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00:00Here to talk about 2026, the economy, investment ideas, great to have back with us the founder,
00:05CEO, and CIO of ARK Invest, Kathy Wood.
00:07She joins us from St. Petersburg, Florida.
00:10Kathy, great to have you here.
00:11Happy New Year.
00:13Happy New Year, Carol and Tim.
00:15Very happy to be here again.
00:16Well, it's great to have you here.
00:17And I want to start with what stocks did here in the U.S. really well last year.
00:21But if you look at global stocks, you could say that there was certainly some underperformance
00:25by the U.S.
00:26You've invested in a lot of U.S. names, but also a lot outside the U.S.
00:30And I think about Chinese companies, BYD, Baidu, Alibaba.
00:34Are you looking for more opportunities outside the U.S. at this point?
00:38And I wonder if you think it's time for maybe U.S. stocks to take a little bit of a breather
00:42after three years of double-digit gains.
00:45Well, I think we're very focused on the deregulation, lower taxes,
00:53and what we believe will be lower inflation, much lower inflation, and lower interest rates
00:58in the U.S.
01:00And we think the combination of those is actually going to drive the returns on invested capital
01:07in the U.S. up relative to those in the rest of the world.
01:12And I think many people are underestimating, especially on the corporate tax side,
01:16that thanks to the new depreciation schedules, our effective corporate tax rate, not the
01:25statutory, but the effective, will drop to one of the lowest in the world at roughly 10%,
01:31certainly near a record low for the U.S.
01:35So do you think, Kathy, that's not priced in yet to U.S. equities?
01:38Like, have investors not realize that, and therefore it's not priced in yet?
01:42You know, it's very interesting.
01:45Maybe a lot of your guests have been talking about the depreciation schedules,
01:50how massively they are going to encourage capital investment here in the United States.
01:59So we've never had full depreciation in year one of manufacturing facilities,
02:07full depreciation in the first year of service.
02:10That means corporations will get huge tax refunds that they will be able to reinvest into innovation,
02:20because we also equipment, domestic R&D, and software.
02:27Those three, full depreciation, first year of service, that has been legislated.
02:33Normally we get, oh, a few years of this, you know, this cut and that cut.
02:37But that has been legislated.
02:40Now it's all the time.
02:42So we don't think people understand how profound some of these tax changes are.
02:48So what does that mean for something like the AI trade specifically, Kathy,
02:52where I think people are worried about pockets of it with, you know, being in a bit of a bubble?
02:57Does it benefit everyone who is somehow associated, whether it's the chip companies,
03:02whether it's the energy companies, do you see the benefits playing out there
03:06and giving it more room to move to the upside?
03:10Absolutely. Absolutely.
03:13I mean, we're having huge build-outs of data centers and power facilities.
03:19All of that, all of those depreciation schedules will apply to this boom in investment
03:27and contribute to it.
03:29So, yes.
03:30Anything.
03:31In fact, Carol.
03:32Yeah, please.
03:32Yeah, I was just going to say, many people think we're in a bubble.
03:35And, yes, the data center spending last year was about $500 billion.
03:41And you can see all of this in our Big Ideas report.
03:44We just released it yesterday.
03:45And thank you, Bloomberg, for featuring it.
03:47But $500 billion is a two-and-a-half times increase from where it had been trending for years.
03:56So, big increase, no doubt about it.
03:58But we think that number needs to go to $1.4 trillion in the next five years
04:04to accommodate the AI boom that is now underway
04:08and is going to drive productivity gains incredibly.
04:12I want to get into that in just a moment.
04:13I'm really also interested in the health care aspect of it
04:17because I feel like there's a lot going on.
04:18Before we do so, we also have your 2026 outlook.
04:23And what's interesting is you note that this is an important economic historical moment.
04:28How so?
04:30Well, we are in a technology revolution.
04:35And many people thought that the Internet was a technology revolution.
04:40And to some extent, it was.
04:41But today, instead of just one major platform evolving, we have five.
04:48So, robotics, energy storage, AI, blockchain technology,
04:53and multi-omic sequencing in the life science space,
04:57which we believe is the most profound application of AI, health care.
