Latest interview with Cathie Wood: NVIDIA "sold too early" is no big deal, the new purchase Coinbase is doing even better

Cathie Wood's Insights:

• We believe that by 2030, the entire ecosystem of autonomous taxi services will generate revenues of $80 trillion to $100 trillion, with platform providers like Tesla capturing half of it.
• NVIDIA is leading in the AI competition, but to prove its valuation is reasonable, we need to see more evidence that AI is accelerating enterprise revenue growth.
• Corporate management is still struggling to understand the significance of AI for themselves. This takes time... Tools like AI are not useful for many employees. ChatGPT reached 100 million monthly active users in just two months, with peak active users reaching 200 million, but now it has dropped to around 180 million. I originally expected it to far exceed this number.
• (What other factors could drag down NVIDIA's growth?) China is working hard to develop its own chips, as are cloud service providers like Google, Amazon, and Microsoft. Tesla is also designing its own chips because they are crucial for autonomous driving. Tesla has already removed some NVIDIA chips from its vehicles.
• We expect a good annual return rate for NVIDIA, but it fell below our minimum threshold of 15%. We sold NVIDIA stocks too early, but these funds were reinvested in Coinbase, which has outperformed NVIDIA in the past year.
• (What AI-related investments are promising?) In the AI field, proprietary data is key.
• We will see a slowdown in labor force growth, but it will not decline. AI technology may replace some job positions in the short term, but many displaced individuals will take on the responsibility of supervising technology. In the long run, the number of employment positions will continue to increase.
• Today we have a better understanding of AI, but the government should not play the role of referee. There is a movement in the U.S. Congress aimed at slowing down regulatory actions and letting the market take its course.
• Last year, Amazon doubled the number of robots in its distribution centers to 1 million, which may surpass the company's human employees in about a year. Figure AI will be a player in this field.
• Since at least 1998, when interest rates rise, the purchasing power of gold tends to decline. However, this correlation has been broken since the Fed began raising rates in 2022. As other regions of the world rush to seek safe havens, gold is breaking out. This indicates global economic weakness.
• The fusion of different technologies, especially driving explosive growth in output and cost reduction... Electric vehicles are a combination of robotics, energy storage, and AI. We believe that the price of electric vehicles will drop to the range of $20,000 to $25,000 within five years.

Cathie Wood, CEO of ARK Invest, may be Tesla's "biggest fan" on Wall Street. Despite Tesla's stock price falling 31% this year, she remains steadfast in increasing her holdings Wood recently accepted an interview with Barron's, discussing Tesla, Nvidia, and other AI concept stocks, as well as the future of ARK.

She expressed optimism about Tesla's long-term prospects, mainly based on its leading position in the fields of autonomous driving and humanoid robots.

In contrast, Wood's enthusiasm for Nvidia is not as high. The stock has more than doubled in the past year, but Wood's flagship fund, ARK Innovation, sold it off at the beginning of 2023.

Wood recently warned that Nvidia's stock price has risen too fast, comparing it to Cisco in the past. Cisco's stock price soared during the Internet bubble due to a surge in demand for network hardware, but later plummeted after competitors entered the market.

In the latest interview, she pointed out that competitors such as Google, Amazon, Microsoft, and Tesla are all personally involved in developing chips, which will drag down Nvidia's future revenue growth.

Wood believes that although Nvidia is in a leading position in this round of AI competition, more evidence is needed to prove its valuation is reasonable, showing that AI is accelerating enterprise revenue growth. She is optimistic about investing in proprietary data in the AI field.

Wood also stated that the current global economic environment is similar to the early 1980s, with a strong US dollar, pressure on emerging market economies leading to rate cuts, all signaling global economic weakness. In addition, gold has broken its correlation with the US dollar, marking a historic breakthrough, reflecting uncertain global economic prospects.

Furthermore, Wood expects that electric vehicles, as a combination of robotics technology, energy storage, and AI, will drop in price to the range of $20,000 to $25,000 within five years.

After a challenging 2022, ARK Innovation rebounded significantly last year, with a cumulative increase of 72%, surpassing the 45% increase of the Nasdaq Composite Index. However, this year, with US inflation making a comeback and rate cut expectations plummeting, the fund has already dropped by 10% as of April 10.

The following is the edited interview content:

Host: Tesla's stock price has dropped by 30% this year. What keeps you optimistic?

Wood: Tesla is conducting the world's largest AI project through autonomous driving, with more real-world driving data than any other company. We believe that by 2030, the entire ecosystem of autonomous taxi services will generate $80 trillion to $100 trillion in revenue, with platform providers like Tesla capturing half of it.

Through the Optimus humanoid robot project, Tesla will also become one of the leaders in the field of humanoid robots. Many tasks in car factories require flexible handling of bolts and nuts, which robots currently cannot do. But when they are ready, humanoid robots can help car factories scale up faster Host: Is selling Nvidia before its significant rise in the past six months a missed opportunity for you?

Wood: We expected a good annual return from Nvidia, but it fell below our 15% minimum threshold. We sold Nvidia stocks too early, but these funds were reinvested in Coinbase, which has outperformed Nvidia in the past year.

From a hardware perspective, Nvidia is in a leading position in the AI competition. However, to prove its valuation is reasonable, we need to see more evidence that AI is accelerating enterprise revenue growth.

In the coding field, there is a huge increase in productivity. But we have not seen accelerated revenue growth in some large companies, many of which were expected to be the first to show the results of AI applications, such as Salesforce.com, Adobe, and even Autodesk.

Host: Why is that?

