The Compound and Friends - We Are Ready For Prime Time

Episode Date: June 2, 2023

On TCAF 95 Cathie Wood joins Michael Batnick and Downtown Josh Brown to discuss investing in innovation, AI fact vs fiction, how big Tesla can get, why Ark bought Nvidia in 2014, Zoom vs Google Meet vs Microsoft Teams, and much more! Thanks to Flourish for sponsoring this episode. Advisors who are interested should check out flourish.com. Rates are subject to change and terms and conditions apply. Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

You've been in St. Pete since 2021? Yes, November of 20- We opened our offices November 1, 21. Can I hit you with a little St. Petersburg little known fact? What? You interested? Yeah. Okay.

Do you know the Salvador Dali Museum? Yes. Which I don't know how it ended up in St. Petersburg of all places. which I don't know how it ended up in St. Petersburg of all places. It is the largest single artist collection that any museum has anywhere in the world. I did not know that. 2,000 works. I know Hank Hine who's the CEO or president or whatever.

I did not know that. Can I blow your mind? Who's Salvador Dali? Yeah, I know. Okay. How about this one the world's first ever commercial flight yes flew out of saint petersburg across the bay to tampa tampa but it had to stop in the bay it was a seaplane yeah couldn't make it all the way but it was the first commercial we give that we get we give them some slack it was 1914 yeah but they were using a micron chip so uh do you do you know why it's called saint petersburg i don't okay i should

know that so really really funny story or interesting story so the guy who recognized that there was some value it was all swamp marshland across the bay from Tampa, and he bought it for a song, but he needed money to run a train from the other side of Florida so that people could actually get here. This is the 1880s, so there's no cars. So he gets a Russian investor willing to put up the money to build the train tracks to make it accessible,

and they flip a coin, what they're going to name it. And the Russian guy wins the coin toss. So he names it St. Petersburg after his hometown. So the American who actually owned the land said, all right, well, I'm going to name the biggest hotel. And that's why it's the Detroit Hotel, which was like the big hotel here. So yeah. So it was a guy from-

Were you on Wikipedia on the flight? Yeah, yeah. I just didn't really know much about St. Petersburg. You have the highest, longest cable stay bridge in the world. Did not know that. That's the Skyline Bridge. My word. Well, it's an-

So my point is, this is an innovation place. Oh, I know that. I know that. That you chose to come and build your innovation set. Oh, so are we going now? Yeah, we're cool. Oh, I know that. That you chose to come and build your innovation set. So are we going now? Yeah, we're cool. Oh, okay, whatever. We're going.

So what you just said, this is an innovation space, is why we chose St. Pete. So we looked at other places in Florida, you know, actually Nashville, tax-free states and so forth. And it was the vibe. First, we thought it was going to be Tampa. And I think the region should be more united, and over time will be. So we thought, okay, it is going to be hard to beat Tampa, because they showed us a 3D-printed rendering of what it was going to look like, Water Street and, you know, because Jeff Vinnick and Bill Gates.

He owns the Lightning Vinnick? Yes. And he was a former mutual fund manager? Yeah, under Peter Lynch. He was his protege. Okay, I did know. A Fidelity, so the Magellan Fund. Yes.

And he was looking around the country for a hockey team and found the Lightning when it was really not at all. The world capital of hockey being Tampa. Yeah, exactly. Right. So he chose Tampa St. Pete. He started Embark Collective, which is an incubator over there. He and the Gates Foundation put somewhere between two and three billion dollars into downtown Tampa. So we thought that's where we were going to go. It was like unbelievable what they're doing over there. Came over here, and it was the vibe. It was the innovation vibe. And this is maybe it's a much more artistic part of this region. Is it like Manhattan, Brooklyn, Tampa, St. Pete? Kind of.

Kind of. Kind of. That's a really good analogy. You could have that. You could steal that. Thank you. Thank you. I will.

You've taught me so much about where I live. Thank you. All right. So you love it. So you love it. You seem very happy. Love you. All right. So, but you love it. So you love it. You seem very happy. Love it. Love it. I feel joy no matter what's going on in the markets. Yeah. I walk out of my condominium every day and just feel joy. I also think that if you're going to be an asset manager, who's focused on the future, you kind of should be somewhere that's

sunny and bright just as a, well, just as like a level set. Absolutely. You begin your day. And one last thing on St. Petersburg. Can't do this in Winnipeg. No offense to Winnipeg. Well, Bailey Gifford is doing this, but from Scotland. And maybe they're not optimistic enough as a result.

One last thing on St. Petersburg. The city has America's record for the longest stretch of days, of sunny days, 761 straight days of sunshine. Wow. I don't know when that was, but so you're in a very sunny place with a bright outlook. And I, I can't help but feel like that's almost like a prerequisite for believing that the future will be better than today. And this community has rolled out the red carpet for ARK Invest. So, you know, we're very grateful. You built your ARK in St. Petersburg. So, Kathy, the future started in November

with ChatGPT. But for real, it really, it came, like, what month is it? It's only May. It was like, it happened overnight. This is the best thing that happened to, has happened to us in a long time. Who's us? Us, ARK. Us and anyone interested in innovation. It seemed like last year investors were so depressed

that when we pointed out that this girl, Alyssa, in the UK had been cured of leukemia Alyssa in the UK had been cured of leukemia after being on her deathbed for six months. I vaguely remember this. You remember? Vaguely, yeah. Nobody paid any attention to it. No stock. This was base editing. This is Beams technology.

Didn't even cause a ripple. Good news, does not click bait. No, but chat GPT somehow, because people can touch it and use it and see it in their own lives, chat GPT has awakened people to this idea that we are in a moment of innovation that most can't believe once they try it. Or they're still skeptical of it, but they are starting to experiment and become less skeptical. But the first time anybody, so my wife the other day was like, oh my God, I found this thing.

And I was like, I found this thing. Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Today's show is brought to you by Flourish Cash. Flourish Cash is a held-away cash management

solution built exclusively for financial advisors. As advisors, we spend a lot of time thinking about assets in the portfolio, but our clients hold more cash than we think in their checking and savings account, and usually that money is earning next to nothing. Our friends at Flourish have a solution for that, and we use it ourselves for RedHull's wealth management clients. solution for that, and we use it ourselves for Redholts Wealth Management clients. Flourish Cash offers clients a top rate of 4.65% as of today, June 2nd, and up to $6 million in FDIC coverage through their program banks for a two-person household. It's only available by invitation from registered investment advisors, so it's a great way to add value and help your clients earn more money while you gain visibility into the money they've been saving on the side. Advisors who are interested should check out flourish.com.

