Over the last year, the conversation among investors and analysts has prominently centered on artificial intelligence.

The topic of artificial intelligence is among the "Big Ideas" from Cathie Wood-led Ark Invest, but the ETF company says the days of Nvidia Corporation's (NVDA  ) reign as the go-to AI investment may be waning.

What Happened: Shares of Nvidia are up over 200% year-to-date, as the company is seen as one of the major beneficiaries of growth in the artificial intelligence space. Wood and Ark Invest were previous investors in Nvidia, but sold their shares when they believed the valuation got too high.

Wood and Ark might be signaling Nvidia is hitting overvalued levels, calling for investors to look at small-cap companies instead.

"We believe the days of relying solely on mega-cap companies for tech innovation are waning and an era of AI-centric small-cap companies is emerging. Find out where we see potential growth opportunities built on AI," Ark Invest tweeted Monday.

In a new report, Ark says that artificial intelligence could be a "long-term growth driver more impactful than the internet."

The research report says that mega-cap technology stocks saw a rally on the excitement surrounding artificial intelligence possibilities, but this might be the wrong move for traders to make.

"We believe non-benchmark names are likely to accrue more value from AI over time."

Avoiding Mega Caps: The research report said that benchmarks like the S&P 500 and Nasdaq 100, tracked by the SPDR S&P 500 ETF Trust (SPY  ) and Invesco QQQ Trust (QQQ  ), respectively, saw rallies led by artificial intelligence-linked names.

Apple Inc (AAPL  ), Microsoft Corporation (MSFT  ), Alphabet Inc (GOOG  ) (GOOGL  ), Nvidia, Meta Platforms (META  ), and Amazon.com Inc (AMZN  ) made up 51% of the Nasdaq 100 as of June 30, according to the report. The report said the six names also represented 68.8% of the rally for the Nasdaq 100 year-to-date through June 30.

A chart from Ark shows there is minimal overlap between the Invesco QQQ Trust and SPDR S&P 500 Global ETF with its two leading ETFs, the Ark Innovation ETF (ARKK  ) and Ark Next Generation Internet ETF (ARKW  ).

Of the 504 holdings of the SPY, three are in the Ark Innovation ETF and five are in the Ark Next Generation ETF, representing 12.7% and 11.6% of assets, respectively.

Ark also highlights that ARKK and ARKW only hold 0.5% and 1.6% of assets, respectively in the six large-cap names above, compared to 50.9% and 25.7% weightings for the SPY and QQQ.

The performance of ARKK and ARKW through June has outpaced the performance of the SPY and QQQ, but the returns of the Ark ETFs trail the benchmarks when looking at three-year and five-year returns.

"From a portfolio management perspective, investing in the well-known benchmarks exposes investors to concentrate risk in a few well-known companies whose fortunes heavily influence their overall performance."

Nvidia is trading at a price-to-sale multiple of 40.5x, Ark said.

"While we believe Nvidia is likely to remain a prime enabler and beneficiary of continued breakthroughs in AI, many other potential beneficiaries are not well understood, may sell at much lower valuations, and potentially could deliver significant revenue and earnings surprises on the high side of expectations."

The report says that a company like Cisco Systems (CSCO  ) is a good comparison to Nvidia. The company grew revenues exponentially in the 1990s, and the stock peaked at a price-to-sales ratio of 61x in 2000. Since that time, the stock has returned 1.4% on average annually, trailing the S&P 500 and Nasdaq 100 benchmarks.

Stocks to Watch: For years, one of Wood and Ark Invest's favorite stocks has been electric vehicle leader Tesla Inc (TSLA  ).

Ark sees Tesla as one of the biggest beneficiaries of growth in AI, but also points to its valuation. Tesla trades at 9.6x time sales.

"(Tesla) is the largest AI exposure across our strategies given the $8-$10 trillion revenue opportunity and SaaS-like margins," the research report said.

One of Ark's favorite AI related stocks is UiPath Inc (PATH  ), a software and automation company.

"Our research suggests that other companies in this space rely too heavily on API's that are far-removed from natural human behavior and decision making. UiPath's emphasis on low-code no-code interfaces emphasizes flexibility, scalability and ease."

UiPath is the fifth-largest holding in ARKK and eighth-largest holding in ARKW, representing 5.9% and 4.8% of assets, respectively. UiPath is also a top 10 holding in the Ark Fintech Innovation ETF (ARKF  ), Ark Autonomous Technology & Robotics ETF (ARKQ  ) and Ark Space Exploration & Innovation ETF (ARKX  ).

Another stock named in the report is Twilio Inc (TWLO  ), a cloud-based communications platform-as-a-service company.

"In our view, Twilio is building the leading customer communication platform including core messaging APIs and a suite of software products."

Ark said Twilio could be best positioned to "introduce artificial intelligence into customer communication channels."

"As budgets normalize, we believe Twilio should benefit significantly from the AI opportunity."

Twilio is the ninth-largest holding of the Ark Innovation ETF.

The price-to-sales ratios for PATH and TWLO are 8.3x and 2.9x respectively, as listed in the research report.

Outside of public companies, Ark also highlighted its Ark Venture Fund, which holds investments in several notable privately held artificial intelligence companies including Replit, MosaicML, and Anthropic.