Bitcoin, electric vehicles, virtual reality technology, robots, self-driving taxis, 3D printing and multi-cancer screening: what do these things have in common?
They’re some of the big bets that one of the world’s best money managers are throwing their weight behind in 2021.
ARK Invest is a US asset management firm with one key difference: it invests away from traditional investment sectors and in “disruptive innovation” and technology that’s expected to grow for years to come.
Founded in 2014, ARK Invest has some serious credentials. Its ETFs have delivered returns well above 100 per cent last year, with ARK’s Innovation ETF stealing the crown of the world’s largest actively managed ETF from JP Morgan.
But the asset manager isn’t guarded about its secrets: every year since 2017, it publishes a report on the latest developments in innovation that guide their investment focus.
Some themes, like Bitcoin, electric vehicles and automation, are well-known and have entered into the mainstream, while others – such as drones and multi-cancer screening – are lesser-known.
Here are seven of ARK’s major predictions for 2021:
1. Bitcoin’s price could break US $400,000.
Institutional investors have invested in the popular crypto, and companies like Square and Microstrategy have allocated hundreds of millions of dollars into Bitcoin.
But why stop there? ARK Invest predicts that if every S&P 500 company invested just 1 per cent of their cash into Bitcoin, its price could rise by US $40,000. Investing 10 per cent would add US $400,000 to its price.
2. Electric vehicle sales will rev up
The best investment funds have been calling it for years; electric vehicles (EVs) are the future. And there are plenty of signs: Tesla’s stock price has shot up an eye-watering 552 per cent in the 12 months to 8 February 2021, and Chinese rival Nio’s growth is even more impressive at 1,464 per cent.
Not only that, but EV sales went up even during the pandemic, while gas-powered vehicles decreased.
In the span of five years, ARK predicts EV sales will increase twentyfold, from roughly 2.2 million units to 40 million by 2025.
“This market is going to go from 2.2 million sales … in 2020 to 40 million in 2025,” @ARKinvest CEO @CathieDWood says about electric vehicles. “The capital markets are going to finance this transition from internal combustion engine to electric.” pic.twitter.com/OQtJTtmLV7
— Yahoo Finance (@YahooFinance) February 2, 2021
The only thing that would hold this forecast back is if traditional automobile manufacturers don’t keep up with the transition.
3. Virtual reality: We’ll be living in it
‘Virtual worlds’ are defined by the report as computer-simulated environments such as video games, augmented reality and virtual reality.
Video game take-up is expected to increase from 1.1 hours per person per day to 1.5 hours over the next five years. Meanwhile, investment into augmented reality (AR) by social giants such as Snapchat, Facebook and Apple has risen. The AR market alone is expected to balloon from US $1 billion today to US $130 billion by 2030.
“According to our research, revenue from virtual worlds will compound 17% annually from roughly $180 billion today to $390 billion by 2025,” the report said.
4. Automation will give you a pay rise
A few years ago, fears were running high that the rapid acceleration of automation and robotic technology would leave millions jobless.
The OECD’s Employment Outlook from mid-2019 indicated more than one in three (36 per cent) of Aussie jobs faced significant or high risk of automation.
More recently, the World Economic Forum’s Future of Jobs 2020 report predicted that automation and “a new division of labour between humans and machines” will uproot 85 million jobs across the world but – but create 97 million new ones.
The thinking now is that it doesn’t have to be either-or; rather, humans should be able to work with technology. “ARK believes it will empower humans, increasing both productivity and wage growth,” the report states.
Automation can also help shift unpaid labour to paid labour, it added. “For example, as food services automate, they will transform food prep, cleanup, and grocery shopping into market activities including food delivery.”
Automation will add 5 per cent, or US $1.2 trillion to US’ GDP over the next five years, ARK predicts.
5. Self-driving taxis will become the norm
A future where self-driving cars and Ubers are ubiquitous seems lightyears away – until it isn’t. Innovative automobile makers are fine-tuning self-driving vehicles, and this will drive down the cost of catching an Uber or a taxi so low that it’ll be much cheaper than owning a car, meaning we’ll see wide-spread adoption.
“We believe autonomous ride-hailing will undercut the cost of human-driven ride-hailing by roughly 90 per cent in the US and 50 per cent in China,” the report said.
“ARK’s research suggests that autonomous ride-hailing platforms will generate more than $1 trillion in profits per year by 2030.”
“In addition, automakers and fleet owners could enjoy profits of $250 billion and $70 billion, respectively.”
6. 3D printing will transform manufacturing
COVID-19 drove demand for 3D printing to create crucial devices and equipment such as ventilators, face shields, respirators, mask filters, isolation wards and more.
According to ARK, it’s also been accelerating innovation in areas like batteries, aircraft design, and drones – and has opened up possibilities that didn’t exist before.
“The convergence of 3D printing and artificial intelligence enables highly optimised designs not possible in traditional manufacturing,” the report states.
“ARK believes that the global 3D printing market will scale at a compound annual rate of 60 per cent during the next five years, from $12 billion to roughly $120 billion by 2025.”
7. Multi-cancer screening will become cheaper
This is technology that saves lives: innovation in medical tech has already pushed down the cost of multi-cancer screening from US $30,000 in 2015 to just US $1,500 today.
ARK expects this downward trajectory to continue, with the price expected to fall further to just US $250 in 2025.
“The multi-cancer screening market should scale to $150 billion in the US. A multi-cancer screening protocol could avert 66,000 cancer deaths per year in the US, saving 1.4 million human life years.”