Transcript
0:00 Greetings, everyone. It is time for Arc's Big Ideas 2026, and I'm pretty excited about it. And I have to tell you right up front, I'm standing on the shoulders of the research team and actually the marketing team and compliance and, you know, really almost all the teams at Arc. Especially Katie, Keith, and Walker, who spent 8 hours to 16 hours a day in the last few days to really make this the final push. So, very happy to introduce it to you again.
0:38 And so, I'll go very quickly through what hit me as we have been going through our research this past year and how we crystallized it in Big Ideas. I'd like to start with a section we're calling the Great Acceleration. And what we're trying to communicate is that AI is in early stages still. And that it has miles to go. Sure, it feels like it's a hype cycle because capital spending in the tech and telecom sectors as a percent of GDP is nearly as high now as it was during the tech and telecom bubble.
1:25 But if you will remember, the tech and telecom bubble laid fiber and most of it remained dark. Today, the GPUs are driving this cycle. And and I'll steal from Brad Gerstner at Altimeter. He's saying, "Those aren't dark. They're in short supply and they are being used." And we agree completely with that. We compare this capital spending cycle to the railroads in the 1800s.
2:01 That got up to 5 to 6% of GDP. And then the automobile explosion in the early 1900s. That got up to 3 to 4% of GDP. And then we get to the tech and telecom bubble. That, when you added software and hardware com equipment together, that was about the same size as the auto capital spending cycle. And we're about there now in this cycle with AI, robotics, energy storage, multi-omic sequencing, blockchain technology. But we think we're going a lot higher. We think we will go up to our capital spending as a percent of GDP will rise to 12%.
2:56 And I'll get into some of the reasons why, but key is productivity, as usual. Economics, productivity. So, we've we believe we're fairly early in this cycle. So, let me before I go on to some of the productivity gains that we see, also highlight that as a result of this investment boom and the increased productivity that we see, we believe that real GDP growth will accelerate towards the 7% plus range by 2030.
3:35 The ingredients are all there, and it is also a hallmark of technology revolutions that we see a step function change in GDP. The 400 years until 1900, for example, global GDP averaged 0.6%. And then in the late 1800s, early 1900s, of course we had the railroads, we had telephone, electricity, the internal combustion engine technology revolution.
4:10 That 0.6% real GDP growth went to 3% for the last 125 years. And so, that was a fivefold step up in GDP growth. We're saying maybe a two and a half fold step up, but I actually think that's conservative given the five innovation platforms evolving at the same time. Robotics, energy storage, artificial intelligence, multi-omic sequencing, and blockchain technology. And those innovation platforms are converging.
4:48 And that's what's causing the great acceleration here. So, I'll take you through a few of the stats and the aha moments we've had this year as we were doing our research. So, Frank and Joseph on the AI infrastructure side. So, we believe that the data center infrastructure cycle, which is at about 500 billion now, up from up two and a half times from pre-chat GPT, that that is actually going to 1.4 trillion dollars per year by 2030. Thank goodness we had the chat GPT moment because that was the aha moment for all of us as we were saying, "Wait a minute. Look what I can do with this. This is a miracle." And now we see as we've done the analysis, and you'll find this in in Big Ideas, that that $20 subscription that each of us pays here at Arc, well, actually Arc pays for it, but the $20 per seat subscription, and in a few cases the $200 per month subscription for those heavy users, the $20 were paying off in about a half days work. So, the payoff time is almost nothing as we are able to do our research and leverage our time enormously.
6:31 We also think, and this is this is somewhat controversial because software stocks have been going through a very difficult time ironically through this AI boom. And it is because of the disruption that AI is going to cause to in particular SAS, but all legacy software. We think that software will grow, the market will grow at roughly 19% in our bear case to I think is 54% per year in our bull case up from 14% per year over the last 5 to 10 years.
7:19 But you have to get on the right side of change. A lot of those software companies are in the private markets, Open AI, Anthropic, XAI. And and in the public markets, the real success story of course has been in the platform as a service part of the tech stack. And that of course, the poster child there is Palantir. So again, have to get on the right side of change. I'm not saying that all the SAS providers are going to be crushed. It's going to be like all legacy players, you'll probably have, you know, the market consolidate and there'll be one very big player, you know, Walmart in retail, for example, is is is how we're thinking about this. Or as we get into fintech and blockchain technology and DeFi disrupting the traditional financial world, JP Morgan's probably going to be fine. It is harnessing these technologies and it probably will cut consolidate the market. I'd like to flip back to the consumer side. So, I've just given you more the enterprise side. On the consumer side, so Nick and Varshika have done this work, and I think they might have been two years ago the first ones to even think about this concept of an AI purchasing agent, or now we're calling them AI assistants or and and other such things.