Rates are subject to change and terms and conditions apply. All opinions expressed in this podcast are the speaker's own and do not represent those of Flourish. Ritholtz Wealth Management is coming to Austin, Texas in June. If you've ever wanted to learn more about what it's like to be a client of the firm, this is your chance. This spring, we opened an office in Austin and we're coming to celebrate on Monday, June 12th, Tuesday, June 13th, and Wednesday, June 14th. I'm bringing eight of my top financial planners and client service people with me for a week of meetings, music, and barbecue. If you want to talk to us about your situation, this is how you can get in touch. Send us an email, info at whitholtswealth.com with the subject line, Austin.

That's info at whitholtswealth.com, subject line, Austin. We have a limited number of meeting slots available, so don't wait. One other thing. If you're a financial advisor in Texas and you're looking to take your career to the next level, this is a great opportunity to meet us. Founding partner, Chris Venn, is coming with me, as well as new firm president, Jay Tinney. We love our fans and followers in Texas. See you in June. Hey, everyone. Welcome to The Compound and Friends. We are on the road here at the Urban Stillhouse in St. Petersburg. This is one of the most remarkable buildings I've ever been in. They've got the still literally functioning behind the bar,

two levels, dining, all sorts of bar areas and smaller rooms and a lot of history in the building. And we are so lucky to be joined by Kathy Wood. Kathy is the CEO and CIO of ARK Investment Management, which is an innovation-focused platform of ETFs with over $13 billion in assets under management. Kathy, welcome to the Compounded Friends. We're so happy to have you. Thrilled to be here. I'll just make one little correction on that. So our total AUM is closer to $24 billion. I apologize to Kathy.

No, that's okay. Okay. Well, someone's getting fired back in New York. No, that's our ETFs. So it's ETFs and then we have many other wrappers. Are you in separate accounts? We are. Okay. We are. Okay.

I want to talk to you about your outlook for the second half of 2023. I can't believe we're already talking about the second half of the year. Does it feel like 2023 has been a roller coaster, but a more fun roller coaster than last year and is going by very quickly? Yes. That's how I feel. Yes, it has been much more fun than the last two years prior. Innovation was punished as soon as, you know, after COVID, people went back to work and supply chains, it was clear that this was really messed up and was going to be, and the debate around inflation and interest rates began. February of 21, we peaked, and we went straight down through December.

And this year, this year, I think partly because of chat GPT, partly because more investors are beginning to tune into the disinflationary, if not deflationary, undercurrents at work in the market. And beginning to see, even if the Fed itself does not, beginning to see the other side of interest rates. And if you're asking me about the outlook on inflation and interest rates- We're definitely going to get there. Okay. I think thematically, so you've got leadership in tech again. Yes. Feels like it's been forever.

It hasn't been that long, but that's how punishing last year was. Oh, yes. A lot of the things that were punished the most in 2022 are leading now in 23. The billions in market cap that have come back to the largest growth stocks in the index, but then also the secondary and tertiary stocks, which I think are more your playground, where you've got innovative companies, you've got one-of-a-kind business models, you've got businesses that Main Street, Mainstream Wall Street doesn't necessarily pay a lot of attention to.

Those stocks are catching a bit as well. They are. But I will say, as we look at the broad market, the narrowness, the breadth has dropped so significantly that many people are wondering about the true health of this market. Now, we think the resolution is going to be, and we're beginning to see it, as you say, in some of the less than mega cap tech stocks. think the resolution is that the rest of the market will catch up if we're right on this notion that the big surprise, probably the biggest surprise out there for the second half of this year is deflation. I'm so glad you mentioned that because I've got some data. And forgive me,

but I'm just going to show you a few charts and we'll talk about them. Sure, sure. So this one has shown the percentage of S&P 500 stocks beating the index over the last three months. And you could see it's collapsed to the lowest level, basically going back to, this goes back to the early 90s. We've also got a chart showing NASDAQ versus breadth and that the coupling is serious. And so to your point, everybody seems to assume that when leadership is narrow, that when those stocks give it up, when Apple, Nvidia, Tesla, when they fall, the market's going to implode. However, I saw a brilliant stat today from BMO research showing that the S&P 500 has averaged a 6.7% gain in six months following mega cap outperformance streaks. So in other words, the rest of the market tends to catch up when the leadership is so narrow.

It doesn't usually fall apart. The rest of the market tends to catch up when the leadership is so narrow. It doesn't usually fall apart. The rest of the market usually catches up to the leaders. And if the scenario plays out, we can see why it will happen this time. But we have to be right on that call as well. The Fed, again, today is talking about we shouldn't pause. I mean, you've got a lot of- Loretta Mester at Cleveland is saying, if inflation stays high, there's no reason to think we're pausing. I am shocked that, I don't know, I think they have 200 PhDs. And I'm truly shocked that these PhDs are not holding up charts. If you look at the Bloomberg Commodity Price

Index, it's down 28%, 29% year over year. Oil stocks are the worst of the year. Copper, copper, the commodity with the PHD is breaking down. And so I think we're seeing a lot of deflation enter the pipeline. and what the Fed is looking at, lagging indicators. I mean, horribly lagging indicators. M2 down 5% probably for May on a year-over-year basis. Money supply. Yes, money supply. Which never happens. China just entered. Not since the 1930s. China just entered a bear market. China. And their economy is the slowest we've seen in our lifetimes. Yeah, the PMI came out today and was very disappointing. Again, they exited zero COVID, and everyone expected them to create another commodity wave. That did not happen.

Are you surprised with the strength of the market? So we're halfway through the year. The NASDAQ 100 is up, I don't know, what, 25%, something like that. Are you surprised, given everything that the Fed is doing, that they keep going, that the market is so resilient? I think the market is looking over the Fed, saying, wait a minute, there's so much evidence brewing here. Not only that there is deflation out there, and forgive me for using an identity in macroeconomics. It's very simple. It's an identity.

And when people hear it, they say, oh, yeah, that could be the risk here. So what is that identity? MV equals PQ. PQ is nominal GDP, price times quantity, right? First quarter, nominal GDP was up 7%. Okay. So that's good. MV is money times velocity.

The velocity of money is the rate at which money- The circulation through the economy. The rate at which it turns over. We now, if you look at what happened in the first quarter, we know that M2 money was down 2% year over year. So what had to happen to get this 7% GDP? Velocity had to go up 9%, and it did. It's an identity. It had to.

Okay. The problem now is we had a crisis, a regional bank crisis at the end of the first quarter. A crisis always, or during a crisis, people pull back saying, wait a minute. Wait a minute. What's going on here? Especially when it involves the banking system. A financial crisis, not a weather crisis. Exactly.

