Since 2017, ARK Investment Management, a subsidiary of Cathie Wood, has released its own New Year's investment outlook at the beginning of each year, and although "Wood Sister" has not achieved satisfactory investment results this year, this year's New Year's investment theme is still released as scheduled.
The theme of investment in 2022 is still around the disruptive innovative technologies that "Wood Sister" loves the most, and the five most promising industries are AI, battery technology, blockchain, robotics, and genetic technology. ARK estimates that the average annual compound growth rate of these five industries will increase by 26%, 35%, 43%, 51% and 40% respectively in the decade from 2020 to 2030.
In the opening outlook, "Sister Wood" wrote: "The beginning of change is always very slow, but suddenly it breaks out, and over time, innovative enterprises will eventually be able to replace traditional industries and improve social efficiency.
Artificial Intelligence (AI)
AI mainly includes four categories, the first of which is mobile connected devices. In the future, people will live in a connected network, and everything in their lives, such as notification messages, entertainment, interaction with others, etc., is included in this network, and devices play the most important role in this network.
ARK believes that the cost of AI training will fall more than twice as fast as Moore's Law over the next 10 years. Moore's Law means that computer hardware and performance are about doubling every two years. For example, assuming the human brain has 240 trillion synapses, the cost of training a neural network the size of the human brain will be $2.5 billion in 2021, and by 2030, that cost could drop to $600,000 at a rate of 60 percent per year.
At the same time, AI will increase the output of knowledge workers by 140% by 2030.
By 2030, AI software companies can generate $14 trillion in annual revenue. The resulting $4 trillion in free cash flow could create more than $80 trillion in business value, up from $2.3 trillion in 2021, with a compound return of 48% over the next nine years. By 2030, AI hardware companies can generate $1.7 trillion in annual revenue. The resulting $350 billion in free cash flow could create $7 trillion in value for businesses, with a return of 57 percent over the next nine years.
Electric vehicle
As the range of electric vehicles increases and prices fall, the biggest obstacle to user purchase is gradually being overcome. ARK predicts that by 2023, the cost of electric vehicles may be comparable to that of fuel vehicles.
The biggest cost component of electric vehicles is the battery, and the decline in its cost is crucial to achieving parity with fuel vehicles. According to The Wyright Law, for every doubling of cumulative production, battery costs will fall by 28 percent. Lithium iron phosphate (LFP) batteries are cheaper than nickel batteries and have a lower production base, potentially accelerating cost and price declines.
The ability of electric vehicles to charge quickly is affected by vehicles and charging infrastructure. Once tram rates reach acceptable levels, ARK expects the industry to optimize for other features such as autonomous driving, safety, and possible entertainment.
If traditional automakers accelerate their transformation, electric vehicle sales will increase from 4.8 million to 40 million in the next five years.
robot
The use of industrial robots accelerated again after the dot-com bubble burst in 2002 and after the 2008-2009 crisis. In response to supply chain bottlenecks in 2020-2021, the penetration of industrial robots is likely to gain more momentum.
Amazon deployed its first 200,000 robots in seven years and another 150,000 in the next two years. In those nine years, Amazon's workforce has grown nearly fifteenfold. Despite eliminating retail jobs, ARK believes that automation will create new demand for products and services, and overall increase the demand for labor.
Gene editing and treatment
According to ARK's research, breakthroughs in gene editing are creating more effective therapies at the fastest rate ever. Compared to zinc finger nuclease (ZFN), which transfers zinc finger nuclease from discovery to the first human dose in about eight years, CRISPR takes less than half the time, or three years, to resolve 48% of known diseases.
Given the potential treatments for diseases, gene R&D funding for therapeutic innovation should continue to rise. By 2026, companies used for gene editing and treatment can increase from 3% to 17%. By 2026, the market value of gene editing and treatments could grow at a compound annual growth rate of 54%, from about $130 billion to $1.1 trillion.
Blockchain
Public blockchain infrastructure is the backbone of a new form of economic coordination: it minimizes the need to trust centralized institutions. The decentralized, open, and permissionless nature of public blockchains reduces coordination costs, among other advantages.
The tech stocks that "Wood Sister" holds the most have all fallen this year
Wood's flagship innovation fund, the Ark Innovation ETF (ARKK), has fallen 27 percent this year, down half from its peak in February.
ARKK is betting on high-growth U.S. public companies, particularly in areas related to DNA technology, automation, robotics, electric batteries, artificial intelligence and fintech. The company's most held stocks this year have all fallen sharply, with Tesla down 23.5 percent, Zoom Video Communications down 20.7 percent, and Coinbase down 26.1 percent.
At the 2022 Virtual Creative Summit hosted by ARK, "Sister Wood" said:
"Many people associate volatility with risk, and we use volatility to our own advantage."
She urged investors not to over-focus on short-term volatility but to take advantage of opportunities with lower valuations, noting that ARK's return cycle is five years.
At present, "Wood Sister" has also switched the return on its website from "year-to-date" to "5-year (annualized) return as of 12/31/2021", and the year-to-date return rate of 27% from the current cumulative decline has become a five-year annualized return of 38.38%.