Transcript
0:00 Good morning, everyone, and thank you for joining us. I'm Marty Switzer, CEO and Managing Director of Associate Global Partners. It's a real privilege to be interviewing Cathie Wood today. Cathie needs little introduction. As the founder, CEO, and Chief Investment Officer of ARK, she is widely regarded as one of the most influential investors in the world. Today, ARK manages more than $30 billion across its investment strategies. And at Associate Global Partners, we're delighted to partner with ARK Invest to bring the ARK Venture Fund to Australian wholesale investors. Now, before we begin, a bit of housekeeping. This webinar is general in in nature. It does not constitute financial advice. There are no recommendations. We will Cathie and I will talk for about 30 minutes. We'll then go to Q&A, and you can ask your questions on the GoTo Webinar control panel. Cathie, welcome.
0:50 >> Thank you, Marty. Thank you very much. I'm excited to be talking to Australia. >> Fantastic. Cathie, I'd love to to start at the beginning of your journey. why did you found ARK? Or why did you start the company? What was the original purpose of the firm? And how has the mission evolved, or is it evolving? >> well, yes, I founded the firm in 2014 for two reasons. The first was to focus exclusively on technologically enabled disruptive innovation.
1:23 and then the second was to focus on an open source research ecosystem, where we share our research, give it away on social media. not only because we want to educate people, which is one of our missions and values, but also because we wanted to reach innovators who are out there building companies, so that we could get direct to the source of where all of this innovation was coming from.
1:56 the reason for exclusively disruptive innovation is we felt that, after the tech and telecom, bubble and bust, and even more so after '08-'09, investors had become extremely conservative and were moving towards passive portfolios or very benchmark sensitive portfolios, and, even investment bankers were giving up on the new new. And we believed that we were entering a period where we would see a technology revolution. And, I can tell you now, I we are more we were more right than we knew we would be or that we believed we would be.
2:45 >> So, really want to talk about this sort of whole thematic of disruptive innovation, but before we do, can you give us your view on the world today, the US economy, global markets, and what that means for this whole concept of disruptive innovation? >> Yes, today feels very much, like the early days in my career. So, in the '80s and '90s, when I was fresh out of school and very, impressionable, I was looking at I was looking at the the stock market, the equity market, and we were in we were climbing a wall of worry, especially after, well, really starting in 1982.
3:32 when I say a wall of worry, we investors were worried about inflation. They were about interest rates. They were worried about, quotas, so trade quotas. Now, today that would be tariffs. They were worried about wars, the Iraq war and so forth. They were worried about financial crises. In 1987, we had Black Monday, where in one day the stock market dropped almost 25%.
4:03 Which is a little bit like the private credit drama today. But the market went on to new highs. So, I think we're in the same kind of environment. And in the US specifically, we think that we're moving into what I believe in hindsight will be considered a boom. And it is being driven, we think importantly, by some of the new technologies evolving. So, five major platforms, robotics, energy storage, artificial intelligence, importantly, blockchain technology, and multiomic sequencing in the life science space.
4:47 And this this revolution we think is going to accelerate real GDP growth beyond levels that we're used to. And this is really important, especially given the worries in the market. We think that it is going to lead to much lower than it expected inflation. Maybe even deflation from time time to time. Not bad deflation in the sense that technology is inherently deflationary. So, we think that these technologies are big enough now to start moving the needle and impacting real growth and inflation.
5:28 >> Cathy, you touched on it before, I'd like to sort of dig a bit deeper on it now. Yeah, Arc is known for this distinctive philosophy around disruptive innovation centered on five innovation platforms. Can you explain what the You talked about before, but can we actually go through in detail what those platforms are? What sort of differentiates, you know, true transformational in from the latest market fad, and some of the investment opportunities or technologies that come off the back of that.
5:57 >> Sure. So, I just mentioned the five major innovation platforms. They involve 15 different technologies. But the platforms themselves, the the three characteristics they have is they follow a learning curve. Technologies are all about productivity and gaining efficiency and scaling unit growth and falling costs. So, that's the first. So, lower costs.