So second quarter, it looks like M2 will be down 5% year over year. And velocity, if we want to get the consensus nominal GDP numbers, 5% to 6%, velocity will have to be up 10% to 11%. It's not going to be. So I think that's why we're seeing some breaks here in pricing. I think that what is giving way is pricing because the consumer has been saying, no mas. We are not. We're trading down. We are not. So I think that the margin pressure that we're going to see here is going to be serious. And an antidote to that is technology, AI, productivity gain. So

I think innovation solves problems. I think that's another reason our stocks are doing well. In the first quarter, so we have all the earnings. And what we basically saw was an expectation that S&P 500 earnings would be down 7% versus Q1 22. And in fact, it ended up down two. For me, other than AI, the second biggest story for investors this year is the resilience of profit margins and the top 500 companies in America having this ability, almost supernatural ability, to just find a way to grow earnings. We are now seeing analysts raising full-year 23 earnings guidance for the S&P 500. I did not think that that's where we would be. I think RBC and Bank of America just did that, raised EPS guidance.

Are you as surprised by that as I am or as a lot of the markets? I see a lot of manufactured earnings, buying back shares, and leveraging up to do so. I don't think that's healthy. I think the top-line growth rates— So it's not operating earnings. It's cash earnings. Well, and the confirmation of that is if you look at—in the GDP accounts, there's a measure of profits called NIPA profits, National Income and Product Account profits.

And what this measure of profits, it's called after-tax profits with IVA. So that's inventory valuation adjustment. That means it eliminates inventory profits and inventory losses. It adjusts for those because those aren't real. Those aren't real underlying profits. And the other one is the CCA, the capital consumption allowance. That's depreciation. And so what it does is if we've had an upsurge in the prices of capital equipment, then the depreciation schedules are too low. So it adjusts those up. If you look at that

measure of profits, which we believe is true underlying profits, that has been falling for the past two quarters. So we're overestimating S&P 500 profits as a tool to look at profitability overall, because you've got this small handful of companies that dominate the index and are very good at financial engineering? I don't, I mean- Is that the story? That's one of the answers. If you ask me why, I'm not surprised. But the corroboration is this measure of corporate profits.

Okay. So that's what you, is that one of the things that you follow most closely? Yes. So understand the economy- True underlying profitability. Okay. So from looking at that and thinking about velocity of money and money supply, so when I ask you what's your second half outlook, you're bullish on the innovation segment of the economy

because that is where the earnings growth is going to come from, but you're not necessarily bullish overall about what we could see from the S&P 500. Well, I think we're going to end up in a harder landing of sorts than most people think. I mean, everyone's dancing around soft landing and so forth. No landing. And thinking we'll skirt it. Yes, altogether. Right.

But when I say of some sorts, is this hard landing pricing? Because innovation, you know, innovation is deflationary, right? And you look at what Elon's doing. You look at what Elon's doing. Everybody thinks Elon is cutting prices because demand has fallen off. And it may very well. But he can afford to cut prices because his margins are so much higher than all of the other auto companies out there. And he has always said he would. He would drive prices down in line with cost declines. Now, maybe a little bit more now because margins have come in. But this is the history of innovation. But we have so much innovation now taking place at the same time. I mean,

I go through the five platforms, if I may just quickly name them. So multi-omic sequencing, we used to call it DNA sequencing, but it's RNA, it's proteins, it's methylation, it's complicated. It's going to transform healthcare. Highly deflationary. You've got robotics, same thing, industrial robotics, energy storage. Can we back up? How is gene sequencing and the like, how is that deflationary? Because it seems to me that the better the medicines, the more expensive when they first come out. So what I'll do is I'll lay out the five platforms along with the deflation that they're causing. And then, so- Great.

Yeah. Let's take DNA sequencing. We've done the work on that. So we center our research on something called Wright's Law, which helps us understand how quickly costs associated with new technologies are going to decline. DNA sequencing, there are two flavors. One is long read sequencing, which is more accurate, more comprehensive, but more expensive. And then the other one

is short read. If you know Illumina, you know short read sequencing. PacBio is long read sequencing. Long read sequencing for every cumulative doubling in the number of whole human genome sequenced. So when we say cumulative doubling, it's one to two, two to four, four to eight. And we're at a low base. For every cumulative doubling, costs associated with long read sequencing drop 28%. With short read sequencing, that number is 40%. If you look at industrial robots, that number is 50%. And that's at an extremely low base in the hundreds of thousands around the world. This is robots to manufacture or to operate an Amazon warehouse? Or to pick and place, yes, yes.

That's right. In hundreds of thousands, so very low base compared to where we're going. If you look at energy storage and drivetrain technology, that is 28%. Batteries. Batteries and, yeah, drivetrains generally. 28%. Batteries. Batteries and, yeah, drivetrains generally. Artificial intelligence is shocking us. So if we do Wright's Law, that number is 48% for every cumulative doubling of a metric of data that we use. Now, what's interesting about that is the cumulative doubling there is taking place in less than a year's time. So AI training costs are dropping 70% per year.

Why do people think the opposite is true, which is that the chips are getting more expensive and more scarce, and therefore the cost of this is too high? You're arguing the opposite. What don't the rest of us understand? So this is a measurement of data that is the cumulative doubling, right? Okay. So yes, the chips have become more expensive, but much more powerful, right? Okay. You know, parallel processing, GPUs.

The power is outrunning the price increase. Yeah. Okay. Yeah. Yeah. Okay. GPUs, NVIDIA has been, I mean. Now, just before we finish the five platforms.

Blockchain technology is. Josh's favorite. So, Michael, I'm a skeptic. Michael's a believer. Well, I'm more open-minded to the potential than you are. I'm completely closed-minded. Wait, but I want to ask you, so it seems like AI actually feeds into all of those other four. All of them.

And maybe speeds up. You are so right. Okay. If you look at— I'm so right, Michael. And Michael, you're right too. Everyone's right. Okay.

So what you just highlighted is what we highlighted in Big Ideas 2023. So our chief futurist, Brett Winton, prepared a convergence section, the convergence between and among these technologies. And we have scored the impact of each of these technologies in catalyzing innovation generally. AI wins, hands down. So AI is the biggest catalyst and is involved in each one of these technologies, and we'll speed it along. So the way I like to characterize it so people really understand what's going on here is you have an S-curve, say, associated with electric vehicles. That's one S-curve. You have another S-curve associated with artificial intelligence and autonomous mobility. They're going to feed each other. The growth rates are going to be explosive.

Can you think of an example from the past where we've seen something like that? Would wireless and internet be? Yes. And yeah. So 20, 25 years ago. Yes. Yes. And the iPhone capitalizing on, I mean, do you remember, maybe you're too young, but I remember in 07 getting the iPhone and saying, wait a minute, I can get the computer. He's not that young. I can get the internet. He's not that young. I'm not that young. I can get the internet. I know I project youthful, but yes, I remember 07. Yeah, I can get the internet. The iPhone. There was so much friction in getting information for investing before that. This was miraculous. That was, at that time, the epitome of convergence among the economists.

