UiPath and Twilio Undervalued by Investors, Says Ark Investments Director

UiPath and Twilio are undervalued by investors, says Frank Downing of Ark Investments. UiPath’s automation software could be boosted by large language models, while Twilio’s access to vast customer

UiPath and Twilio are undervalued by investors, says Frank Downing of Ark Investments. UiPath’s automation software could be boosted by large language models, while Twilio’s access to vast customer

UiPath and Twilio Undervalued by Investors, Says Ark Investments Director

According to Frank Downing of Ark Investments, two firms specializing in artificial intelligence, UiPath and Twilio, are being undervalued by investors. UiPath is a business process automation firm that develops software to automate manual workflows at large enterprises. Downing suggests that large language models like those made by OpenAI could significantly boost UiPath’s potential. He believes this could mean fewer manual human interventions and substantially improve efficiency for the company’s customers. While previously sought after only by financial departments of major corporations, UiPath’s potential is now being eyed by marketing and compliance departments too, opening up new markets for the company.

Despite UiPath’s potential growth prospects, not everyone is convinced about the stock’s value. Analysts at investment bank Mizuho believe the company’s conservative guidance for this year’s revenue and a slowdown in new customer growth due to the slowing economic environment do not give the stock much upside. Mizuho’s $16 price target points to a 10.8% downside for the stock. However, UiPath remains one of the top holdings in ARK Next Generation Internet ETF with a 5.69% allocation.

Twilio is another potentially undervalued stock according to Downing. The cloud communications platform acts as a communication medium between businesses and their customers and is often used as the backbone of call center and customer service software. Downing explains that Twilio’s access to vast customer data would enable it to deploy large language models that make their messages more personalized and impactful.

Investors have been concerned about the high cost of developing new AI models but Downing believes companies such as Twilio and UiPath are likely to capture the next wave of growth as AI becomes increasingly commoditized. When GPT-3 was first trained in 2020, it cost an estimated $4.6 million; just two years later, the training cost has fallen to $400,000. Downing suspects that consumer willingness to pay for wide-ranging AI products may be limited due to open-source models increasing commoditization. Instead, he suggests that differentiation and value will likely arise from niche use cases that can offer a high return on investment.

Twilio accounts for 4.34% of ARK Next Generation Internet ETF. However, according to FactSet’s estimates, most analysts are conservative on Twilio’s share price. The consensus price target points toward a 10% decline over the next 12 months, as the stock has already risen by 37% this year.

Downing believes that large language models may unlock an additional 20% and perhaps even 40% of processes that UiPath can now automate over and above the processes they’re already automating. This could mean fewer manual human interventions and substantially improve efficiency at UiPath for its customers. As AI becomes increasingly commoditized, companies such as UiPath and Twilio are likely to capture the next wave of growth.