6:31 That in the second characteristic, those lower costs enable access more industries to access these new technologies. The lower costs go, the more industries can access them, and even consumers. And then the third characteristic is these platforms serve as launching pads for more innovation. So, just to give you an example, if in the in the multiomics world, DNA sequencing has the costs have dropped from 2.7 billion dollars to sequence one person's genome 23 years ago to less than 100 dollars today.
7:21 So, now that all of us are going to have our genome sequenced with time and probably every year, we're going to be able to identify mutations with the help of AI. And now that we can identify mutations, which are the earliest manifestations of disease we'll be able to use a new technology. So, sequencing was the launching pad for CRISPR gene editing, which can edit out those mutations or those programming errors and cure disease.
7:59 >> So, Cathie, you you mentioned it before, but just just a recap on the platforms. So, we we mentioned multiomics, but you've got AI. >> AI AI is the biggest catalyst transforming and speeding up every other platform. So, AI, robotics, energy storage, blockchain technology, and yes, multiomics sequencing in the life science space. >> And off the back of that, there's about 12 to 13 technologies that you look to to invest in.
8:31 >> Yes. so, those platforms involve 15 different technologies. And just to give you a sense of what we mean by this. So, robotics is very broad space and reusable re- reusable rockets are a part of the robotics theme. And of course, that's creating a whole new world for investing. >> Yeah. And you also talk about, I guess, the convergence of the platforms. And that's what really makes it truly transformational company. Can you talk a bit about that? Maybe give us an example that would be well known to the audience.
9:14 >> Sure. Yeah. Yes. I think the reason this we're calling this period a technology revolution is not necessarily because of the technology technologies each one of them alone, but but because of their convergence. And you know, it's been very interesting to watch Elon Musk over over the years. I mean, we've been following I've been following him for you know, 20 years now, but he he never used the word convergence until last year and he and he said and we're pretty proud of this and he may even be reading our research because he does read our research, but he said, you know, I think I think my companies are converging more than I ever thought and so wouldn't you know it soon after that SpaceX bought xAI and now there are rumors of SpaceX buying Tesla. So what is that? So one big one big convergence here is autonomous mobility. Now Elon today is working on robotaxis, autonomous vehicles, passenger vehicles, and that's the convergence of robots, autonomous vehicles are robots, energy storage, they will be electric, electric vehicles are going to become much cheaper than gas-powered vehicles, and and AI, they'll be powered by AI. So that's three of the five major innovation platforms.
11:05 We believe that this space all-in globally including China is going to scale from billions of dollars today in revenues generated to more than 10 trillion dollars within the next 5 to 10 years. Think about that. That's about a third of the US economy today right there. So that is going to move the needle and when we say real GDP is going to accelerate, we think that's going to be as transportation transforms, not just autos, but trucks, drones, air taxis.
11:44 we think that that's going to be one of the most powerful accelerators of economic activity in the next 5 to 10 years. >> Cathy, before we talk about the Ark Invest fund, you touched on Elon before, so I was going to ask this question a bit later, but I thought it'd be a good segue to to do that now. you've been one of his strongest supporters. You know, you've invested in many of his companies. What makes him such an exceptional entrepreneur? And why have you maintained such conviction in his vision?
12:19 >> He's He's the most productive human being in the world. I'm convinced of that. and And And so what he has done, we get the question all the time, how can he run all of these companies? Well, he does not run all of those companies. He has surrounded himself by some of the most brilliant people in the world, both engineers and business people who want to work on the hardest, most challenging, most exciting projects in the world. And but what he does is he sets the the the milestones, the goals for the companies. And when a one of his companies is missing a milestone, he becomes obsessed with it. And he then starts working aggressively with the teams involved in order to break through any obstacles. I think what makes him unique is he he bases everything on first principles. He's He's an engineer. He breaks a problem down. And he does not let the way conven- He does not let what conventional wisdom suggests is the right way to do things.