All right, so we're dying to get your view on NVIDIA, ChatGPT, what people are getting right about AI, what people are still underestimating, or what people are flat out wrong about. I want to just start by setting the table and saying the scariest thing about AI to me right now, obviously our impending deaths, but there's nobody on the other side. Nobody is saying, no, AI is not going to be important. This is really interesting to me. I remember the early days of the internet and people saying it's a fad. They were skeptics. People saying, oh, it's no big deal. There's nobody saying that right now

about what AI is about to do to and for society, the economy, innovation. Like everybody seems to universally agree that the launch of chat GPT is equivalent to the iPhone moment in 07, where everyone just says, OK, this is it. Isn't that scary? Well, and it's also, so to parse that a little bit, the question is, who's going to make money? Now, we've been doing research since the firm began in 2014 on AI. And we found NVIDIA in 2014 because we were asking the question, first principles research, what is an autonomous vehicle going to be?

What's going to go in it? And as we start, white sheet of paper, no benchmark to guide our investing. White sheet of paper. We want to see if anything in this space is going to become investable in the next five years. and Tasha Keeney, our analyst, trying to figure out what would go inside an autonomous vehicle, came back to one of our brainstorms and said, you know what?

GPU. GPUs. And I said, what? Because PC. It's a video game chip. It's a PC gaming chip company. I said, what? I said, and we owned it in ARKW at the time, our next generation internet fund for gaming. And so, but I said, what? And she said, yep, it seems like that's going to be

the brains or the central nervous system of an autonomous vehicle. I said, nobody knows that. Because it's parallel processing and it's not linear. And therefore, you can carry out multiple operations at the same time. Right. Nobody understood that. Taking data from many, many sensors at the same time, cameras. Some people thought LIDAR at the time, radar and all of that stuff. Which if you think about it, video game is a facsimile of the real world. It's 3D.

You're trying to have characters have sunlight on their face and all of this data. So it does make sense, but that was a big insight. So on a split-adjusted basis, NVIDIA was at $5. And it went to the top, not only of our ARKW, but ARKQ, which is our autonomous technology and robotics. Because if you look at the robotics movement, first of all, autonomous vehicles are robots, right? So this movement, again, very low base industrial robotics. You look at anything in the, you're looking at drones, robots in Amazon's warehouses,

autonomous vehicles generally of all kinds, autonomous trucks, you're going to have the same three variables that are going to make any company the winners in this space. They have to have visionary managements, first and foremost. Bold, don't care what short-term oriented shareholders are saying. Founder-led when possible. Yes, when possible. They have to have domain expertise. They have to know what they're doing and they're given. They have to bring in artificial intelligence expertise.

And once they've got that, there's something else they need that is probably the most important and will determine winners versus losers. The largest pools of high quality proprietary data. And Tesla has that in the autonomous front. And you were going to ask a question. No, finish your thought. Yeah. So it was NVIDIA back then, split adjusted, $5. We were just piling into it. I mean, we piled into it. We even put some into our ARKGR, our genomics fund,

because we were learning from NVIDIA itself because we were asking them these questions. They would answer the questions if you asked them. No one was asking about genomics. No one was asking about genomics. No one was asking about autonomous. And now, of course, everybody knows that the genomics revolution is all about the convergence of these various sequencing technologies, artificial intelligence, and other technologies like CRISPR gene editing.

So the internet was giving you shit this last week, as they do sometimes, for blowing out of NVIDIA before it reported earnings. However, Balchunas has a great chart showing a nice look at ARK's NVIDIA position since inception. It was a top holding in the ETF right out of the gate in 2014 and is the fourth all-time biggest contributor to total returns. So to your point, back in 2014, not a lot of people were talking about NVIDIA, $5 split adjusted. You were there. Yeah, we were there. And we own it. Wait, you're now having articles written about the stocks you don't own. You've now reached a point where any stock that goes up, Cathie Wood missed it. Please click here. You must have the thickest skin.

You must have the thickest skin like of any asset management. Like a rhino. That's not very attractive sounding. No, but can you imagine articles written like Tom Brady doesn't win the Stanley Cup? I mean, that's where we are at this point. In terms of setting the record straight, I thank Eric. I thank you, Michael, as well. But we do own it.

It's in the top 10 of ARKQ because ARKQ, autonomous mobility and robotics, is more of a hardware-centric portfolio. more of a hardware-centric portfolio. And it is in some of our, we sub-advise some funds for Nikko Asset Management in Japan. So mobility as a service, hardware-centric. So it is in the top 10 of a number of our funds. But we took it, we started peeling out of it when this breadth that you pointed to, you had NVIDIA tripling. We bought it at $100 in our flagship last year when it was getting creamed. It was in a 70% drawdown. Exactly.

Then we saw it on its way to tripling, quadrupling now, since in that short period of time. And we said, wait a minute, we'll take profits there. And in ARKK, our flagship, our genomics or multiomics theme was being crushed still, as were some of our other stocks like Roku and Teladoc and Unity and other names that we think are going to be big beneficiaries of artificial intelligence. Okay, so to set the record straight, ARK does own NVIDIA. ARK has owned more NVIDIA than probably most asset management firms in a concentrated way, just not in the flagship right this second. Okay, this week NVIDIA joined the $1 trillion market cap club.

Briefly, we'll see if it stays up there. Is it too far too fast? Like, is it too much? Or is there too much demand for this one ticker because of a perceived dearth of other opportunities? So I wanted to share your tweet. Yes. Remember the Brett one.

The Brett one sets it up nicely. So Brett said, the companies are dumping tens of billions of AI chip investments implies that they are anticipating hundreds of billions in AI software revenue. Seems a lot until you consider a knowledge work wage bill of 30 trillion and the productivity potential

of the software advances. And then your response to that, in 2014, most investors considered NVIDIA priced at $5, simply a PC gaming chip stock. In contrast, ARK's first principles research pointed to NVIDIA as the premier equity play on AI. Now up 80-fold, investors seem to think NVIDIA is the only AI play. It is not.

And so now Cathy will exclusively reveal the next NVIDIA. Well, you know, it's interesting. But there are other ways to invest in AI is the point that you guys are making. That's one of the points we're making. One of the points is hardware. So it's not, you know, you're going to see on the hardware side, AMD, you know, have, you know, what AMD has done over the last few years vis-a-vis Intel is phenomenal. And I think that they are moving into AI and don't discount them. Number one. Well, the market cap is not discount. I think they're getting a lot of credit for AI chips that they are not yet making. And taking share from Intel.

The stock is up huge. Yes, it is up huge. But in terms of the competition out there, everyone thinks NVIDIA is alone. Tesla has its own AI chip. It pulled NVIDIA out of the car and put in its own chip. It's the only auto company. And these are special purpose, whereas NVIDIA is more general purpose, right? Purpose built for what they're doing, not necessarily applicable to the wider market. Google has its- I wanted to ask you about that. So Google's got Tensor and the TensorFlow environment. What do they call it? TPU. TPUs.

