← The Rundown
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- [00:00]
A
Welcome back to the Rundown interview edition. Today we are talking to Cathie Wood, the CEO of ARK Invest. Cathie is a legend in the investing space. She's known for investing in disruptive technologies. So in today's conversation, we talked about the big themes for 2026, including AI robotics and robo taxis. We also talked about Tesla's advantages moving forward, why elon might merge Xai and SpaceX, and a fun debate about Bitcoin versus gold. I got to say, this was of my favorite interviews that I've ever done. I think you guys are really going to enjoy this one. So let's get into it. Kathy Wood, welcome to the Rundown.
- [00:42]
B
Thank you, Zade. I'm really happy to be joining you today.
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A
I'm super excited to talk to you. This is a, this is a big moment for me and I wanted to start off by talking about the, the yearly ARC Big Idea report. I, I look forward to it every year and you guys just posted it last week. And the theme from this report is the Great Acceleration. Now, I like the title, but I got to, I got to, you know, I feel like we've been moving pretty fast, right, you know, the last few years. So what's interesting is you guys think that we're going to move even faster. You know, I think the big takeaway for me after reading the report was that you think that AI investment, capex investment is going to accelerate. I think the number you threw out there in this report was 12% of GDP, which is shocking, especially when you compare it to previous CAPEX booms like the automobile and railroad. I think those capped out at 4 to 5%. So I want to turn it over to you. Why are you so bullish on this particular cycle of the capex boom when it comes to AI?
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B
Well, it is because AI is the catalyst to all of the other innovation platforms, to speeding them up as well. There's a great convergence taking place. So if you think about robo taxis, it's the convergence among robots. Robo taxis are robots, obviously, energy storage. They will be electric and AI, they'll be powered by AI. They couldn't exist without AI. And we think that that's going to scale to a global revenue generation opportunity of more than $10 trillion in the next five to 10 years from almost nothing today. And another example of convergence is in the health care space. Many people don't think about technology as much or AI as much when they think about health care, but it's probably the most profound application of AI and It's the convergence of sequencing technologies, including single cell sequencing. We each have 35, 40 trillion cells in our bodies and now we're going to be able to sequence down to the cell level sequencing technologies, AI and then CRISPR gene editing, which is able to edit out programming errors that we are now able to find thanks to the convergence between AI and DNA sequencing. Well, all kinds of sequencing.
- [03:25]
A
So you think that AI is going to be the engine that drives innovations in all these other fields like healthcare, robo taxis, transportation. But you can make the case that we've had, you can make the same case for the Internet, right? The Internet innovated so many different industries.
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B
Yes.
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A
And there was a boom and bust in that industry as well. Are you sure the market is going to kind of put up with this kind of spending that we're seeing in AI or are they going to start rejecting it like we saw with the AI bus back in 2000?
- [03:54]
B
Right. There's a huge wall of worry. The strongest bull markets are climbing walls of worry. I remember I was in the Internet, well, the tech and telecom bubble as it's called, and there was no worry at all. The only investors worrying were value investors because they thought they'd lose their businesses. Right. And they ended up having the last laugh back then. But the most senior portfolio managers and investors in our industry today, they were fairly young during the tech and telecom bubble. They now have the gray hairs and they're saying, been there, done that, I am not going to get caught in that kind of a mess again. So we have, you know, two steps forward, one step back as you get that kind of worry. And the reason we think this is not like the Internet is because we have so many technologies now. Back then, as you say, we had come off sort of the PC and PC software cycle into the Internet age and then into mobile. But we, we didn't have five major platforms evolving at the same time and they involve 15 different technologies. So the five platforms are robotics, energy storage and AI. And of course Tesla is the poster child capitalizing on that one. The other two innovation platforms are blockchain technology and multi omic sequencing. In the life science space, what we are expecting is the convergence of these technologies will be like S curves feeding S curves. In most technologies they evolve slowly, slowly than all at once. Right? Well, we're having all of these technologies, yes. It's taken a long time for autonomous mobility to get here, really. We were talking about it at the founding of ARC in 2014, but it is here. And part of the Reason is robotics, energy storage and AI have developed enough, have evolved enough so that their costs are low enough so that we're ready for primetime. I'm going to give you an example of how ridiculous in the tech and telecom bubble it included biotech and there was this dream of personalized medicine back then. Why? Because we were close to sequencing the first whole human genome. Back then it cost $2.7 billion to sequence one person's genome. Today it costs $100. Think about that. Right? So from 2.7 billion to 100, we are ready for primetime. The technologies are ready and the costs.