13:36 He likes to rethink how how to do things, especially because we have new technologies now. Why would, as automakers did early on, they were trying to construct a battery especially for the auto for the auto industry when we had consumer electronics, laptops, and cell phones. We have that whole battery supply chain, which now lines the bottom of a Tesla car. so, he was way ahead of the other auto manufacturers because he thought about a technology that was already in existence whose cost curve, or the cost curve of which, he could ride down while other auto manufacturers were creating an entirely new battery which which actually doesn't work. They're They're all moving towards this way of thinking about the world.
14:33 >> So, SpaceX yeah, has been or is a a top holding and has been a very successful investment in the ARK Venture Fund. yeah, IJP is delighted, Cathie, to be be partnering with you on this this fund in in Australia. it's been going for 4 years now, you know, very strong performance, about 33% per annum over the last 4 years. Can you talk us through the fund and tell us what problem it's trying to solve for investors?
15:04 >> Yes, well, s- especially in the United States, we were watching companies stay private for longer. and that's because regulations in the United States, after the various crises we were through, whether it was tech and telecom or '08 '09, just one set of regulations after another after another. And so companies and you know felt that that would it was becoming too costly to go public and too distracting to go public. And so they're staying private longer and so this is why we have trillion dollar companies like SpaceX going public finally. Why are they going public now? It is because you know the idea of global, I mean orbital data centers. So data centers in space, that is going to take so much capital that they're going to need to tap into the the public equity markets. But it went public at 1.75 trillion. The problem we were trying to solve solve was to give all investors, whether accredited investors or non-accredited investors, everyone an opportunity to participate in the private world. And of course, because of what we do, we were very well set up to do it. All we focus on is technologically enabled disruptive innovation and we've always followed the private markets because it informed our public market investments as well.
16:45 As we saw the competition brewing or new ideas brewing in the private markets. So it was very natural and I'll say the other thing bringing giving investors access in a vehicle that is direct to cap table. So all we are direct to cap table. We do not expose our clients to SPVs and especially especially the layered SPVs where there's one fee paid upon another upon another.
17:19 And at the end of the day, investors don't even know if they own a piece of the underlying stock. They may just own a promise of an income stream from another investor. So, we are direct cap table. We know the founders. The founders know our research. And so, we we have been able to provide access and to gain access to information rights, which many investors in private companies do not have information rights. Those are most appropriate to us. And because of the research we do, we have found founders very friendly to us in terms of information rights.
18:07 >> Yeah, and you're investing with some of the biggest names in in they say investing in terms of I guess it's a it's a private and public fund. How many private names are there in the portfolio, Cathie? >> I there You know, we have had a number of a number of go public recently. So, the number may not be exactly correct, but it's around 50 names. >> Right. Okay. And in terms of the investment process, it'd be good to talk through that. You know, how a how a a company makes the portfolio. Can you talk us through the stages from let's call it ID to investment. And then it'd be also nice to talk a bit about the bench strength and the team that you've got associated with this vehicle as well.
18:53 >> Sure. First, I'll talk about the team because that's very important. So, we have 15 analysts. And why do I use that? Why do we like that number? It is because of the way we have organized our research. I mentioned we have five major innovation platforms, but they involve 15 technologies. So, our analyst responsibilities are broken down not by sector, not by industry, but by technologies that are going to scale across industries. And so, our analysts are technology specialists.
19:39 but they are sector generalists because as I described and industry generalists, as I described these as cost fall, these technologies scale across industries and sectors. the other thing that's very important about to know about our team is that it is a very collaborative team. Why is that so important? That is important because these technologies are converging. So, we have the Tesla model, for example, we have three analysts on that model. Robotics, energy storage, and artificial intelligence.
20:20 and they collaborate. and that is why I believe our Tesla model and our Tesla expectations were so much higher than any other analyst out there because in traditional firms, who follows Tesla? Even in traditional VC firms, although there aren't many VCs following the auto sector, but just let's say for argument's sake, in a traditional firm broken down by sector and industry, the auto analyst follows Tele- Tesla. Well, guess what?