Okay. Amazon obviously is building its own AI chips. Meta is now building its own. So one of the risk factors, I think, for NVIDIA is that one of those companies in an AWS style inside out will say, you know what? We're going to make this available to the marketplace and we're going to produce these at scale. Is that not going to happen? We do think it's going to happen. You do think it will?

Yes, we do think it's going to happen. But NVIDIA is ahead of everyone still. I mean, when you look at the specs of these chips, NVIDIA is ahead. NVIDIA saw the future. Now, Google has probably, with DeepMind, some of the best AI minds out there. We look at chat GPT as could be a mortal risk to Google's base business model. The speed at which this is happening is hard to put into words. So here's a tweet from

Coif. NVIDIA was up 24% yesterday. So this was the day after earnings. But the stock got much cheaper. How does it happen? Next 12-month earnings are 100% higher than before the quarter due to revisions and earnings growth. Yes.

This is astounding. Well, this is the chat GPT moment. And this, I think, is the moment for innovation again. Because, you know, again, given how bearish everyone had become, it took experimentation personally for people to say, wait a minute, this is crazy. This is crazy. How is this happening? So, you know So capture the imagination. So we've talked about the hardware side.

NVIDIA still is ahead. I mean, you have to give them all kinds of – ChatGPT hits the market. Hits the market. There's no launch party. No. They didn't expect it. But they were shocked about the response to it. The thing hits the mainstream at a moment where the NASDAQ is in a 35% peak-to-trough drawdown.

Yes. That's how it always happens. It does. Right? It does. Innovation does surface during those times. So that's the hardware side. Give NVIDIA—

Can we stay on the hardware side for one second? I'm just sorry. Last thing on NVIDIA. Can we stay on the hardware side for one second? I'm just sorry. Last thing on NVIDIA. So analysts now expect NVIDIA's revenue to triple in just four years, reaching $83 billion by 27 with a 60% EBIT margin.

That's a long time away, but we'll see. But just the growth is astounding. So on the hardware side, Brett estimates, or Brett Ark estimates, $1.7 trillion in AI hardware spend by 2030. That's the hardware. Let me push back on that a little bit, and I would love to get your thoughts on this. All right. Brett is for the audience. Chief futurist.

Chief futurist at ARC. At ARC, former director of research. Now we have three directors of research overseeing each of the majors. Can you ever tell a Bloomberg reporter, no, it's Brett sold NVIDIA, not me. No, no, never, never, never, never. So Matthew Ball just wrote a phenomenal piece on everything that's happening in tech right now.

And he said, by my estimates, Meta has spent roughly $52 billion on its reality labs division since 2012, with roughly $7 billion in cumulative revenue over the same period, resulting in roughly $49 billion net loss. Annual net profits at this point seem far off, and if so, then Meta's cumulative losses might cross $80 billion first. Alexa, according to Matthew Ball, has 10,000 full-time employees in 2022, isn't profitable. And he estimates that they lost tens of billions of dollars over the last decade. So all of that, not all of that, a lot of that is

made possible because borrowing costs were very low, right? And so they were able to absorb those losses. Wall Street was very accepting of those losses, growth, growth, growth, growth, growth. The interest rates are over 5% now. So how is that, where does the rubber meet the road with borrowing costs and losing all this money for investors? Well, these are cash-rich companies too, and highly free cash flow generative. So I think if you look at Alexa, a lot of what these companies are going to do in terms of positioning for the future is collect as much data as possible. Alexa is part of that. So you don't know what they're going to do with this information. I know there are going to be all kinds of privacy concerns. GDPR in Europe is an issue that they all have to be thinking about, especially the larger companies.

The metaverse, you know, Mark Zuckerberg has pivoted. Now he's everything AI and efficiency. So that was a jog. And Matthew Ball is right. The market didn't agree with it, punished meta platforms enormously last year. Now he's pivoted to AI, which is going to increase productivity dramatically. Amazon, where is the cloud and the AWS business, which is the fastest growing business, and Amazon, where does it come from? There were probably 10 of those. Nine of them, they stopped funding because it was not showing any value. And then the 10th one becomes the next growth engine. I think these companies are the size of governments. They can invest that way and they probably should. But so that raises another good point. Is the winner of AI going to be one of the incumbents? Obviously, ChachiBT is a new one, but is there going to be something that comes out of nowhere?

Or where is that going? So now we're into more the software side of the discussion. And we think- Away from chips towards software now. Towards software. So Brett put in that tweet, $1.7 trillion. That number actually now, we've changed our model, is $1.9 trillion in hardware coming out of AI over, I think that was by 2030, right? Do you know what it is today? So today, I think we're at, well, NVIDIA's, if you look at their accelerator chips, somewhere in the $30 to $40 billion range.

So numbers like this, I think, blow people away, myself included. When you see, we're going to go, in your estimation, let's just ballpark, we're at $100 billion, whatever it is. There's going to be a 20x in the next seven years? Yes, yes. In tech spending. Yeah, yes, because the productivity gains, which I think was another chart. Oh, it was a chart you pulled up.

Yeah. If you look at knowledge worker activity globally, we pay knowledge workers $32 trillion a year, right? And this movement is all about massive productivity gains for knowledge workers. So I look at companies, you know, so when we talk about NVIDIA at $5, that was roughly $10 billion market cap, somewhere in the $5 to $10 billion range. There are a lot of companies, stocks in that $10 billion market cap range today. You know, we have been featuring UiPath, which is some of these names nobody has. I know that stock. So it's small. It got caught up a little bit with the AI stuff. What does UiPath do? It's automation, right? Yes. It's RPA, process, automation. And a lot of this is administrative work.

So if you listen to the CEO, he'll tell you, you know, the biggest surprise to us as we were evolving this company is that people in BPO, business process operations, they were willing to get together from different companies and share best practices to try and get their costs down. So what they have done is that they're effectively automating using these inputs for all of these companies, you know, the most mundane and administrative tasks possible. And that's where that productivity increase comes from. Yes. More of that kind of thing. Yeah, more of that kind of thing.

Okay. This is, I mean, if you look at the assembly line for manufacturing, AI is the assembly line for knowledge workers. And it is one of the best positioned with, and again, this visionary management is critical. Because you might have a business like that, but if you are not thinking, oh, I could build a foundation model here, the ultimate foundation model for BPO that the world can use, if you're not thinking in that way, you're not going to win. Are there other Jensen Wangs out there that should be on

investors' radars as you look at companies and look at management and gauge how visionary the founder is? Are there any other people that come to mind? Well, the most obvious one is Elon Musk. I know everyone knows it. We got him. Yeah, you've got him. Okay. The reason he is so important here is talk about proof of concept.

so important here is talk about proof of concept. We believe that autonomous mobility, just autonomous taxi platforms, forget drones and robots, but a mobility, and forget trucks too, that that will deliver $8 to $10 trillion in revenue by 2030 globally. So Tesla doing Uber? Tesla doing autonomous Uber. Autonomous Uber. So I'm talking about $8 to $10 trillion for the global market. That's everyone who gets- And Tesla will lead that.