- [07:14]
A
Are low enough that, so that you make a very, very compelling case. I guess what I worry about is right now a lot of the spending is coming from the hyperscalers, the Microsoft's, Google, Amazon. And as we saw this week with Microsoft, the market is now ready. They're being a little worried right now. The market's worried that well, if this investment isn't paying off like we saw with the Azure cloud, growth came in slightly under, under what the market wanted. The stock got crushed. And so how much stomach does the stock have or does the market have for all this increased spending if there's not a payoff in the near term?
- [07:56]
B
So this is where we're going to learn a lot. I think investing's, the pendulum shift is going to move back to longer term time horizons. What many analysts are struggling with right now is the short term time horizon. They have. I want my profits now, I want my dividends now, my share repurchases now. And unfortunately it is going to take some time partly because of the supply chain issues we're seeing. TSM. You know it was interesting. TSM's CapEx was stalled at roughly 10 billion. Right. And we were thinking, okay, is TSM signaling that there is an inventory problem looming out there? Well, I think they just jacked that up, didn't they jack it up to.
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A
I forget what, 40 plus?
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B
Yes, quite significantly. And that, and they're extremely cautious. They've been through many, many, many cycles. And what they do is they, they, they go to the customers of their customers. That's how paranoid they are about this inventory situation. And I think they, they learned as they were doing that. Wait a minute, what, what's happening is the applications associated with I AI are so broad, so profound and the productivity changes are, are so enormous that you know, they, they began to understand, wait a minute, this is a revolution. It's a revolution.
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A
Yeah. And yeah, TSMC increasing their capex plus ASML which is one of their suppliers, the lithography machines. They make the lithography machines. They also said something similar. They're, they're, they're seeing record orders. So we're seeing the signs that like there's no slowdown in, in, in the investment. But I, I think you make a fantastic point about like investors are going to have to be patient now. This is not like a short term play. You're, the payoff might not happen for maybe half a decade. And so that's something different that the investors aren't used to.
- [10:10]
B
We actually think the payoff is, is from our point of view we have a five year investment time horizon and we think the payoff is going to be not five years. We're going to start seeing, we've already started seeing productivity gains. We've, we've said for some time we've been through a rolling recession. Manufacturing has been down for three years. Housing's been down for three years. Small businesses terribly depressed for three years. That is all starting to change. But productivity, partly for that reason, companies have been focused on efficiency gains. And so productivity is close to 2% on a year over year basis which is fairly strong for this time in the cycle. We think that's going to accelerate to the 5 to 6% range as manufacturing comes back. As you know, the entire global economy recovers from I think the vestiges of an interest rate cycle that really hurt and while, while GDP didn't show it. And so if you don't dig beneath that headline growth rate, you can't understand this. When you talk to companies, you definitely understand it.
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A
Do you feel like these software companies, these SaaS companies are just cooked now because of the rise of AI and like we're seeing it, the, the SaaS valuations are just getting wrecked right now. And whereas I think you said in your YouTube video that you posted last week that you believe that software will see what a 19% growth and but you think that's going to be coming from the private AI companies and not the public software companies.
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B
Well, the, the way we analyze what's going on in the tech stack is we look at the infrastructure layers, so chips and data centers. We look at platform as a service poster child. There is Palantir and then applications, including software as a service. If you think of SaaS, SaaS was really one size fits all. What we can do now with companies like Palantir or even just internally, we can customize software to our own needs. We don't need one size fits all now. This is an oversimplification, I think, what will happen in software as a service, and we called it, we said the share is shifting from SaaS to platform. That's been absolutely right. We'll probably end up with one or two major SaaS players as they consolidate the market, sort of like retail. Walmart kind of consolidated the market as Amazon took enormous share. JP Morgan in the banking space will probably do the same thing. So I'm not saying it's death and destruction for, for everyone. These companies do have very good installed bases. They're just going to have to introduce a little more customization, which is different for them.
