Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
‘Convergence’ of technology the biggest bull case for stocks
Few companies represent the last two years of movement in stockmarkets better than Ark Invest. Under the leadership of Cathie Wood, the group went from close to zero, to hero amid the pandemic, only to be sold down heavily in the current tech selloff. Their approach is simple, take a very-long term view on the massive technology market and invest in innovation that has the potential to change the world.
Ark Invest recently published their “Big Ideas 2022: Change and Convergence,” a research note outlining the firm’s main predictions on disruptive technology.
ARK Invest’s CEO, Cathie Wood, predicts Bitcoin’s price could exceed $1 million by 2030 and Ethereum’s market cap could exceed $20 trillion in the next 10 years. The star stock-picker and founder of $60 billion (assets) ARK Invest, which invests in innovations like self-driving cars and genomics, has had a difficult year with their flagship Disruptive Innovation ETF on track for its worst year of performance since launching in 2014. That is however, after the ETF delivered a whopping return of 150% in 2020.
The report centres around the “belief that five innovation platforms are evolving and converging at the same time: Artificial Intelligence, Robotics, Energy Storage, DNA Sequencing, and Blockchain Technology.” Looking at the chart below, ARK have identified 14 transformative technologies that are approaching tipping points as costs drop and demand increases, initiating further innovation.
Artificial Intelligence innovation could accelerate productivity gains. The Ark report says, “By 2030, artificial intelligence is likely to boost the output of global knowledge workers by 9% at an annual rate, from $41 trillion in expected human labor output to roughly $97 trillion in AI + human output.”
ARK estimates that “if automation boosts productivity by 140%, AI software could increase the output of global knowledge workers at an annual rate of 9% to $97 trillion in 2030.”
The market for AI could grow exponentially from US$2.5 trillion to US$87 trillion in enterprise value by 2030. And to meet this growth is a new digitally native consumer that is spending a massive amount of time socialising and purchasing online. ARK estimates that “as measured by online entertainment spend, advertising spend, and platform e-commerce fees-is likely to grow at an 18% compound annual rate during the next five years, from $1.8 trillion today to $4.1 trillion in 2026.”
COVID-19 has changed our lives, creating a shift from offline to online activities. On average in 2021, internet users spent 38% of their free time online and 62% offline. By 2030, ARK expects these averages to flip, with users spending 52% of their free time online and 48% offline.
As you can see it’s a huge shift towards the online world. Sectors still in their infancy such as – Digital wallets, Blockchain, Bitcoin, Ethereum & DeFi, Web3, NFTs and Gene Editing, are all sectors that have long-term growth prospects and plenty of runway should they show merit and uptake. Ark Invest expects higher returns from their stock picks looking forward. With the growth-oriented ETF expected to deliver a compounded annual growth rate of up to 40% over the next 5 years, it could be worth keeping an eye on.