Tesla will lead it here in the United States. And here in the United States, when you think about, okay, China is moving very quickly in this direction. I'm sure they will not let Tesla be in the lead there. It'll be another company. But in the United States, because transportation costs are so much higher here than they are in China, the value of this is going to be much higher in the United States. Okay. Right?

So the 7 to 10- People will pay more here. People will pay more. Yes. Agreed. You know, if you've used Uber here in St. Pete- That's all we do. There you go.

Well, the prices have gone up dramatically here, as I'm sure they have in the rest of the world. So this need for an autonomous solution has increased dramatically. You could pull the driver out of the car, but have the car do the same thing. That's a much better business than it is today. And if you've been here for a little while, you'll see parking is a problem. You're in Uber, so maybe you don't see that. But in the autonomous world, well, right now, autonomous world, well, right now, here in the United States, for every car in the US, there are five parking spaces. With autonomous, you'll just need one. Think about the real estate value that will unlock. Right. Yeah. My car just sits in a spot 80% of the day, maybe more, 90%. That's actually 95%. 95%.

Let's talk about Elon quickly. I know your fund has become associated with Tesla because you were one of the earliest to recognize the story there. And you made a lot of money for people being an investor in Tesla. What are your thoughts on the dedicated CEO for Twitter? Do you think that's meaningful for Tesla shareholders now that maybe they get more of his focus on some of the things that you're talking about? Is that something that you're excited about for the second half of the year? Yeah. You mean for Tesla specifically or Twitter? Well, I guess getting him away from the day-to-day Twitter stuff that he's doing and having him back focused on the future. Well, as we've looked at Tesla's evolution here, it was critical that Elon be there

on premise as they were scaling the Model 3. You don't want him in San Francisco. Like the less time he spends. Oh, yeah, yeah, yeah. Right. So, well, it was in Fremont, which is close to San Francisco. He was sleeping on the floor, right? Yes.

So he got that. That is, I would say, almost on automatic pilot. And as they build more and more efficient factories with robotics and AI, the factories of the future, they're going to get more and more efficient and more and more competitive relative to other auto companies. Now we need this autonomous. This is the heavy lifting now. So yes, happy that he's going to be spending a lot more time perhaps on it. But you think Twitter is also very AI driven. You know, so we, you know, he's using his mind. And how, you know, there may be things he's learning from AI and Twitter that he's going to bring back to the auto market and vice versa. God, let's hope not.

So I want to ask you about the Cybertruck. Yes. This seems to me that it's going to be the next Tesla battleground now that a lot of the old battles have been won or lost. The predictions for the Cybertruck range from it's going to flop on day one to it's going to be one of the biggest selling things Tesla has ever done. I don't have any opinion at all. I don't follow it that closely. What do you think is going to happen? When is it supposed to happen?

And are you baking that into any of your modeling? Yeah. So we actually, Sam Khoras. Are you going to drive one? Let's start with that. You know, I've actually thought about, I have a three and a Y. I don't really need anything else. But I've thought about it because I do think they're very cool.

Sam Kores, who is our director of research for autonomous technology and robotics, just wrote a piece on the Cybertruck. And we think they're, given the costs that they're taking out of this part of the market, taking out of this part of the market. We think they're going to be highly competitive, as well as being competitive in terms of power and range. So Elon's very focused on costs, power, and range performance. So I think that a lot of analysts, they don't even have a cyber truck. What does it compete with? Does it compete with the smaller SUV or the pickup truck? I can't really decide what I think. That's right. And that's exactly right.

If you look at what the Model 3 has done, it has expanded the market, or the Model S even. People have stretched because they want this. And they've actually enlarged certain segments of the market. So it doesn't even really need to neatly fit into a category. If it captures the consumer imagination and the waitlist gets populated, it could be its own category. And it's interesting, the Ford F-150 Lightning just increased its price from $45,000 to $60,000. We think the Cybertruck is going to come in below that. And again, with performance and range that we think is going to be highly competitive, and the form factor

is provocative. And that's... Well, that seems to be, right, that seems to be a really big part of the story. But you know, if you look at the search, and I think Sam put this into his piece. If you look at the search queries, where they're coming from for Cybertruck, they're coming from the places you would expect truck buyers to be from the Midwest and the Southwest. Kathy, all credit to you on Tesla. You were right, obviously, early. To our analysts. Okay, to the whole team. To the whole team. Yes. However, what do you say to people when you see charts and the numbers aren't,

you can correct me, they're not right, but the direction of the right, where Tesla will be 10% of all auto revenue or something like that, but it has a bigger market cap than the next 12 biggest companies combined. How do you think about valuing something like that? I know maybe two years ago, you had a base case, a bear case, and a bull case that, respectfully, the bear case at a trillion seemed aggressive. So how do you defend or how do you think about valuation in Tesla versus whatever? Yes. So if you look, many analysts do not believe that autonomous will either be possible or be available anytime soon. So they don't put it in their models.

In fairness to the critics, full self-driving was six months away for the last few years. Three years ago. Yeah. And we didn't believe that. Our first forecast said 2022. We were wrong. Our first forecast said 2022. We were wrong.

Actually, as we talk about this now, we needed the breakthroughs in AI to happen in order for autonomous to happen. You know, I will sometimes say, okay, guys, we were just wrong. The trajectory of AI breakthroughs is correct. Surprising expectations. I mean, blowing them away, actually. In fact correct. Surprising expectations. I mean, blowing them away, actually. In fact, there were no expectations, right? Is Tesla the first company to get to a $5 trillion market cap? We think it could, yes. If we're right on autonomous travel, we think it could be the first to get there.

So that'll be the engine. Because what is this? So that'll be the engine. Because what is this? Many people, analysts in particular, say, OK, electric vehicles, 25% gross margins. What they're not thinking about is autonomous mobility will have SAS-like multiples. So gross margins in the 80% plus. So not car margins. Not car margins.

Because it's a service. It's a service. You're not buying a good. You're paying a subscription or whatever to have a car on demand able to come and get you. And so our base case now, I think the stock is around $200. Our base case for 2027 with autonomous mobility in there is $2,000. Forgive me. What sort of compounded growth rate is that for the next seven years? I mean, it's a lot.

Is that a 60% something like that? What did you say? Is it 60? Wow. Somewhere in the 40% to 60% range. Where does that optimism come from? How does your brain get there? How does the brain get there? We're seeing it play out, you know, this idea of S-curves. When we did our first research and started putting out our first research on Tesla and electric vehicles in 2015, 14, 15.

