ARK INVEST - TOP 3 INDUSTRIES TO INVEST IN (NEXT 5 YEARS)
Capitalising on disruptive technologies is one of the best ways to make huge gains on the stock market! For example if you'd invested $1000 in Apple & Microsoft back in the 80's then you would now have over $2.5 million!
Essentially, if you can find a company at the heart of disruptive new industries in the same way Apple & Microsoft started putting a smartphone or PC in everyone's hands then the potential gains will dwarf any stock that resides in an already established industry!
Someone who knows more about disruptive technology than almost anybody in the investing world is Cathie Wood, she's the founder and CEO of Ark Invest and perhaps most famous for her bullish calls on Tesla!
Ark continues to outperform most asset management companies and they recently produced a report in which they pointed out the most disruptive and innovative industries out there!
So let's look at 3 of these big ideas, discuss their growth potential and point out a couple of stocks that stand to benefit!
1) DEEP LEARNING
First on the list of Ark's big ideas then is Deep Learning which they claim is the most important software breakthrough of our time! Deep learning is Software 2.0 and is responsible for powering the next generation of computing platforms from smart speakers, self-driving cars & popular consumer apps that have gotten better at things like recommending which videos you might like!
Deep learning is expected to be worth $30t within the next 10-15 years and Ark expects it to add more economic value than the internet by 2037! The biggest beneficiaries of this will be the companies creating the AI chips behind deep learning! For example, data centre spending on AI processors is expected to increase 4 fold from $5b to $20b by 2025 and therefore companies like Nvidia, Intel, AMD & Cadence which specialise in creating GPU's & TPU's are sitting in the middle of an enormous growth industry.
The stocks that I mentioned are already quite large so despite this huge tailwind they aren't going to produce the kind of 10x gains that you could potentially get from smaller companies in this space however they are the leaders in this industry and probably the safest ways to ride the deep learning trend!
2) VIRTUAL WORLDS
Up next is what Ark is calling Virtual Worlds which right now consists of video games, augmented reality and virtual reality! Research suggests that revenue from these 3 industries will grow by 17% annually through to 2025 creating a giant $400b market!
Gaming is expected to make up over $360b of that market and therefore publishers such as EA, Take Two, Nintendo & Activision should continue growing their revenues as the market expands. You've also got the companies that provide the tools for which games are being built and my favourite stock in this space is Unity which provides the software on which 50% of games are being built today!
You should also consider stocks that are well positioned within the esports market which is one of the fastest growing subsectors of the videogame industry! Stocks to watch in this space include Tencent, Douyu, Huya and the 2 publishers that I've already mentioned Activision & Take Two!
VR & AR is much more in its infancy and some research suggests that the market can grow as much as 59% annually over the next 5 years! The likes of Apple, Facebook. Microsoft & snapchat have been big investors in Augmented Reality and each are hoping to tap into this future $30b market via the upcoming release of virtual & augmented reality headsets.
Alternatively you could invest in something Qualcomm which currently supplies the key components for over 30 headsets currently on the market!
3) AUTONOMOUS VEHICLES
The 3rd big innovation that ARK has written about and 1 that I'm really optimistic on is the autonomous vehicle and ridehailing industry! We've seen huge investment in driverless vehicles from the likes of Google & Tesla and almost all major analysts are expecting this industry to grow from practically zero revenue today to a multi-billion-dollar industry over the coming years!
Cathie Woods and Ark are particularly interested in 1 key area of this market and that's autonomous ride-hailing or in other words, self-driving taxis! Ark expects the industry to generate over $1t in profits every year from 2030 with the industry likely to undercut human driven taxi services by up to 90%!
Ark expects the bulk of those profits to go to the auto-manufacturers with the best electric vehicles therefore stocks like Tesla & NIO are obvious choices however their market caps reflect this and there are many other options out there! Industry giants like Ford, GM and Volkswagen were late to the party but they're now fully invested in Electric vehicles and they might be worth taking a look at!
You also have a string of electric vehicle start-ups such as Lucid, Rivian, Fisker & Xpeng which all carry more risk but more reward potential if they can succeed in emulating Tesla's success!
So there you go, 3 exciting growth industries for you to look into! I've named some of the most popular stocks within those sectors so have a look into them but also keep your eyes peeled for other companies entering the space!
It's worth remembering that investing in disruptive technology does carry more risk than established industries due to the rapid pace of change, regulatory hurdles and unproven business models! If however, you do your research and you're able to select the future leaders within these industries then you can make a lot of money by being patient and holding onto these shares for a number of years!