8:57 But based on that work, and you can see it in Big Ideas, they believe that the advertising market is going to go to 65% in this AI space, AI generated space. And that shopping, commerce will be I I think that that it will be 25% of it will be powered by the AI space.
9:29 So, stay tuned to or definitely take a good look at their blogs and their Big Ideas chart. David in the Bitcoin realm, it's been controversial this year because we had the drawdown after the flash crash 1010 in October. We think that a lot of the deleveraging associated with really that was a software glitch I think at Binance The that that deleveraging automated deleveraging caused $28 billion of carnage. We think we've worked through that now and I think the main question on Bitcoiners minds is, okay, are we finished with the traditional four-year down draft? Every four years a down draft in the cycle.
10:28 We're beginning to think we are, although we could base here in the 80 to 90 thousand dollar range for a while, but we do believe the next inflection is up. And while I know I got we got a lot of publicity this year because we talked about stable coins usurping one of the roles we expected Bitcoin to play. Now, we expected this 10 years ago before stable coins happened on the scene. but in terms of remittances and emerging market activity, we're seeing stable coins usurp that role that we thought Bitcoin would would provide. That doesn't take away though from what we think ultimately will happen to Bitcoin.
11:18 Bitcoin's role as digital gold has miles to go. Interestingly, and you'll see this in my New Year letter, the correlation between Bitcoin and gold has been almost non-existent over Bitcoin's life, 0.14. nonetheless, we do think it is not only a risk on asset thanks to the new technology, but it is also a risk off asset. It's a hedge against inflation.
11:50 Its growth rate is lower than gold's growth rate and I'll bet gold miners are doing their darndest to get more of that stuff out of the ground now that they're being paid so much more. That can't happen with Bitcoin. And Bitcoin miners mathematically metered to top out at 21 million units. So, we do think it will be a very important store of value going forward, particularly as we go through the intergenerational wealth wealth transfer that we expect during the next during the next 5, 10, 15 years.
12:34 we also had a lot more on DeFi and tokenized assets. Stable coins just a little bit more on that. I think we passed 300 billion dollars globally in stable coins. We saw a very large increase in the in tokenization on on public blockchains up to 19 billion. Now, that's a large increase. I think that was a tripling or maybe even more in the last year.
13:09 But we ultimately think that's going to 11 trillion. Highlighted by public equities, sovereign debt, and bank deposits. So, it's going to be a very big market and we are putting out a DeFi quarterly now to accompany our Bitcoin quarterly. So, stay tuned. Pay a Pay a lot of attention there because there's a lot of excitement brewing and there will be a lot of dislocations in the financial sector because of this wholesale shift really to a new technology. And so, we're pretty excited about that.
13:54 The other thing we'd like to highlight is, you know, these these companies, their their productivity, the companies that are emerging, their productivity is astonishing. Tether, for example, last year, we believed believed delivered 50 million dollars per employee. that is unheard of. Unheard of. But we think the the capitalizing on all of these new technologies is going to drive productivity gains much higher than people can even postulate right now. And with that, while many people are afraid given the robotics movement of, you know, and AI, everyone being thrown out of jobs, we disagree.
14:45 We think this is going to be one of the greatest opportunities for the entrepreneurial spirit in history. Especially because you can go to chat GPT or Grok and and say, you know, I think there's a huge unmet need for this, that, or the other product or service. Think about it. And I would like to start that business. Boy, when we started ARK, there I would have loved to have a starting point like that. And you can work with chat GPT, xAI, Grok to build your business. Try it. If you're looking for a job, figure out what's that unmet need. I'm going to try and start that business and believe me, starting a business very exciting, exhilarating actually, but full of risk. Remember, 90% of all startups fail. So, just go in soberly that way. Make sure you're addressing a real unmet need. And then harness AI, harness blockchain technology, harness any of these new technologies.
15:56 Now, when we get to multiomics, normally I start glazing over. But I think multiomics, which is life sciences and really the convergence among sequencing technologies, artificial intelligence, and new technologies like CRISPR gene editing. What are we doing? We're diagnosing cancer in stage one or before stage one. Polyps also shed into the blood and this is just with blood tests.
16:30 We're collapsing the cost of drug discovery and development. We think it could drop from 2.4 billion for one drug to roughly 700 million over the next four years and that of course includes the failures along the way. And then most provocatively and and Shay has done an amazing job of documenting what a cure is going to be worth and I have to give Brett Winton incredible credit as he partnered with Shay on this project to try and figure out how much is a cure worth.
17:12 And we think while the cure for HAE, which is a very rare disease, would be worth 11 million dollars. One and done. You get this treatment and you're done. That's Intellia's trial right now and it's in vivo. You don't have to go through any excruciating preconditioning. It could be worth 11 million.
