Investors can tap into exchange traded fund strategies that capture these to capture disruptive innovations and enhance portfolios.
In the recent webcast, Big Ideas 2021: Technological Breakthroughs Investors Shouldn’t Miss, Catherine Wood, Founder, CEO, CIO, ARK Invest, highlighted breakthrough technologies that will change the global economy and open growth opportunities for investors.
For starters, Wood highlighted deep learning that could create more economic value than the internet did. The Internet added $3 trillion to equity market capitalization globally over two decades, and deep learning has already created $2 trillion in market capitalization as of 2020. ARK Invest projects deep learning could add $30 trillion to equity market capitalization over the next 15 to 30 years.
ARK believes server processors will transform in the next decade. Wood argued that accelerators, dominated by GPUs, will become the dominant process in the data center, growing 21% at an annual rate of $41 billion.
Virtual worlds could hit $400 billion by 2025. The global gaming market will rise at a 16% compounded annual rate over the next 5 years, from $175 billion in 2020 to $365 billion by 2025. Meanwhile, augmented reality and virtual reality markets will grow at a 59% compounded annual rate over the next five years, from $3 billion to $28 billion.
ARK Invest estimates that the U.S. digital wallet space could be worth $4.6 trillion by 2025 if each of the estimated 230 million U.S. digital wallet users were valued at $19,900. Additionally, Bitcoin could play a pivotal role in corporate cash. If all of the S&P 500 companies were to allocate just 1% of cash to bitcoin, the price of Bitcoin would increase by about $40,000.
Global electric vehicle sales could scale roughly 20 fold from 2.2 million in 2020 to 40 million by 2025. Additionally, the sales of smaller, cheaper ‘neighborhood electric vehicles’ could rise dramatically as a share of total EV sales.
Automation could add 5%, or $1.2 trillion, to the U.S. GDP over the next five years. ARK calculates that automation could boost U.S. real GDP growth by 100 basis points on average per year to 3.4%.
Autonomous ride-hailing platforms could generate over $1 trillion in operating earnings annually by 2030.
ARK also sees opportunity in the nascent drone delivery market, which could generate nearly $50 billion in revenue, $14 billion in hardware sales, and $3 billion in mapping revenue by 2025.
Satellite broadband revenues could hit $10 billion per year in the U.S. and $40 billion globally over the next 5-10 years. Furthermore, global governments could add more to the demand for space services.
Faster travel through hypersonic flight could enjoy huge demand. According to ARK, passengers on short-haul flights are willing to pay $15,000 for every two hours saved on private planes, and businesses are willing to pay $100,000 to save 13 hours on a 2-3 hour private hypersonic flight from New York to Japan.
The global 3D printing market is expected to scale at a compounded annual rate of 60% over the next five years, from $12 billion today to $120 billion by 2025.
In the next phase of medicine, ARK believes allogeneic cells and cellular immunotherapies will create $250 billion in incremental revenues. The developments could advance in vivo gene therapy that would enable gene-editing to cure thousands of rare diseases over time.
ARK’s Disruptive ETF Lineup
As a way to capture these various innovations, investors can look to ARK Invest’s flagship ARK Innovation Fund (NYSEArca: ARKK), which seeks to invest in the cornerstone companies taken from healthcare, technology, and industrial sectors that focus on investing in disruptive innovation. Such companies may include ones that benefit from big data, cloud computing, cryptocurrencies, the sharing economy, genomic sequencing, molecular medicine, agricultural biology, 3D printing, energy storage, and autonomous vehicles.
The actively managed fund includes companies that merge healthcare with technology and capitalize on the revolution in genomic sequencing. These companies try to better understand how biological information is collected, processed, and applied by reducing guesswork, enhancing precision, and improving our quality of life.
The technology component focuses on the next generation of internet names. These tech companies benefit from the shifting bases of technology infrastructure to the cloud, enabling mobile, infrastructure and services, internet-based products and services, new payment methods, big data, the internet of things, and social distribution and media.
Lastly, the industrial exposure covers a so-called new industrial revolution, or advances in autonomous vehicles, robotics, 3D printing, and energy storage technology that are enhancing productivity, reducing costs, and transforming the manufacturing landscape.
Investors can also look to the ARK Industrial Innovation ETF (NYSEArca: ARKQ), ARK Web x.0 ETF (NYSEArca: ARKW), and ARK Genomic Revolution Multi-Sector Fund (NYSEArca: ARKG) to target the three innovative segments separately. The ARK Industrial Innovation ETF captures the converging industrial and technology sectors, capitalizing from autonomous vehicles, robotics, 3D printing, and energy storage technologies. The ARK Web x.0 ETF targets next-gen internet innovations like artificial intelligence, cloud computing, cryptocurrencies, and blockchain technology. Lastly, the ARK Genomic Revolution Multi-Sector ETF tracks the convergence of tech and health care.
ARK Invest offers the ARK Fintech Innovation ETF (ARKF) to help ETF investors capitalize on the burgeoning fintech industry and capture innovative financial solutions in a digital age. ARKF invests in equity securities of companies that ARK believes are shifting financial services and economic transactions to technology infrastructure platforms, ultimately revolutionizing financial services by creating simplicity and accessibility while driving down costs.
Lastly, the ARK 3D Printing ETF (CBOE: PRNT) tries to reflect the Total 3D-Printing Index’s performance, which is designed to track companies involved in the 3D printing industry. The Total 3D-Printing Index is composed of related companies from the U.S., non-U.S. developed markets and Taiwan that are engaged in 3D printing-related businesses engaged with 3D printing hardware, computer-aided design (“CAD”) and 3D printing simulation software, 3D printing centers, scanning and measurement, and 3D printing materials.
Financial advisors who are interested in learning more about technological breakthrough investment opportunities can watch the webcast here on demand.