05:03And so, this boom, if you look back at the railroad boom,
05:10the amount of investment that we saw back then was about 6% of GDP at its peak, 5% to 6%.
05:20The Internet boom was more like the auto boom in the early 1900s.
05:27It was more in the 3% to 4% of GDP range.
05:30We believe this five-platform innovation strategy or boom is going to move to 12% of GDP.
05:45And we do believe also that productivity growth will accelerate to the 4% to 6% range and be sustained there.
05:55Normally, we see a cyclical peak around there and then it falls back.
05:59We think it will be sustained and we think that by the end of this decade,
06:05real GDP growth could be averaging more than 7% per year.
06:11And I know that sounds shocking given that we've been at 3% for 125 years.
06:17But it is the history associated with technology revolutions, a step change up in GDP growth.
06:25The productivity increase, the GDP growth that you are forecasting as a result of these disruptive technologies,
06:32to what extent is that the result of fewer people doing more?
06:37My question is about job losses as a result of this technology.
06:40Because if everything that investors are betting on when it comes to this AI revolution comes true,
06:45it means that companies aren't going to need as many people to do a lot more.
06:49What does that look like?
06:51Well, GDP growth at 7% plus per year tells you there's going to be a lot of economic activity,
06:59more economic activity from a sustained growth point of view than we've seen in quite some time.
07:06The history of technology is it's a net job creator.
07:11In the early 90s, when developers were evolving the Internet,
07:17we could not have imagined Uber or Airbnb back then.
07:23And I think the same is true now.
07:25We cannot imagine the kinds of jobs that are going to exist in the future.
07:31And the other thing that we're excited about from a job creation point of view
07:35is we're seeing new worlds being created.
07:39And by that I mean most of us think about Earth.
07:43But now we're moving into space.
07:46Even data centers, we think, Elon leading that charge, will start moving into space.
07:52And we won't have the not in my backyard and the bureaucracy associated with data centers.
07:58There's going to be huge job creation around the space exploration and all of the opportunities out there.
08:07And then the other one, and you'll find this in our digital assets section of Big Ideas,
08:14is the digital world, immutable private property rights.
08:18We know from economic history, the best way to lift people and countries out of poverty
08:26is with private property rights that are immutable.
08:31Well, that is now moving into the digital world for the first time, thanks to blockchain technology.
08:38So we're not worried about job creation.
08:41But for those who are, because there is something happening that I know is concerning to many people,
08:48the unemployment rate for 16 to 24-year-olds has moved to 12%.
08:5912%, big increase.
09:01And what is that saying?
09:03That's saying that entry-level jobs are not being created the way they used to be.
09:09To those people, I say, you know, you must have in your mind an idea for a new business,
09:18something that frustrates you, an unmet need.
09:21Well, now you can go to ChatGPT, you can go to Grok, and you can have an assistant help you build out that business.
09:29Just interview for jobs, but also think about new business ideas.
09:34I think we're going to see entrepreneurial explosion here.
09:37Well, and, you know, speaking of entrepreneurial explosion, I think about, you know,
09:40how long you have certainly been with Tesla and a backer of Elon Musk, a long time.
09:46And I think about, you know, when we first talked and you likened him to Mr. Einstein, Albert Einstein.
09:51But I just wonder, Elon at Davos earlier today, and he talked about the carmaker's fortunes will be increasingly dependent on humanoid machines.
10:01Kathy, how are you modeling this?
10:03I mean, into the thesis of Tesla.
10:04And is that where the growth is more so than EVs for Tesla going forward?
10:10Without a doubt.
10:11We've always said Tesla is not an auto company.
10:15It is actually the convergence of three of the platforms I mentioned.
10:19So robotics, energy storage, and AI.
10:23Each one of those technologies has its own S-curve.
10:27And now they're feeding each other, and we're seeing that in robo-taxis.
10:33Robo-taxis, we believe, will account for 90% of Tesla's valuation by the end of the decade.
10:41We're in print at $2,600.
10:43That includes nothing for optimist robots.
10:48And we're beginning to understand how quickly Tesla is moving on that front.
10:55Why?
10:55Because it's the convergence of the same three technologies, robotics, energy storage, and AI.
