Enthusiasm over artificial intelligence has pushed the tech-focused Invesco QQQ QQQ ETF to impressive returns in 2024. A new report from investor Cathie Wood’s ARK Invest outlines future AI disruptions and its capacity to shape the markets.
The Shift to AI: The report said consumers’ adoption of AI will be much faster than their adoption of previous technologies, such as the smartphone and the personal computer.
“Our research suggests that AI-enabled consumer hardware — defined as hardware with integrated AI agents — could penetrate 50% of the U.S. internet user base in fewer than four years, and nearly 75% penetration by the end of 2030, up from near-zero in 2022,” the report said.
The report saw AI as a significant time saver for consumers, who can heed AI product recommendations instead of doing the research themselves.
ARK Invest cited a study that showed consumers spend on average 15 hours researching cars before making a purchase, time which could be saved dramatically by AI. Its research suggested that AI could facilitate $9 trillion in global private consumption by 2030.
“While brand recognition and loyalty currently play meaningful roles in consumer purchases, especially of non-discretionary goods and services, brand leverage is likely to shift from consumer-facing applications and marketplaces to trusted AI agents,” the report said. “As a result, AI choices could subsume personal brand preferences in favor of product availability, competitive pricing, and delivery times.”
Advertising Implications: Such a shift in consumer behavior would also create a significant opportunity in advertising, per the report. Advertising would be generated from “AI agents” that would operate at the system level and interact with users, and query-level suggestions similar to today’s online search.
“If AI-facilitated ad spend were to approach $9 trillion globally in 2030, AI agents could extract more than $800 billion in total intermediation revenue, up from zero today,” the report said. The majority of the revenue is projected to come from AI agents rather than search queries.
Wearable Tech Implications: The report highlighted that AI integration could finally lead to the widespread use of wearable tech.
“Today, gesture and voice are the natural user interfaces (NUIs). Whereas early NUIs like Apple's Siri and Amazon's Alexa operated with limited functionality, generative AI is likely to realize the potential of NUIs by circumventing physical interactions and transforming complex human-computer interactions into conversations similar to human-human exchanges, as suggested below,” the report said.
Such technology would allow users to simply ask an AI assistant a question out loud and receive an answer. The report believes that wearable technology would coexist alongside smartphones and other hardware.
Big Tech vs. The Little Guy: As for which company will win the race to utilize AI, ARK Invest outlines two possible cases.
The first possibility is that established tech giants Apple Inc AAPL, Alphabet Inc GOOG GOOGL, Microsoft Corp MSFT and Meta Platfom Systems Inc META will utilize their extensive moats and simply run away with it. All of the companies mentioned above already have extensive ecosystems and distribution networks for the usage of AI.
The alternative is that new players will be able to disrupt the status quo. The report believed new entrants can upend Big Tech by focusing on “consumer-centric products” and addressing consumers’ needs better. It links this idea to the rise of personal computing in the 1980s and 1990s and the success of then-smaller players Apple and Microsoft over “Big Blue” IBM.
The ARKK ETF: ARK’s flagship ETF is the ARK Innovation ETF ARKK, which primarily invests in disruptive technology such as AI. Wood is known for her bold investment style and, as some would argue, rash predictions. She predicted that Bitcoin would reach $3.8 million by 2030, an increase of over 5,000%. Wood also holds a $2,000 price target for Tesla Inc TSLA for 2027, which would value the company at over $6 trillion.
Despite having exposure to several AI companies, ARK Innovation ETF has largely sat out the AI boom. It is trading down over 70% from its peak in 2021.
Photo created using artificial intelligence MidJourney
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