ARK's tech themes

Ark Invest recently published their annual Big Ideas report which you can read here. While, Kathy Wood (the fund’s CIO) is not everyone’s cup of tea, it’s worth noting that her fund ranks in the top five tech funds in terms of assets, with roughly $20 billion under management, much of it allocated to large-cap US stocks. As a result, her views are widely read, even if to check the pulse on market consensus, challenge the current investment narrative or find areas of disagreement. The annual report gives ARK’s version of some of the most promising and disruptive technological trends that are likely to “shape the future of our worlds.”

Here are some key points from the latest ARK Big Ideas report:

Convergance

“One of the key insights in the report is how multiple disruptive technologies are converging all at once, with AI playing a central role in areas such as autonomous driving, robotics, and cloud computing. As the report notes, “software that evolves with data can solve intractable problems, automate knowledge work, and accelerate technology’s integration into every economic sector.”

Online Leisure

ARK predicts this increases in efficiency will lead to a 1% increase in leisure time per year. The report suggests that this additional leisure time will increasingly be spent online, and that at some point in 2029, digitally facilitated leisure spending (such as digital audio and video, video games, and e-commerce) will overtake physically enabled spending (such as cinemas, theatres, gyms, and amusement parks). In practice, this means that spending on services like Spotify, Netflix, Amazon, and games from the app store, as well as membership in clubs in the digital world (such as Zwift) will overtake spending on cinemas, theatres, gyms and amusement parks.

Energy Storage

Energy storage: According to the report, declining costs of advanced battery technology should cause an explosion in form factors, enabling autonomous mobility systems that collapse the cost of getting people and things from place to place. As Noah Smith recently pointed out, there is an argument to be made that the general purpose technology that will transform our society will be the battery. As batteries continue to improve, the disadvantages compared to fossil fuels will decrease.

Robotaxi

These improvements in both AI and batteries will mean that sooner or later, autonomous taxis or ‘robotaxis’ will eventually start roaming around our cities. And with prices ranging from $4 to $0.25 per mile, the robotaxis could be a more attractive option than ~60% of short-haul airline flights, based on time and cost savings including transport to and from airports.

Digital wallets and DeFi

This can be classified under medium term disintermediation and empowerment stories. As more consumers and merchants adopt digital wallets, the use of traditional checking accounts, credit and debit cards, and direct merchant accounts is likely to decline, disrupting traditional payment intermediaries. Two main problems need solving: 1) there are about 9 intermediaries involved in a credit card transaction, and 2) over 2 billion people lack access to basic banking services, including account management and credit.

Blockchains

The report also adds public blockchains, cryptocurrencies, and smart contracts to the list, citing that these technologies “increase transparency, reduce the influence of capital and regulatory controls, and collapse contract execution costs”. Despite price declines in 2022 and general ‘risk-off’ sentiment, ARK is bullish on both Bitcoin and what it calls ‘smart network theme’ theme.

Other bits and pieces, some of which we will be reverting to later:

Online Groceries

Online today accounts for only 6% of grocery sales globally. ARK thinks that in 2030, e-commerce could capture 35% of the $11 trillion grocery market globally, with robots accounting for more than half of the deliveries. This will be supported by autonomous logistics, including trucks, drones, and robots, should lower delivery costs and increase convenience.” ARK estimates that autonomous logistics revenue could scale from nearly zero today to $1-2 trillion by 2030.

3D Printing

3D printing is likely to enable new products and markets, and see the largest leaps in robotics. Boston Dynamics’ Atlas humanoid robot, for example, achieved a strength-to-weight ratio that enabled leaps and somersaults, thanks to 3D printing.

Future of Equity Markets

Perhaps intended as a parting thought, slide 19 says that “Disruptive Innovation Platforms (such as AI, energy storage and public blockchains) could constitute the ‘majority’ of global equity market value by 2030." I always take in such estimates with a large grain of salt, however it is not unreasonable to think that share of innovators coming from those areas will continue to present a relatively larger set of investment opportunities (whether those will be via public markets, private markets or new emerging mechanisms such as crowdfunding or those facilitated in the future by web3).