20:55 The auto analyst is great at the internal combustion engine and human-driven cars, but this analyst is not a robotics analyst or an energy storage analyst or an AI analyst. That analyst is in a very difficult position and can't possibly understand what Tesla is. It's not an auto company. So, it's very important to define markets correctly. >> Yes. >> Okay, so then process ideation anytime we hear of a new technology, we seize on it. This is what we do.
21:31 And I'll just give one of the very first examples of this because it brings to life a few things. In the early days of ARK, our director of research, now he's our chief futurist, Brett Winton, he asked Tasha Keeney, who is still with us, she's now director of research for autonomous technology and robotics, asked Tasha to go out and figure out what an autonomous vehicle was. What did Elon Musk mean in his master plan?
22:07 And so she did and got to know that ecosystem that was necessary to build an autonomous vehicle. One was a GPU, which at the time GPUs were nothing but PC gaming chip companies. That was it. And PCs were dropping in unit growth because of laptops. So, Nvidia was getting crushed. And when we found this out and we started understanding how powerful this autonomous vehicle strategy would be because it was part of an even bigger movement, AI, we understood Nvidia was going to be much bigger.
22:53 We She also followed other parts of the ecosystem, lidar for example, and very quickly we thought that was not going to be a part of this ecosystem. Anyway, ideation, as we're doing research, we meet through social media, we meet those involved in these new worlds. They present themselves many times. and as we meet these companies, we automatically move into our bottom-up. So, we're doing both top-down research.
23:23 How big is this market going to be based on how quickly the costs are going to fall and the units are going to scale. And as we're doing that, when we find companies, we start our bottom-up process. Our bottom-up process has a six-metric scoring system. and I can go through those scores if you'd like or for the sake of time, maybe not, but the one of the most important ones to me is people. So, visionary man-management, the right culture, willingness to stand up to short-term oriented shareholders or venture capitalists, and you know, defend their vision of the company and their strategy. so, that gets a score. and if you'd like, Marty, I can go through others, but just that's we go through all >> I think that's a that's a fantastic place to start and we can definitely go into that in more detail when you're at in September, which we're very excited about as well.
24:29 >> too. Yes. >> So, Cathie, it's a it's a a private public fund, about 80% private names. There are some public names. You've touched on a couple of them today, SpaceX, Tesla. Be good to get into some of the companies. ARK has been an early investor in, you know, the big names, OpenAI and Anthropic, which are, you know, scheduled to have, let's call it, some of the most significant IPOs or may have some of the most significant IPOs in the coming years. who knows when that will be, but you know, it may be sooner rather than later.
24:58 What attracted us to these businesses before they became household names? What sets them apart from the competition? And what would an eventual IPO mean for investors in the fund with regards to those names? >> Yes. So, both of them are going to go public for about a trillion dollars. we because we had been doing research on artificial intelligence more and more intensively after the breakthrough in deep learning, which was in 2012. Brett and I were at the same firm before I founded Arc. So, AI we had a big breakthrough in 2012 deep learning and an even bigger one in 2017 transformer architecture. which which basically brought us into the world of natural language programming effectively. so, we were looking for companies and in the AI world it is winner take most. it's certainly and we were right on that assumption. So, we were trying to figure out, okay, who is moving the fastest and the most aggressively in terms of investing in computing power and focusing on tra- transformer architecture and natural and natural language programming, not processing programming. and we we were because we're so focused on it, OpenAI and Anthropic presented themselves as the most aggressive in in in those regards. And then we had the chat GPT moment. And we became of course that was OpenAI and that was okay. Yes, we're right on that one. And you know, we've been in the business long enough where, for example, I know Sarah Friar, the CFO at Open AI.