11:03So I think that price target, obviously, if Optimus is successful, and we believe it will be,
11:12we think that humanoid robots is evolving into a $26 trillion opportunity,
11:20half in the home, half in manufacturing plants.
11:24We're speaking with Kathy Wood, CEO and CIO of ARK Invest.
11:29Kathy, you mentioned Tesla.
11:31We're talking about Tesla, the regulatory environment.
11:34Certainly, it's a less favorable regulatory environment for Tesla than it was just a few years ago, just two years ago, just one year ago.
11:42You also talked about the Trump administration and the ease of regulations that we're going to see through the Trump administration.
11:49You've talked about that with us in the past.
11:51I'm wondering, a year into his presidency, what do you still want to see in terms of deregulation?
11:58What have you not seen yet that you want to see?
11:59Well, I think it's constant chipping away.
12:05In his first administration, I think President Trump said, for every regulation you put in place, you have to take away, too.
12:19And so it's a mindset in this administration.
12:22And I think we have it.
12:24We're seeing amazing deregulation in the health care, on the health care front.
12:31And I don't think many people understand that the FDA has decided that animal testing is no longer necessary for monoclonal antibodies.
12:45And I don't think they're as aware of how the FDA is harnessing AI itself and encouraging the companies it regulates to start using AI.
13:02So I think it's a mindset shift, and I think it is happening.
13:07I think the most profound deregulation is taking place in the energy realm, and that's not just oil and gas and so forth.
13:20It's nuclear.
13:22If we, in the 70s, had not started regulating nuclear the way we did and driving construction costs up,
13:31electricity prices today would be 40% lower than they are.
13:38And so we think as nuclear comes on stream that it will serve to take some of the edge off of the increase to electricity prices that data centers are causing now.
13:53Hey, Kathy, just big broad in terms of, you know, all of the different funds that you have and the exposure.
13:58I'm just curious where you're seeing flows in and out.
14:01We've done some reporting on this, and we know some of your funds certainly showing some interest among investors.
14:06But we also talked about earlier this week about some of the withdrawals from the ARK Innovation.
14:11What can you tell us specifically when it comes to flows and performance so far this year?
14:17What's working?
14:18What are investors interested in?
14:19Well, we have had, year to date, I think, our ETFs have roughly a billion dollars in inflows,
14:28heavily skewed to space exploration and defense for obvious reasons,
14:37and then autonomous technology and robotics.
14:40I think that autonomous taxis and drones, very big parts of that fund as well.
14:50And then our flagship strategy is also starting to inflow.
14:56It had been held down by the multi-omics theme.
15:01So this is what we used to call the genomic revolution, and it was a very difficult space.
15:09Even though the innovation was taking place, the investment markets were not interested in it for a couple of reasons.
15:18One, lots of investment necessary, therefore not very high, if any, cash flows, and the cash cushions needed to be built up.
15:33We think they've done a lot in the last few years to become more efficient.
15:39And so we're beginning to see outperformance from that space as well, because now many people are beginning to understand we're seeing cures to disease.
15:48We're seeing early diagnosis thanks to AI and sequencing technologies.
15:53I want to pursue this further with you at a later date and some of the companies that are in that.
15:58Just 30 seconds, though.
15:59What's your best idea, you think, for 2026 at this point?
16:02And I know there's a lot in your research, but is there a best idea or a narrative?
16:06Just quickly, if you could.
16:07Well, so the top three stocks in our flagship are Tesla.
16:14We think it has miles to go.
16:16We do take profits from time to time, but it could break out here in a big way as more and more analysts do their homework on robo-taxis.
16:25CRISPR Therapeutics has moved into the second position.
16:28That company is curing sickle cell disease and beta thalassemia and has its eyes set on not just rare diseases, but curing the bad cholesterol problem, especially for those who have hereditary issues in that realm.
16:48That could be an enormous market, and I don't think anyone is doing the modeling work there the way we are.
16:55I love it.
16:55All right.
16:56Hopefully, we can check back with you as the year plays out.
16:59Kathy, thank you so much.
16:59Really appreciate it.
17:01Kathy Wood, of course.
17:02Be well.
17:02Former founder, CEO, of course, and CIO of ARK Invest, joining us from Florida.
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