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Ark’s Big Ideas for 2021

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What You Need to Know

  • Each year Ark outlines its Big Ideas for investing.
  • The 15 ideas focus largely on disruptive technology and impacted industries.
  • This year ideas range from Bitcoin to cancer breakthroughs to electronic vehicles, and more.

Every year Cathie Wood’s ETF shop, Ark, writes up its Big Ideas report that outlines key disruptive technology that bodes well for investment possibilities.

As the firm states in its report:  “ARK aims to identify large-scale investment opportunities by focusing on who we believe to be the leaders, enablers, and beneficiaries of disruptive innovation.”

Focused on technology in its investments, Ark also states that it hopes to “gain a deeper understanding of the convergence, market potential, and long-term impact of disruptive innovation by researching a global universe that spans sectors, industries, and markets. Today, we are witnessing an acceleration in new technological breakthroughs.”

In 2021, here are the 15 areas the firm sees that potentially have long-term growth, and of which it is investing.

1. Deep Learning

What Ark believes “could be the most important software breakthrough of our time” is a form of artificial intelligence that is turbocharging the industry. Firm research sees deep learning adding $30 trillion to the global equity market capitalization during the next 15 to 20 years. “We believe that state-of-the-art AI training model costs are likely to increase 100-fold from roughly $1 million today to more than $100 million by 2025”.

2. Reinventing Data Centers

ARM, RISC-V and graphics processing units (GPU) likely will become the new powerhouse processors and together could scale at a 45% annual rate to $19 billion in revenue by 2030. In data centers, these GPUs likely will become dominant processors for new workloads and experience yearly demand growth of 21%, putting the market at $41 billion by 2030.

3. Virtual Worlds

Computer-simulated environments, such as video games, can be accessed by anyone at any time. Going forward, these virtual worlds will become interoperable. Ark sees revenue from virtual worlds compounding 17% annually and hitting $390 billion by 2025. In-game purchases could grow from $130 billion in 2020 to nearly $350 billion by 2025.

4. Digital Wallets

Venmo, Cash App and others could become the new bank branches — and upend banking models. By 2025, a consumer’s digital wallet could grow from a base of about $1,900 today to $20,000. The number of digital wallet users in the U.S. already surpasses the number of deposit account holders at the largest financial institutions.

5. Bitcoin’s Fundamentals

The cryptocurrency has hit all-time highs, with firms like Tesla and Square investing in it. This shows that Bitcoin is playing a role as corporate cash, the firm says. Ark notes that if all S&P 500 companies were to allocate 1% of their cash to Bitcoin, its price could increase by $40,000.

6. Bitcoin: Preparing for Institutions

Ark sees Bitcoin’s risk-reward profile as “the most compelling” among assets, noting it could scale from roughly $500 billion now to between $1 trillion and $5 trillion in 10 years. More firms are buying it; insurance giant MassMutual invested $100 million into Bitcoin in 2020.

7. Electric Vehicles

About 10% of the Ark Innovation ETF is invested in Tesla, so it’s no surprise the firm sees EV sales increasing 20-fold, from 2.2 million in 2020 to 40 million units in 2025. The firm also sees EV prices coming down and reaching parity with gas-powered cars by 2023. Further, while EV sales were up 33% in 2020, sales of gas-powered cars fell 15%.

8. Automation

Ark predicts that the growing use of automation could add 5%, or $1.2 trillion, to U.S. GDP in the next five years. With the move to more automation, Ark anticipates higher wages for workers, lower prices for consumers, higher margins for companies and higher levels of investment — creating virtuous cycles.

9. Autonomous Ride-Hailing

These services could reduce the cost of mobility to one-tenth the average cost of a taxi today, dropping from $0.70 a mile in 2016 to $0.25 a mile in 2025, spurring widespread adoption. Ark believes these platforms will generate more than $1 trillion in profits per year by 2030.

10. Delivery Drones

Lower battery costs and autonomous technology should power the use of aerial drones, Ark says. It also believes drones will deliver packages, food “and even people” faster in the near future. Thus, drone delivery platforms could generate some $275 billion in delivery revenues, $50 billion in hardware sales and $12 billion in mapping revenue by 2030.

11. Orbital Aerospace

Upon regulatory approval, Ark plans to launch a space-themed ETF and sees this area’s opportunity — including satellite connectivity and hypersonic flight — exceeding $370 billion annually.

12. 3D Printing

Ark notes that 3D printing collapses the time between design and production, shifts power to designers and reduces supply chain complexity at a fraction of the cost of traditional manufacturing. Last year, despite being used for everything from ventilator valves to swabs to face masks, its revenues declined. However, Ark estimates 3D printing’s annual growth rate at roughly 60%, putting the industry at $120 billion in 2025 vs. $12 billion in 2020.

13. Long Read Sequencing

Ark sees this next generation of DNA sequencing — and more accurate sequencing methods — as “the driving force behind the genomic revolution.” By the end of 2025, long-read sequencing should be on cost-parity with short-read sequencing. Long-read revenues could grow 82% a year, with the market set to hit $5 billion in 2025 vs. $250 million in 2020.

14. Multi-Cancer Screening

A convergence of technologies has pushed the cost of multi-cancer screening — which detects dozens of cancers by a single blood test — down from $30,000 in 2015 to $1,500 in 2021; this might drop to $250 by 2025. The market for multi-cancer screening could expand to $150 billion, while averting 66,000 cancer deaths per year in the U.S.

15. Cell and Gene Therapy: Generation 2

The next generation of cell and gene therapy could increase “the total addressable market for oncology therapeutics by more than 20-fold.” Another trend is the shift in gene therapies from ex vivo (modifying a patient’s cells outside of the body) to in vivo (doing it inside the body). In vivo is more cost effective and could enable gene-editing — and hopefully cure thousands of rare diseases over time. Ark estimates that advances in cellular immunotherapies could create $250 billion in incremental revenues for the industry going forward.

Source: Ark Investment Research “Big Ideas Report 2021”