27:03 She and I have been in the business. I've known her for 25 years. So, we had access that way, too. And interestingly, when it came to Anthropic, we started our fund, and I will say there was a lot of luck here. We did not start it at the beginning of '22. We sat started it at the end of '22 when the bear market in the equity market was ending. But in the venture world, there was a bit of a lag. Dario, it was only a $4 billion market cap at that time. He He really did want to talk to us because he wanted because he knew the research we were doing, and he was having trouble getting attention, believe it or not, from others. but we were very interested in him, not only for AI, but also because of his background, which is in the multiomic field, and we thought AI was going to become the most well, the most profound application of AI was going to be in the multiomic space.
28:07 so, that's how we met her. >> Okay. now all the the the news at the moment, and it seems to be changing day by day, week by week, is sort of open source open weight challenges to, you know, that the large US-based LLMs from China, which is the Kimikaze 3, owned by by Moonshot. Can you talk a bit about that competition, what it means, and where you think or who you think will be the the winners in the end?
28:37 >> Yes. and I'm just going to add one more thing to the last answer. I have to give Charlie Roberts. Charlie Roberts, who leads our venture team. he himself practiced the convergence of multiomics sequencing and artificial intelligence. And of course, he knew a lot of the people in the field including Dario. So, didn't definitely have to get that in. Okay, Kimmy K 3.
29:09 Yes, so we've analyzed the model as we do all models. And you know, we we never believe the costs that that are thrown up out when when we hear, for example, Deep Seek $6 million. It did not in hindsight as we learn more and more, the computing capacity necessary to do that was very costly. and we believe there were some government subsidies there.
29:41 analyzing Kimmy K, very good model. Very good model. but very inefficient. Very inefficient. And and not as good from a performance point of view as our closed end models are. Now, we are fans of open weight models. And in fact, I think Microsoft and others put out a it was a letter yesterday or the day before in support of open weight, sending it to our government saying, "Don't shut this down." We signed it.
30:21 >> Just summarize for the audience just in case there's those out there that don't know, just very quickly the difference between open weight and let's call it the the closed end of models like Open AI and Anthropic. >> Yes, the open weight models basically make transparent the weightings of each of the parameters in the model, whereas the closed models do not. And so, it's not fully open source. A lot of people think this is open source and you can see all of the code. That is not true.
30:55 just the weights of the parameters. But, you know, what's been interesting about China is and the US really brought this upon the world, I would say. because we stopped selling our software into China because of IP theft. And so, they went open source for the most part. And they've done very well scaling it. I I'm a big believer in open source. If you look at data centers, Linux was the first at real open source software out there. And it dominated data centers. So, you know, that that's very important. we like the competition from China. I think it makes us better. And we can see their weights.
31:43 And so, many people say, "Oh, well, the Chinese are just distilling US models." I'm sure they are. I'm sure they're, you know, reverse engineering and maybe there's theft somehow. I don't I don't know. but, we can see their open weights. And we when we see something clever, our closed models adopt them. I mean, Sam Altman and Sam Altman and Jensen Huang himself complimented Deep Seek saying it was very clever with its algorithms. And oh, by the way, we're copying you.
32:16 So, you know, I think I think it's been that's been a very important develop development recently in the US because the worst thing that could happen now, if we're right that we're in the very early days of AI, is that our government starts regulating it, right? So. >> Yes. Now, that's a that's a a great summary. Thanks, Cathy. Could you talk to us about some of the other names on the private side in the Arc Venture Fund that you're excited about? I'm sure there are a few, but maybe you could give us a couple.
32:49 >> Well, some that I think you may or may not know about, prediction markets are becoming the rage. I don't know if Kalshi has reached Australia. My guess is it did because you're a big >> We probably hear We probably hear more about I know a bit about Kalshi. We hear more about Polymarket. I think they seem to get more PR and press. Yes. I think some people are starting to learn about Kalshi, but yeah, that'd be a good >> Yes. What's interesting about that is and I know Shane, who's the CEO of Polymarket, met him here. You know, he loved what we do, we loved what he did.
