Cathie Wood has a new thing to be bullish about, thanks in part to the public's recent infatuation with ChatGPT.
The generative AI chatbot has sparked huge public interest in artificial intelligence, spurring hand-wringing over the possibility of bot-written term papers, amusement over bot-composed fiction, and renewed interest in Microsoft’s Bing search engine.
But the real promise of new-wave AI technologies is their ability to make work more productive, says ARK
Invest’s Cathie Wood.
“AI is going to enable the most massive productivity increase in our history,” she told Yahoo Finance Live. "The productivity gains are going to be astounding and shocking."
OpenAI's ChatGPT helped @ARKInvest's marketing team craft this tweet to fit within 280 characters. ChatGPT also poses a threat to Google Search, as AI continues to disrupt the FANG's. AI, TikTok's secret sauce, has attracted significant mindshare from Meta and Netflix. https://t.co/0RZdjzOdCP
— Cathie Wood (@CathieDWood) December 29, 2022
The consumer-facing part of ChatGPT might have entered the brunch conversation, a bigger effect will be on professional coders, Wood and her team wrote in their “Big Ideas 2023” report.
AI “is catalyzing all kinds of changes in all kinds of industries, and I don’t think that investors have done enough research on how profound this impact is going to be," the report said. "I think the market’s scrambling to try and understand how AI is going to impact the world.”
ARK's report projects some big numbers: “AI should increase the productivity of knowledge workers more than 4-fold by 2030. At 100% adoption, AI could increase global labor productivity ~$200 trillion, dwarfing the ~$32 trillion in total knowledge worker salaries.”
This projection is by no means a sure thing, with the technology in its infancy and the forecast built on a lot of assumptions. The technology has already faced controversy over programmed-in racial bias, for example, and ChatGPT's compositions are frequently littered with inaccuracies.
On the flip side is the concern that artificial intelligence will replace human jobs. Eric Brynjolfsson, director of the Stanford Digital Economy Lab, has written about the “Turing Trap” of AI replacing workers instead of augmenting and assisting them, triggering increased inequality.
Wood is taking an indirect investment approach
There’s the big question of how AI could change global economies and cultures, and then the question of where investors can look to take advantage of its growth.
You won’t find any companies with “AI” in the name in Wood’s benchmark portfolio (ARKK). Rather, she’s been looking at companies that integrate artificial intelligence and data analytics into their operations.
Wood highlighted her ETF’s top holding – Tesla (TSLA) – as one example. It has one of the “largest pools of real-world driving data in the world. So we believe that it will be in the pole position for the autonomous taxi platform opportunity, which is a software as a service opportunity with massive margins.”
Exact Sciences, another of Ark’s top holdings, is using AI to analyze medical data to try to detect cancer, she said.
ARK is betting these long-term big ideas will reignite returns. While Wood emphasizes that her firm operates on at least a five-year investment horizon, it had a brutal 2022, plunging 67% following a dizzying rise in 2020 and early 2021.
“We believe that chapter is over. You never say the coast is clear – there are always risks. But we think we’re on the other side of the most difficult time that innovation-oriented strategies have ever had.”