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A
Yeah, I wonder if that's the same where, like the power laws dominate in the industry, where, like the bigger companies are going to end up probably just taking the lion's share of the market, whereas the smaller companies might struggle. And so that's going to be interesting to see how that plays. I do want to pivot a little bit and talk about Tesla. You know, it's one of your highest conviction plays. And what, what struck out to me was in the report you talked about how the emergence of robotics and AI and robo taxis and energy storage. And so, like, when I hear those words, I'm like, that sounds like Tesla, right? That sounds like, sounds like Tesla is like primed to take advantage of all these, all these ideas. So can you talk more about like your, your conviction in Tesla and how, where, where you see Tesla going in the next three to four to five years?
- [14:10]
B
Yes. So it's an important moment for Tesla. I think we just learned this week that there is no chase car behind the robotaxis in Austin. And on the earnings call, Elon said that Tesla's robo taxis will be in 25 to 50% of the major cities in the United States by the end of this year. So scaling so much F than Waymo did. And in fact, on the call he said that there are about 500 robo taxis out there right now and without unsupervised, and he thinks that number is going to double every month. And if so, that means Tesla's robo taxi fleet will surpass Waymo's in three months. And we thought this would happen. And we also thought, and he mentioned it on the call, that federal legislation, you know, sort of enabling the scaling across state lines would be very helpful. So maybe he has an inkling. We'll see that. We think that 90% of Tesla's valuation in five years is going to be because of robo taxis. And we have very little. The, the last model we did was for 2029. We're updating it now, so I can only give you those numbers. So our price Target There is 2600 and we're in the low 400s today. So a nice appreciation over five years, but we don't have anything for Optimus in there. And what's interesting about the call is clearly Elon is feeling good about Optimus expecting to ramp to 1 million, I think, is it by the end of next year? I may not have that complete.
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A
The big announcement this week was where they, where they're winding down the Model S and Model Yes, X and then they're going to convert those factories to make Optimus. And so that was huge. And to me it's like they're fully pivoting away from just being a car company and really embracing the robotics and AI, you know, AI themes.
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B
Well, you think about humanoid robots, it's the same three innovation platforms. Robotics, it's just 200,000 times more complicated, as we, as we stated there, than a robo taxi. So robotics, energy storage and AI, it's the same three platforms as for a Robotaxi. So Tesla has cut its teeth on the Robotaxi, very simple robot. And while it is scaling that and the cash flow generation from this subscription model is going to be enormous and it's going to fund the optimist strategy. And as you know, they also announced that Tesla invested $2 billion into Xai, whose appetite for chips and power is enormous. And we've also heard in the last few days about the possibility of SpaceX and XAI and maybe even Tesla getting together.
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A
What's your reaction to that? Because I saw that too and I'm like, this is, I feel like Elon's like doing some big picture play here to kind of just put everything under one roof.
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B
You know what he's doing, he, because he's in China, he recognizes how far ahead China is in capitalizing on this convergence among technologies. On our Brainstorm Today, a person who has really good knowledge of inside China said all of these companies, you hear about them individually, the robotics companies, so Unitree and the battery companies, Catl and AI companies, well, all of their hyperscalers now and Deep Seq, they're all working together and in a way that many of our companies are not. We're very siloed here in the United States. And part of the reason, and it's a big flaw when it comes to innovation, part of the reason is the way the traditional asset management World and even venture capital is set up is very siloed into sectors or industries or even sub industries. I mean, there are a lot of asset management firms that are very proud that they have five healthcare analysts. Well, this is in the new world. You're going to have to get rid of that siloed world and think in terms of these technologies. That's where the silos are. But how they're going to work together to cut across sectors, across industries. So we're not set up correctly. China has the right mindset. Elon knows it.