33:30 But, you know, as we were analyzing the two models, Kalshi versus Polymarket, we preferred the Kalshi model mostly because in the United States, Kalshi had come at this from a regulatory first mindset. >> Kalshi is in the predictions market space. >> Predictions market, yes. It's a Polymarket, but Kalshi has 75% of market and Polymarket market now has 25. That has flipped from the time of the US presidential election, when it was 75% Polymarket, but it was outside the US, and 25 Kalshi, which was just starting inside the US.
34:15 so, it it you know, we we invested last year, and I think if they are able to get this next deal off, given the explosion around the World Cup and now our midterm elections, we probably have we probably have a fivefold increase. It could be even more than that in since our first investment. And that's just because it was so surprising that market share shifted so radically and the World Cup I'm sure you all enjoyed it, but it was brought the whole world together and it certainly gave the prediction markets an incredible boost.
34:59 >> Definitely some of some of Calchies ads throughout the World Cup as well. >> Yes. Yes. Yes. Yes. Oh, yes. Yes, because they were trying to get global attention and the World Cup was a fabulous way to do it. And then I would say there's Zipline. We're looking for drone companies so food delivered delivery whether hot food from restaurants or groceries. Walmart is working with Zipline and with Wing. We own Zipline. and Mana which is an Irish company actually just moved from Ireland because the Irish regulators weren't being as quick to the mark as they needed and so they moved to Oklahoma. Now even the US even in the US nobody moves to Oklahoma, but Tulsa, Oklahoma apparently from a regulatory point of view well and so those two are very interesting. We believe the cost of delivery which in the United States when it comes to a restaurant meal, it the delivery can cost as much as the meal for one person, right? We believe those costs are going to drop by 90% thanks to drone technology.
36:21 So we think there's we think there from a revenue generation point of view this could be a $500 billion plus revenue generation opportunity for those companies. >> We actually have some viewer audience questions, which we'll go to go to now. So firstly, first question, why in Tesla, why the dip, when is the inflection, and why are the hyper scalars being punished? >> Okay. so Tesla so we are glued to each of the earnings calls and every word that Elon and his team utters.
37:04 so in this call, what happened was Elon, who is usually very aggressive, very, you know, he usually sets targets that are, you know, impossible to meet and so forth, as though they are going to be met. But he basically said that they are emphasizing safety when it comes to autonomous vehicles. They've had they've gone 380,000 miles unsupervised, so full fully autonomous driving, without one fatality and or even one accident. so they are they are emphasizing that for now.
37:51 and I think they're waiting for the next software update, which they believe, which would be V15, which they believe is going to be the software that takes them from slowly slowly to all at once. so I think that's one of the things he was trying to telegraph. He also said energy storage margins would be lower than analysts expected because it was a more competitive market. that really doesn't matter to us at all.
38:23 To us the name of the game here is autonomous mobility and we do believe that Tesla is in the pole position to take the lion's share of the US market and we think that the all at once moment will be visible by the end of this year. So he just didn't want people cuz he had he had been saying you know all at once would come this year but he didn't say when and we always thought it was toward the end of this year.
38:54 And then the and then the other the other thing was on Optimus. So humanoid robots according to our research are 200,000 times more complex than a robo-taxi which is also a robot. And so he was making that point. Look, we are manufacturing them but we will not sell them externally probably until next year and some people thought that So if we are right if we are right and the robo-taxi opportunity is the main reason this stock is going to inflect will be here will we're already getting the number of robo-taxis on on the roads a number of different services are calculating that and so we'll begin to see that all at once surface toward the end of this year. If you I don't know if your listeners or viewers know that we post our trades for our public ETFs every day in the US. You can sign up for them on our website and so therefore you know that we've been buying Tesla on the way down as we have SpaceX since it broke its IPO price.
40:16 >> Next question Kathy so a company investors noticed in the portfolio has recently applied, I believe, for a banking license in Australia now. Revolut? >> Revolut. Revolut. >> Revolut. That's right. >> Yes. It has it it is in the US isn't penetrating the US as quickly as it has penetrated Europe. But this is new age banking, online banking, and and and and ancillary services.