The IHS, which is the forecasting agency for autos and others, by 2022 said there are going to be 250,000 electric vehicles in the world in 2022. What's the number? 7.7 million. Okay. We were, okay, so just to show you how we can be right and wrong, so it was 7.7 million. Our expectation for 2022 was for 17 million. Now, who was more right? We were.

No. Yes, but why were we wrong? And we will always be wrong if something happens to derail unit growth. COVID. Couldn't make the cars for a reasonable supply chain. Yes. All of that. Can they make enough cars to hit your projections now, though? No COVID. It seems like a very big lift. A lot of the bearers have a background in auto manufacturing, and they don't think that this company can ever make enough cars to justify the types of valuations that people are talking about. So those analysts are expert at the internal combustion engine. They are not expert at electric, software engineering, all of that's hardware engineering, or autonomous.

So, you know, whether it's battery technology, artificial intelligence, software as a service. So that's where they've missed the potential. Well, it's their directors of research have missed. They should. Because you know, I've been in organizations where if it looks like a car, then it goes to the auto analyst. But if you have someone on the tech side advocating for, hey, wait a minute, this is really a tech company. That's a bit of a wrestling match. Has that changed on Wall Street, the sell side?

Not really. It's still auto analysts that cover Ford, Primarily. Also covering Tesla. Primarily. Kathy, I have to ask you. I know we're running towards the end, but I got to ask you about Zoom. Yes. Because I don't understand it. And obviously you know the stock a lot better than we do.

But Zoom seems to have been killed by Google Meet. Me personally, when I set a calendar invite, I was only a Zoom user. Now I switched by Google Meet. Me personally, when I set a calendar invite, I was only a Zoom user. Now I switched to Google Meet and the company just reported a couple weeks ago and they're just not

really growing. Even internally, Salesforce now owns Slack. We have 58 employees that are all over the country. We're constantly doing impromptu video meets. It's so easy to hit the huddle button in Slack as opposed to going to Zoom, scheduling a new meeting, adding people's email address.

So Zoom is the second biggest holding in the innovation fund. And what are we missing? Well, what you're focused on are intra-company dynamics. This is inside your companies. If you look at the share of traffic inter-company, you'll find that, and I think this is, is it sensor tower data? It's one of those services. You'll find that Zoom is at roughly 40%.

Microsoft is, I think, at 16%. The worst. Microsoft is... Teams is offensively bad. Teams wants you to... Teams, they want you to download an app before a meeting. Restart your computer. Yeah.

Anyway, Teams is at 16. Google Meet is low single digits, if I'm not mistaken. I'm contrarian. So, yes, you're I'm not mistaken. I'm contrarian. So, yes, you're a contrarian. We like contrarians. So Zoom still has its share. It has its share. But they're not really growing that much.

Now, critical to them, critical to them, they have a partnership with Salesforce.com, right? What happens inter? Inter is where the sales take place. One company to another. Yes. Now, that's very high value. Or one organization to another.

Very high value add. Now, if you very high value. One organization to another. Very high value add. Now, if you look at the talent that Zoom is attracting, they just attracted someone who had spent 16 years at Google. She's the chief product officer. 16 years at Google, I think it was nine months at Microsoft, and came over to Zoom. So, we watch management. and came over to Zoom. So we watch management. We watch where talent goes. They've attracted people from Google, Microsoft, Amazon, many of the other companies. They've got this, I would say, moat. It's theirs to lose on the inter. And they're about to launch a bunch of AI products. And they brought people in to help. Now, we're looking very carefully at that to be sure. Eric Yuan is the founder.

He founded WebEx. Cisco bought WebEx. If you think about- The original video conference software. Which has no share now. Yeah. Original video conference software. Which has no share now. Yeah.

So he knew that enterprise communications was going to move from on-prem hardware oriented into the cloud. Yeah. Okay. This is a $1.3 trillion line item. It is the largest part of the tech stack. Enterprise communications. It is the largest part of the tech stack, enterprise communications. It's moving into the cloud.

And who's going to be at the center of this? It will be Microsoft because of Teams and all the enterprises they have. They don't want to be hostage to Microsoft. You have to have some redundancy. So even they will have a failover to something. And others just don't want Microsoft, as you were saying. So this is Zoom's to lose. Now, if they are not, I can tell they have a lot going on and we're putting a high weight on Eric and the team's ability to activate AI within this ecosystem in a provocative way that helps companies increase their productivity and accelerate sales.

What would you say about the DocuSign story, which seemed to have had a similar trajectory to Zoom, but it is not at all-time lows? I think it's getting maybe a little bit more credit than Zoom that it's going to remain. It's going to keep its share. Right. I own that. I bought it just very recently. But you've been in and out of the stock over the years.

Yeah. What would you say? So they have a new CEO from Google? Is that? Or who's running DocuSign now? Oh, DocuSign. Is it from Google? I don't know.

We don't own it now. You don't own it currently? OK. No. Oh, DocuSign. Is it from Google? I don't know. We don't own it now.

You don't own it currently? Okay. No. So they have the same problems that Zoom has, which is maybe it's a feature, not a company. Is it a feature? No, I don't think we feel much more confident this is not a feature. That this is a real enterprise communications play and that it will share the market primarily with Microsoft. It's a huge market. And believe it or not, a lot is still on-prem, a lot.

You go into companies. Go buy a piece of real estate. Yeah, Polycom. So that shift and that shift will accelerate when corporations are fearful enough. This is sunk cost. Now, if they want to lower ongoing costs, they will move into the cloud and pay to do it, pay for this transition to increase productivity. We could be wrong, but everyone thinks we are.

Well, the market thinks so. And so it's price. Right? The staff looks like junk. Not just, yes. And this is my one concern. My one concern is it's a value stock. Which one? It's on Zoom.

Zoom. I never own value stocks. They usually are cheap for a reason. So nine times EBITDA. That makes no sense to me. If we are even 10% right, this stock is going to do very well. Do you think you could be dropped into a situation where somebody says to you, run a value fund? How much of your skill set, and I know it would be boring for you, but putting that aside as a challenge,

do you think you could run a concentrated value fund that's competitive with, let's say, the, what is it, the IVE? What's the value, whatever. Do you think that's something that you would be able to do even if you didn't enjoy it? Our first institutional client, the person who heads up equities, selected us because we have that value style in terms of willingness to be contrarian, not momentum driven. If you look at the momentum factor this year, it's actually negative for the year. I believe it's negative. It's either plus 12% or minus 12% versus, as you said, the NASDAQ up 25%, 20%, whatever percent.

Growth is beating momentum. And most people think those two things are, use those terms interchangeably. They can be. And we are not momentum. OK. We are not momentum. That's really interesting. We are not momentum.

