries. Streaming companies such as Netflix, Inc. (NASDAQ:NFLX) are using AI as their most adept tool for everything from personalization and content optimization to AI-driven closed captioning and language dubbing, and even optimizing streaming quality.
Netflix, Inc. (NASDAQ:NFLX) offers a cheaper, ad-supported tier powered by AI which was launched in late 2022 to enhance user experience and deliver more effective ads in the process. In an interview on “Squawk on the Street”, Jim Cramer highlights how the company’s innovative use of AI in its ad-supported tier places it “so far ahead of everyone else”. Cramer notes that Wall Street’s enthusiasm for the company’s stock is derived from the company’s “beat and raise” quarter which is eventually driven by its success in AI-based advertising.
Jim Cramer has a bullish take on the back of a strong quarter. The streaming giant is increasingly focused on growth in ad-tier memberships, with ad plans for the third quarter already accounting for 50% of the signups in the 12 countries where ads are currently available. According to co-CEO Gregory Peters, advertising is going to be Netflix’s key growth driver, projecting ad revenue to roughly double in 2025.
Overall NFLX ranks 4th on our list of AI news investors shouldn't miss. While we acknowledge the potential of NFLX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NFLX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.