40:49 they've got incredible interaction traction in Europe, but there's more competition here in the United States, and my guess is there's probably more competition in Australia than there was in Europe when they started. so we'll see how they do. >> Yep. next question, give us an example of a theme that evolved in a different way. How did you adjust the portfolio? Also, some stock or company sell examples. Is selling harder your longer-term thematic outlook?
41:24 >> So, one of the reasons we talk as much as we do about the bottom-up steps of our process, and the six metric scoring system is that is the discipline that's our that's our sell discipline and our buy discipline, right? and so, we the as scores move down, we tend to move positions down, and so so that's that's the sell discipline.
41:55 in terms of something that has not worked out the way Now, this is not in the venture fund. in the venture fund, a few things have not worked out, but they tended to be names that we in which we had invested very early on in our in our so Chipper was one of them. Chipper was in Africa. Chipper especially was a basically what would be called a a digital wallet company now like like WeChat Pay. Chipper was trying to do that and was having great success in Africa.
42:38 And and we saw some regulations taking place in Africa that were going to disadvantage Chipper and the crypto market was was in difficult straits at the time and it had a crypto exposure. So, we just did not participate in future deals. And you know, because we were so early when we bought that company, I I don't even know if it makes up 0.2 or 0.1% of the portfolio right now. So, and it would they have a tough road to hoe in the years ahead.
43:21 more broadly though, if there's a theme, 3D printing was a technology which now we we consider that part of the robotics platform. but 3D what happened to 3D printing is somewhat similar to what happened to nanotechnology in the '90s, '90s or maybe early 2000s. Everyone thought these were going to be technologies would that were going to be distributed prolifically, you know, especially 3D printing even in the home. And you know, I think it was completely off the mark as we were doing more of the cost analysis. We believe we we had mistaken the cost structure in some ways and when the markets were slowing down the cost did not decline as quickly as we expected.
44:21 and so we we basically pulled a pretty much away from that theme all together in terms of our sell discipline. >> Okay, now we get the questions streaming in now Kathy. So next one is while SpaceX is below the IPO price and you have invested very early and very successfully can you talk about your excitement about its prospects both revenue and profitability wise long term? And same goes if they merge with Tesla. You touched on it a bit but I'm sure the audience would like to know some more.
44:53 >> Okay, sure. So SpaceX is 10 years ahead of any other rocket launch company. No other company has successfully has successfully re-landed a rocket and reused it so that it was successful got into the desired orbit. Blue Origin's the closest. It landed but when it reused the rocket it did not it did not move into the desired orbit and so has not been successful from that point of view. Blue Origin is facing some trouble here because it's launch pad blew up. and so it won't be able to launch again until the end of this year.
45:45 so 10-year lead think about that. Is have you ever heard of any company having a 10-year lead on all of the other competitors? And one of the reasons is no one thought reusable rockets were going to be possible. Just sounded impossible. Just cell phones or cell phone batteries at the base of a Tesla car, you know, again, he was first principles thinking clearly about this. So, that's the launch business, but that's not the biggest business by far. This is just an enabler for the communications market. So, Starlink SpaceX considers that a $1.6 trillion revenue opportunity. I can tell you in our last big ideas, we were using $160 billion as our revenue opportunity. what what Tesla or no, SpaceX is aiming to do is overtake all of global telecommunications, meaning that's its total available market, not just rural areas where it's impossible to get cell service. so, that's the communications market. and now last year, we learned about the orbital data center market. Now, we like to think we're way ahead of the game in thinking about the possibilities associated with new technologies or solving problems. we did not think of orbital data centers. Elon basically served that up about 9 months ago, and we have been developing our models since then.
47:27 we think the name of the game, the winner in the AI race is going to have access to the largest and least expensive computing capacity. That is going to be SpaceX, and so do not us underestimate SpaceX AI and Grok. In fact, pay very close attention to that. It will compete against OpenAI and Anthropic and perhaps Gemini. Gemini's kind of fallen behind. In the meantime, what will it do with these orbital data centers? Well, we already have the answer to that because what has it done with its terrestrial data centers? It has rented them out to Anthropic and Google. Anthropic for $34 billion per gigawatt. Now, they're not taking a gigawatt, but that's the price per unit that they're paying. And Google is renting renting it the Nashville or Memphis facility for $50 per gigawatt. So, XAI has moved from a massive money loser to a very profitable neo cloud company.