How do you measure momentum? Are you looking at like last six months price change or? I am looking at how those quants, I just look at what they report as momentum and it's not us. You get thrown into that category though by uninformed people who don't understand the difference between investing in growth and innovation versus, hey, this stock's making a new high every day. So Kathy, before you answer that, maybe we can wrap with this. So Bank of America did a chart. It's a history of asset bubbles. Gold, Nikkei, Thailand, tech, China, biotech, Bitcoin. And they throw ARK in here.

They called you your own bubble. Is this flattering, insulting, or both, or wrong? How do you respond to something like this? So it's very interesting. The bears in February of 21 basically said, this is nothing but a replay of the tech and telecom bubble. And they drew a chart from that point of the tech and telecom bust. And they said, this is where they are going to go. I think I might have done that.

You might have done that. And that's what makes a market. And if you shorted us, you did very well. In fact, I think still 20% of ARKK is short. And so we actually declined more than the NASDAQ during the bust. Now, what's fascinating about that is we look at the period from 1980 through the tech and telecom bubble as the period when the seeds for all of the five platforms that I mentioned earlier, they were planted back then. But the technologies weren't ready.

Why did you let me drink Pellegrino before? You know I can't have bubbles, Duncan. Okay, we got that. Apologize. That's okay. So seeds planted. Now, there was too much capital. I mean, the internet just captured the imagination, like ChatGPT is doing right now. The internet captured the imagination. And analysts started valuing companies on the number of eyeballs they might get in 10 years' time. Something crazy like that.

Too much capital chasing too few opportunities too soon. Why? The cloud didn't even happen until 06, AWS. The first big breakthrough in deep learning, I mean, in AI, deep learning, did not happen until 2012. Right. The second big one, transformer technology,

natural language processing, which is chat GPT, which is why we're going to see autonomous driving. That did not happen until 2018. Now we're ready for prime time. What's fascinating, this is going to go down in history, I believe, as a behavioral study, an investment behavioral study to beat all investment behavioral studies. They rushed in in the 90s. That ended badly. A lot of the portfolio managers today were young men, and they have that muscle memory, and they remember how maybe their bosses were thrown out or whatever. I've been here before. I remember. It's my formative memory. Exactly. The last time I heard that expression, exponential growth trajectories, was back then.

It ended badly. What are they doing now? We are in a very bearish moment for the market generally. If you look at cash on the sidelines, if you look at how hedge funds are positioned, no one's optimistic. And so our bet, and consider the source, our bet is staying away from these stocks now is going to end badly and sticking with the benchmark. So they're running for their benchmarks because they think that's where safety lies. The benchmarks are what's going to be disrupted by this massive convergence of innovation platforms. So I think that that's where you and the traditional value investor who calls himself or herself a contrarian have common ground. Yes. Because whether people agree with your point of view or perspective

or individual stock ideas, you're a contrarian still because the whole world is not where you are about the future and these S-curves overlapping. Like you're either early or wrong, but at least you're on your own island. You're not following momentum. Everyone thinks we're going to be wrong. They're positioned accordingly. If you look at the short on ARKK is roughly 20% short interest.

Then you have Sark. And then you have short. You ever talk to that guy, Matthew Tuttle? Personally, Art Laffer did, I guess CNBC asked him to go on against Tuttle. But, you know, they do two different things. So I think it was kind of, they actually liked each other. You don't get upset by it? Like, you don't take that personally, it seems.

No, this is what makes a market. You know, it's interesting. We do research. He does no research. He just bets against us. I think that will grow old. And he charges the same as we do for it.

Right? 75 basis points on the ETF. You know, no research. And if you look at it, yeah, it's gained a little bit of traction. But, I mean, that just gives you a sense of, there are people out there so sure. You are definitely a contrarian from that perspective.

They are so sure we're wrong. They're so sure. For the sake of the people that discovered ArcLate and for the sake of humanity and our future, we're rooting for you. And I hope for the speedy recovery. We like the idea of we're ready for prime time. We hope you're right because it's an optimistic take and people will make money if you're right. So we're certainly rooting for that. I wanted to just tell you, I think you're iconic.

And I think you stay, no, they have you on that chart because you have like come to embody a style of investing. Not everybody has to agree with it. Some people, they'll use you for 5% of their portfolio. Some people more, some people will bet against you, but you have a brand and a strategy and a style. And the research. We are doing research that no one else is doing

in a way that no one else is doing. Transparently. So let's plug the research. Rather than plug, we don't plug funds or ETFs on the show, but where can people go to read and listen to? Because I know you're doing video. You're doing written research as well. Tell people where they could find it.

We give our research away on arc-invest.com. Okay. And there you will find our Tesla blog with the model that gets you to 2,000. And you can go into that model. And if you disagree with our assumptions, there are 41 assumptions you can play with, change them and see what the price target comes out to. So we're also, we give our research away, not when, just when it's finished, but as it's evolving. So we put out charts on Twitter all the time saying, here- Take feedback, and then maybe that shapes how you think it happens.

We are getting, and you know what's really wonderful is there are people innovating in the world out there. They're in the world of innovation, and they believe we're right and want us to be right. And so if they see we're making a mistake in one of our assumptions, they come to us. They'll DM us. Or if, and we've had this happen many times. Respectfully. Yes. I read your research. I think you have this number wrong and here's why. For example, a Carnegie Mellon professor, a battery, he's doing battery research, came to us on our truck, autonomous truck research. And he said, I come up with a different answer. Let's talk about this assumption.

We talked it through. He happened to understand more about the assumption. But it got us to think through, OK, yes, we were right. But he was right to bring this point up. And we need to surface that in our research so that people really understand. And so Twitter is a really good place. All of our analysts, directors are on there.

No, to find us. You can unfollow anyone. We unfollow. Actually, I don't unfollow anyone. A lot of people have unfollowed us. That's fine. That's fine. If they don't want to listen to us, they don't have to listen to us.

So that's a really good forum. And we do white papers all the time. might fit into an overall asset allocation and how they can, according to our analysis, increase returns per unit risk over a five-year investment time horizon. We're updating that because I really think the most important thing people have to do is rebalance with time. Because if you get those massive moves, you should rebalance. You don't want to be 100% of somebody's portfolio on the equity side. No, no, no, no, no. Absolutely not. Okay. I think that's a really important part of the story. It's an idiosyncratic strategy. It's got a time and place where it works really well, and then a time and place where maybe it

doesn't. And so rebalancing can help you live with it as a long-term investor. That's right. That's right. That's absolutely right. Ladies and gentlemen, Kathy Wood. Thank you, Josh and Michael. Thank you. We don't have a live audience, but if we did, the applause would be thunderous. Thank you so much for joining us. We really, really appreciate it. Thank you for giving me this time to state our case. Oh, we'll give you more. Thank you, Kathy. Thank you.

All right. That's it from us. Thank you guys so much for listening this week. Make sure you like and subscribe, do all things leave us ratings reviews duncan loves reading them and we will see you next time all right so that was the warm-up maybe just loosen up a little bit and we'll come back and do it for you