- [19:11]
A
Do you. How do you. What do you think when you hear about all these talks of data centers in space? And I feel like that was kind of one of the reasons he's trying to do this, potentially do this, is because of data centers in space. You know, people have talked about how it might be cheaper to launch these data centers in space than build them here in the US and especially with the cost of rocket launches going down, thanks to all the innovation that SpaceX does, by the way. SpaceX, I feel like, has the least amount of haters than anyone. Everyone agrees that SpaceX is just like the most marvelous company out there. They're just like doing incredible work. And so I think maybe, you know, when I hear data centers in space, though, that might be a bridge too far even for me.
- [19:51]
B
We think it's very possible and it would take, especially given our research on how quickly the cost of rocket launches is diminishing and how much more capable they are of carrying more load. So we think it's very possible and you get rid of a number of problems, power problems, you know, to hook up to our grid is taking five years now for companies. That's why Elon in Memphis, Tennessee just roped together a bunch of generators. You know, not the most efficient, but he got the job done because the regulatory hurdles that everyone has to go through are ridiculous. Now, thank goodness this administration is focused on getting those regulatory hurdles down in a big way, especially on the energy side. So you don't have to go through that. And you have 100% solar power. So the incremental costs are so low and you don't have not in my backyard issues. I was very surprised. I went to Nashville and I was asking people from Memphis, oh, you must be so happy that Elon has chosen Memphis. And they said, no, we aren't. We're very concerned about price of housing is skyrocketing. Maybe it's happening too fast for that city to absorb. That's why Elon's now gone across the border into Mississippi to extend that data center. So, you know, there. So he, he, he's a maestro at saying, okay, first principles. I'm facing all these problems on Earth. Why do I have to do this here? What would it take to do this in space? And that's where. That's where. And to be honest, we, and I think we're way ahead of the game in a lot of things. We did not conceive of that he did just in the last few months because of all of the hurdles he's facing.
- [22:03]
A
Yeah, I mean, yeah, that news started going around. Yeah. A few months ago. And I'm just like, is this really going to happen? When you, but when you lay out the case, especially the concerns around like prices of energy going up, especially in the US everyone's kind of worried these data centers going into my backyard, that's going to jack up my power bill. And so putting it in space, unlimited energy. Now I'm still like, how do you maintain a data center in space? All these questions. But, but I mean, you know, there's a lot of smart people working under him, so they'll probably figure it out.
- [22:31]
B
Did you, how did you, how did we maintain the space station? The International Space Station? Right. We've learned a lot in the last 50 years.
- [22:41]
A
Yeah. But it's crazy how fast this stuff is going. We went from like, like chat GPT three years ago to like data centers in space. And it's just so fast. The great acceleration. Right, Kathy? Like that's what you guys said. We're just moving so fast right now.
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B
It's true. And we think we're going to accelerate.
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A
I want to, I want to end with.
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B
Oh, no, no, go ahead, go ahead.
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A
Sorry, go ahead. Your voice cut out. I'm so sorry. No, no, no. I wanted to end real quick. I had to ask you about, I had to ask you about bitcoin and gold because that a lot of retail traders, especially our audience, is just talking about that non stop. You know, I feel like bitcoin has kind of lost its mojo. The whole narrative of being digital gold investors, especially meme stock investors, are now just buying actual gold. The gold has outperformed bitcoin the last couple of years. I know. I think you guys have a price target on Bitcoin of 1.2 million. Are you still, do you still feel strongly about bitcoin given what's happened with gold recently?
