Hypersonic flight, 3D-printed humanoid robots, groceries delivered by drones, molecular biomarkers for early detection of malignant tumors—these are just some of the many goods and services that could revolutionize marketplaces in the course of this decade, according to Cathie Wood’s ARK Invest.
That’s the conclusion from her annual Big Ideas report published on Tuesday by her money management firm. This 153-page deep dive attempts to handicap the potential commercial opportunities awaiting those startups and incumbents quick to embrace promising new technologies set to supplant older, obsolete ones.
After casting her eye on everything from smart crypto contracts to orbital aerospace, Wood believes companies that succeed in disrupting existing industries will experience “super-exponential growth,” lifting their cumulative value by an average annual rate of 40% in the process to reach a staggering $200 trillion by 2030.
To put that gargantuan figure into perspective, the International Monetary Fund estimated last April that the size of the entire world’s economy would cross the $100 trillion mark in nominal GDP terms by the end of the year.
“The market value associated with disruptive innovation could account for the majority of the global equity market capitalization,” the report concluded.
Wood’s team identifies 14 distinct technologies they believe will feed off each other, broadly converging into five overarching investment themes (“innovation platforms”) grouped around artificial intelligence, robotics, energy storage, public blockchains, and the multiomic sequencing of digitalized biological data.
Underpinning them all in their view are advancements currently being made in the field of deep neural networks.
A form of machine learning that improves the more data they are fed, their ability to train over time allows them to extrapolate and infer outcomes with increasing accuracy much the same way a human being would.
These artificial brains, which power innovations like OpenAI’s ChatGPT, could quadruple the productivity of knowledge workers by the end of the decade, according to ARK Invest.
“Breakthroughs associated with energy storage and robotics alone could add 30% to real GDP by 2030,” it wrote, “and A.I. could dwarf both their contributions.”
ARK Invest takes a different approach from Wall Street—but its risks are high
Wood is something of a tech guru who is notable for her early, accurate predictions of Tesla’s extraordinary bull run that once earned it a $1 trillion valuation toward the tail end of 2021.
More important, her firm doesn’t employ your typical Wall Street analyst.
Instead of emphasizing spreadsheets and valuation models that often focus on short-term fundamentals like a company’s forward-year cash flow or earnings per share, her ARK Invest research team prefers a top-down analysis of what macroeconomic problems inhibit social progress before examining which innovators are doing the most to solve them.
Much of the research conclusions in Big Ideas is based on predicting when technologies may reach mass-market maturity by employing Wright’s Law, a general theory from 1936 that attempts to model cost degradation curves over time. Wood borrows so heavily from it in her research that it merits its very own web page on her ARK Invest site.
Since the report takes a helicopter view of the broader tech sector, it doesn’t come with the usual recommendations of which individual stocks ARK Invest believes investors should buy or sell.
But Wood is known to favor companies like Tesla that offer exposure to several different disruptive innovations at once, such as electric vehicles, energy storage, robotics, and artificial intelligence.
Given her emphasis on investing early in emerging technologies that are often untested commercially, the risks inherent in her differently themed exchange-traded funds are high— both to the upside as well as the downside.
In 2022, the worst year for U.S. stocks since the global financial crisis, her eight ETFs each lost anywhere between a third to two-thirds of their value.
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