Highlights from ARK Invest’s Big Ideas 2023 – The Average Joe

    Highlights from ARK Invest’s Big Ideas 2023

    Victor Lei — Head of Research

    February 1, 2023

    February 1, 2023

    Cathie Wood almost makes Houdini look like a half-rate kid’s party magician. Now performing… the greatest disappearing act in history.

    Die-hard Cathie Wood fans (what little of you remain) and haters, let’s try to set our biases aside for five mins — before we go into her Big Ideas 2023.

    To do that, we’ll have to grade Cathie Wood on different subjects:

    1/ Market Timing: F

    But that’s okay with ARK — which invests with a long-term horizon and rarely tries to time the market.

    • It’s unlikely for Wood to pivot away from growth stocks or move a significant portion of her funds into cash.
    • The past two years have been all about value stocks, so it’s no surprise ARK’s funds have significantly underperformed the market.

    2/ Sales tactics: B+

    ARK loves to make outrageous predictions like $TSLA hitting $1.5K (10x) and $BTC reaching $1M (38x). Gotta get those clicks. After all, Wood is a salesperson first.

    The more people invest in ARK funds, the more ARK makes from fees.

    3/ Research: A

    Cathie Wood is often directionally correct on where innovation is going — except those calls come with timeframes many years out.

    Will there be an Avatar 3 film? Yes… within the next 50 years.

    Let’s cut ARK some slack

    The market’s steep drop has brought $ARKK back to its 2018 levels. But given its exposure to high-growth companies, it wouldn’t be surprising to see the stock outperform on the way up.

    Since the recent (temporary?) market bottom on Dec. 28, 2022, $ARKK has already outperformed the S&P 500 35% to 8%.

    ARK Invest has released its annual Big Ideas 2023 report. Let’s look at the highlights from all 153 pages.

    14 major themes make up the list

    1/ Technological Convergence lands at the top.

    The cost of these 14 innovative fields are falling fast — each serving as a launchpad for further advancements.

    “Neural networks are the most important catalyst” in accelerating other technologies. These powerful artificial intelligence tools mimic the brain and help machines learn from their mistakes.

    2/ Artificial Intelligence. Can’t have a 2023 ideas list without AI.

    The cost to train AI models is decreasing rapidly. Mosaic recently released an AI training model that costs $450K — down nearly 90% from $4.6M two years ago.

    • AI could create a 10x increase in coding productivity.
    • AI software could generate up to $14T in revenue by 2030.

    3/ Digital Consumers. ARK estimates that increased productivity from AI will lead to an annual 0.9% decline in daily hours worked.

    With newfound time, consumers will likely go play in the park turn to digital entertainment. Meaning more time spent on social media, gaming and sports betting (some of ARK’s fave industries):

    • Immersive virtual experiences to drive the next wave of gaming. And it involves the metaverse.
    • Short-form video to continue taking market share from traditional social media platforms.

    Many trends have been repeated from previous years, so we’ll spare you the time:

    • Bitcoin still stands by its $BTC hitting $1M by 2030, despite its fifth-largest and second-longest drawdown in history.
    • Robotics adoption continues, and Amazon could even hire more robots than employees in the next few years.
    • ARK’s love for electric vehicles knows no bounds. EV share of global sales to reach 60% by 2027 (from under 10% in 2021).
    • Digital wallets have reached 40% of the global population — and could reach 65% by 2030.

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