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B
Yeah. Yes. First thing you should know, bitcoin and gold are not correlated. We did the analysis. If you go over this cycle from 2020 to today, the correlation, so one would be a perfect correlation, minus one would be an, you know, the inversion. When one goes up, the other one goes down. It's as close to zero as you can get. So no correlation. That's really important for everyone to know. If you look at the last two cycles, gold LED Bitcoin and then the third thing I will say is if you'll find this on my, on X. Kathy D. Wood a chart showing gold divided by M2. It has only been, it has never been higher. It hit a new all, all time high, all time high this week. Now it's starting to correct. We put, I don't think it's because we put this chart out, but I will say what I said in there is gold is probably riding for a fall because the last two times it was anywhere near this was in the massive inflation. So double digit inflation in the 70s, early 80s and before that the Great Depression when gold, well, the dollar was devalued in gold terms from 20.67 to 35. That's a 70% devaluation. That's like emerging market kind of devaluation. Right back in 1934, January 31, 1934, the government confiscated private gold, didn't allow any more private ownership of gold and money supply collapsed. Now we're not in anything like either of those two worlds and yet gold is where it is. I think if I, if I were a betting person and I can't give advice necessarily, but I would make a shift from gold into bitcoin because I do think the knocks on bitcoin in the last year have been stable. Coins are taking some of the role that bitcoin was going to play in emerging markets. That's true, but that's not forever. That's just for the equivalent of a checking account. When they want real savings, they're going to buy bitcoin. We believe especially if it's a $1.5 million price target in 2030. That's our bull case is right. And this idea, digital gold, it is better than gold actually. You know why? Because the supply, well that, yes, that's critical but the supply in terms of monetary policy, the supply growth of Bitcoin is 0.8% per year and it'll drop to 0.54 in another two years. I'll bet you a lot that gold supplies are going to be up much more than that. Their average over time is 1%. So I think, I think with inter, intergenerational wealth transfer that, that bitcoin is going to take off here.
- [26:56]
A
I think that's very, a very interesting, very compelling case. I think everyone's going to be watching for it. Can bitcoin get its mojo back? Because that's a lot of people are talking about. It's probably like the top tre topic that I hear about from, from our audience. So I really appreciate your perspective. Yes, absolutely. Go ahead.
- [27:11]
B
One more point there. You've heard of the flash crash. 1010. Okay.
- [27:18]
A
So please educate me.
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B
Yeah, yeah, yeah, yeah. This, I think it's. Very few people know this but because there's been, there have been so many other things to worry about. But on October 10th there was the flash crash caused by a software glitch and at Binance and there was an auto deleveraging event. People were just, you know, margin called to the tune of about $28 billion. We know some of the entities that were caught up in that, they were caught flat footed and we think that is just now washing through the system. So if you're looking for something that has weighed on it recently, we do think that happened. Bitcoin's the most liquid of all crypto assets. So it's the first margin call. Right. And we think, we think that's pretty much worked its way out. So we're testing here around 80,000. Again we think that we're going to hold in the 80 to 90,000 range unless all hell breaks loose in Iran, let's say. And then maybe we'll see the store of value come back for bitcoin.
- [28:27]
A
Yeah, that's a very good point and I think you're right. I mean that crypto just hasn't recovered since that crash. And I remember we're talking about the crash in October after Trump tweeted about the China thing and then they caused just a cascading effect. You're right, we're kind of working through that. I mean I'm really looking forward to seeing how this all plays out. Kathy, I really appreciate your perspective on these things. Thank you again for, for joining the podcast. I highly recommend everyone check out the Ark Invest 2026 report. Great stuff. It's like 110 slides but like a lot of, a lot of charts, a lot of graphics, really well done. So shout out to the ARC team for that.
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B
Thank you. Zade, thank you so much.
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A
Thank you. Have a good weekend.
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B
I'm on the shoulders of all the people who did all that research, so thank you.
- [29:09]
A
Of course, great stuff. Thank you again Kathy. Have a good one.
- [29:11]
B
Bye. Bye.
- [29:14]
A
Well, all right, guys, hope you enjoyed that conversation with Cathie Wood. You know, this was my first time talking to her and I really enjoyed it and I hope we're going to her back on the podcast again. Let me know in the comments on Spotify and YouTube what your favorite part of the interview was. Personally, for me, it was the bitcoin versus Gold top. And if you enjoyed that conversation, consider giving us a five star rating on Apple, Spotify, YouTube, wherever you listen to your podcast. All that engagement really does help us out and it helps other people find the show. Thank you guys again for listening, watching and commenting. Shout out to Mike and Connor for all the work behind the scenes and we'll see you guys back here tomorrow.