48:50 And nobody expected that. Nobody expected that. Now, one thing the latest research and Brett Winton, our chief futurist, is passionate about AI and space. And so, he's doing a sensitivity analysis on Starship, which is which is going to be which is going to help them launch these orbital data centers. Starship, it's it's booster, so the lower half of the rocket will be reusable. The biggest question out there to answer for us and everybody is will the upper part of that rocket be reusable. And the most interesting thing that happened in the the launch I think it was it was in the last 5 to 10 days was that the that part of the rocket did but did not It landed. It crashed into but did not break up. Did And it may be reusable.
50:01 If we can get, you know, one out of every 100 reusable, that changes the potential valuation of this company significantly. And knowing Elon, he intends to get every one of those Starship boosters and upper-level rockets to be reusable. >> The next question is relates to Palantir, which is a a listed name that you own, I believe. Question is, what about what about ontology? Palantir have demonstrated the value. Is this going to be the orchestration layer in AI going forward?
50:38 And by extrapolation, will players like Duol, D U O L, and Hims win? >> all right. So, Palantir is in in our flagship public strategy, the largest soft largest software holding, certainly of this ilk. and we do believe that it has a very special place because and we're using Palantir and I'm asking our research engineers and our business engineers all the time, "Are we doing the right thing using Palantir?"
51:16 Because we know OpenAI and Anthropic and Microsoft. I just listened to a part of its earnings calls tonight. they all have a a desire to move into Palantir space. No one will be able to move into it the way Palantir has because of the way the Palantir is doing it. And on ontology is a very important word. and what that's really saying is that's the language of an individual enterprise. No one else speaks that language. it's all the proprietary data, the workflows, and and and and therefore it's highly customized. The the reason we've had the SaaS stocks have had such a problem, SaaS copalypse, is because of companies like Palantir trying to help companies use AI in the most effective way possible for their businesses. so I didn't quite understand the second part of that question cuz HIMSS is the healthcare company, right? So >> I'm not making the link, I don't think.
52:30 >> that's all all good and we might move on. We can we can answer that later for the night. But yeah, it's September, exactly right. so one or two more questions, Kathy. This next one is the performance of the the bench fund's been very strong, but how do you think about benchmark for the venture fund? I believe it's benchmark agnostic. What is your metric for VC risk-adjusted return given the lack of liquidity in the use in the VC universe? Thank you for the question.
53:00 >> Yes. the Well, we should also distinguish our venture fund by saying it does have more liquid liquidity than a traditional fund, quarterly 5% of NAV to the max. meaning gated there. so in terms of our our objective, and and and I'll also give you the objective for the public funds even though they're not there. Just this is the way we think. So for the venture fund, our minimum hurdle rate of return over a 5-year period is 20%.
53:45 So, that's at a compound annual rate. So, 20% per year on average. For our public funds, and we consider ourselves the closest to a venture capital fund in the public equity markets, that number is 15%. >> Cathy, we're going to we're going to leave it there. Thank you so much for your time. We're delighted to be partnering with you, and look forward to seeing you in September. >> I am looking forward to being in Australia again. I haven't been there since 2019, so I'm really looking forward to to it. And we're just loving our partnership with you, Marty, and all of Associate Global Partners, and really looking forward to meeting your clients.
54:31 >> Thanks, Cathy. Thanks, everyone, for your time today. The ARK Venture Fund is now open and accepting applications for Australian wholesale investors. To learn more, go to associateglobal.com/ark. There'll be also phone numbers on there. If you need to talk to the team, the phone number is 1300 052 054. Thank you for joining us today, and we look forward to speaking with you again soon. I'm Marty Switzer. Have a great day.