Wood: Corporate management is still trying to understand the significance of AI for themselves. Companies do not want different departments to purchase various tools without economies of scale. To effectively utilize AI, they need to centralize data scattered across departments, clean it up, and thoroughly streamline workflows. This takes time.

Companies also realize that these (AI) tools are not useful for many employees. ChatGPT reached 100 million monthly active users in just two months, with peak active users reaching 200 million, but now it has dropped to around 180 million. I originally expected it to far exceed this number.

We are still trying to understand where the value of the AI world will manifest, as many are commoditizing open-source models. This poses competition for companies looking to offer professional services on a subscription basis, including OpenAI. If these services are freely included, this business model may disappear.

Host: What other factors could hinder Nvidia's growth?

Wood: China is working on developing its own chips, as are cloud service providers like Google, Amazon, and Microsoft. Tesla is also designing its own chips because they are crucial for autonomous driving. Tesla has already removed some Nvidia chips from its vehicles.

During the chip shortage, many companies placed second or third orders with Nvidia, trying to secure enough supply to advance a large amount of chip demand. This cyclical dynamic may be alleviated in the coming months. Elon Musk recently stated that he is no longer worried about obtaining chips.

Host: Which AI-related investments do you favor?

Wood: In the AI field, proprietary data is key. UiPath has proprietary data on the workflows of all major global companies and is dedicated to finding the most efficient workflows for various tasks. Similarly, benefiting from years of collaboration with governments, Palantir can use this data to develop models that improve government department efficiency PagerDuty is using AI to detect issues in data centers. Block will enjoy a significant boost in productivity and new services in its digital marketplace. Meanwhile, Roblox's ecosystem is experiencing explosive growth as AI creates new games on its platform.

Host: How will AI impact the economy and labor market? Wood: We will see a slowdown in labor force growth, but it will not decrease. Technology may replace some jobs in the short term, but many displaced individuals will take on the responsibility of supervising technology. In the long run, the number of job positions will continue to increase.

People often cannot imagine what new jobs new technologies will create. For example, we know that if we improve how computers prompt us, we will get better answers. Therefore, "prompt engineering" is becoming a new job that did not exist before.

In past major technological changes, due to increased productivity, working hours decreased at a faster rate. Tractors increased farm productivity, so people no longer needed children to work there; they could go out and find paid work in factories.

The same thing will happen this time. For example, due to autonomous driving, parents who act as "taxi drivers for children" will be freed from these responsibilities. The saved time can be used for paid work or leisure.

Host: Will public opposition and regulation threaten the development of AI? Wood: Regulating AI now is like regulating the internet in the early 1990s—we don't even know what it will become. Today we have a better understanding of AI, but the government should not play the role of referee. There is a movement in the U.S. Congress aimed at slowing down regulatory actions and letting the market take its course.

Today, every country wants to be an innovation hub. When the U.S. Federal Aviation Administration restricted drone flights in U.S. airspace, companies like Amazon went to other countries to do business. The U.S. government has realized this, and we are now seeing more regulations that support innovation being enacted.

Host: Which private companies in the ARK Venture Fund excite you the most? Wood: One of the first companies in our portfolio is MosaicML, a software company that helps businesses prepare for the AI era by organizing data and using large language models. Databricks acquired it at 6 times the price we paid, and now Databricks is one of the largest holdings in our portfolio.

Figure AI focuses on humanoid robots, with clients including Amazon and Mercedes. Last year, Amazon doubled the number of robots in its fulfillment centers to 1 million, a number that may surpass the company's human employees around next year. Figure AI will be a player in this field In various fields of study (combining different types of biological data), Freenome is developing a blood test that helps doctors diagnose cancer in the early stages or even earlier by identifying polyps that have shed into the blood.

Host: What could trip up the bull market in US stocks?

Wood: The world today is very much like the early 1980s: the US dollar is strengthening against many other currencies, and many emerging markets are starting to cut interest rates because their economies are suffering. We see signs of severe weakness in other regions of the world, which will impact the US in some form.

Since at least 1998, when interest rates rise, the purchasing power of gold tends to decline. But this correlation has been broken since the Fed started raising rates in 2022. As the rest of the world rushes to seek safety, gold is breaking out. This indicates global economic weakness.

Since last summer, we have seen the market fluctuate on the question of whether inflation will decrease and how many times the Fed will cut rates this year. We are now going to see another reassessment. The latest jobs report shows that almost all new jobs are part-time, while full-time employment is actually declining.

Host: In the coming years, where will new technologies lead the global economy?

Wood: All technologies are deflationary, and prices should eventually fall. The convergence of different technologies, especially, will drive explosive growth in output and cost reduction. This will be a big surprise that we will see in the coming years.

For example, electric vehicles are a combination of robotics, energy storage, and AI. Xiaomi in China has just released a new car model priced at less than $30,000. We believe that the price of electric vehicles will drop to the range of $20,000 to $25,000 within five years.

Host: What are your longer-term plans for ARK?

Wood: Our core business is disruptive innovation ETFs and separately managed accounts in the public markets. We are democratizing venture capital. Our risk funds are available on the Titan and Sofi platforms, where anyone with $500 can get a part of SpaceX or Discord, companies that were previously only open to accredited investors.

This year, we launched ARKB (ARK 21Shares Bitcoin ETF), but this is just the beginning of the broad range of digital asset products we hope to offer in the coming years. We also aim to build all products globally. In September last year, we acquired the European thematic index ETF expert Rize, which allows us to distribute funds throughout Europe. We will soon launch three funds there