17:42 That's how much it would save the system. But they'll probably be able to charge 3 million. And believe me, insurance companies, they will have no problem with that. So, take a look at that section. It's It's fascinating. It's the best one we've ever done. And then we get into reusable rockets. And it is astonishing. SpaceX 10 years ahead of any competitor. It landed its first reusable rocket in 2015.
18:16 And now it owns two-thirds of the satellite market. And something like 85% of all of the upmass put into orbit. And of course now we've discovered a new use case. And it couldn't happen without reusable rockets. S S data centers in space. And this is a fairly new introduction to, you know, our line of thinking and of course inspired by Elon himself. So, take a look at at our reusable rocket section and be inspired by that whole new world that's being developed. Many people when they're talking about automation and AI and unemployment, one of the things I say is, wait a minute, there are two new worlds evolving here. Outer space, a completely new world. All kinds of jobs are going to be associated with that.
19:21 And then in the digital realm. Now, thanks to blockchain technology, we are seeing immutable property rights in the digital realm for the first time. The the best way to lift people and countries out of poverty is with immutable private property rights. And that's what we have and it's just starting.
19:54 so, we're pretty excited about that. and then we've got distributed energy. We've done a lot with nuclear power this past year. Daniel and Sam Chorus, who've also done our reusable rocket work. it's excellent research. they have done our work on nuclear power as well. And it is shocking to see how regulation stunted the growth of nuclear in the mid-70s.
20:34 If regulation had not stopped the cost declines for developing nuclear plants from continuing. electricity costs today would be 40% lower than they are now. so, we have high hopes that nuclear power is going to help us once again as they scale, drive down the cost of electricity and be a counterforce to the demands that AI and data centers are are placing on our grid right now.
21:18 so, take a look at that work. and then of course of course Tasha Keeney and Daniel again on other autonomous vehicles. So, we've got robots and rockets, other autonomous vehicles. Of course, robotaxis. And we believe that we are in the midst of the birthing of the robotaxi market. and you've seen our work there.
21:50 we've updated it to show that Tesla's competitive edge over Waymo is is has well, at least according to our estimates, increased. We used to think that their cost structure, Tesla's cost structure, would be 35% lower than Waymo's. but as we have refined our analysis, we now believe it's going to be 50% lower. And it is very interesting to watch Uber and others trying to insinuate themselves into this space.
22:28 They know it's important, but we have been saying all along and still believe that Uber and others will be lead generators for Tesla and Waymo, which will probably be number two as they scale throughout the US. And one of the most interesting piece of pieces of work that Tasha and Daniel did this year was on the percent of urban miles that Uber covers right now in the United States. It's about 1%. And so, we did a calculation how many autonomous vehicles would Tesla have to produce or Waymo to cover 1% of urban miles?
23:19 that would be 140,000 units. Now what what would be the number? How many vehicles would it take to cover all urban miles? And that number is only 24 million. That is less than 10% of the installed base of ve- of autos in the US today. So, that is a US that is US analysis.
23:55 And we know that auto sales right now they're at roughly 15 million per year. That gives you a sense of how much the auto market, in terms of vehicles produced could shrink and yet we could still cover with autonomous vehicles which obviously have much higher utilization than personal vehicles. We drive our cars 4 to 5% of the day.
24:28 Whereas an autonomous vehicle could be 50, 60% of the day. so, you get the sense of how much the vehicle market could shrink and still we'd be able to satisfy 100% of all the urban miles in the United States today. and we do think that and we still think that the autonomous vehicle market will drive 30 I think it's 35 billion, 34 trillion, sorry.
25:04 Billions, trillions. 34 trillion dollars in market cap by 2030. In 2030 30 trillion for the global ecosystem, not only the auto providers and the lead generators, but most importantly the platform providers. And they will get the lion's share of the economics as Tasha and Daniel show you. And then finally, autonomous logistics.
25:38 autonomous trucks will cut delivery costs by 60%. drones and rolling robots are also going to cut delivery costs dramatically. Did you know there already 4 million deliveries per year by drones? now, to be sure, Zipline, one of the companies in our venture fund is responsible for I think half of those.
26:10 but we believe that the cost to deliver by drone will cut delivery costs right now, DoorDash $15 per to less than a dollar. So, a 90% reduction over time. So, this is a another huge market percolating out there. And we're so excited because we believe we're now in the prime time for the reason I founded ARK. I founded ARK in 2014 for this reason.
26:50 I felt that ARK's research would fulfill an unmet need. And I'm very proud of the research we're doing. It's the kind of research that investment banks used to do when the M&A market was much more vibrant than it has been for the last 4 years. in the under the last FTC, it was shut down. So, our research has met or fulfilled an unmet need. And we're so happy to see our research in the startup decks of so many startups out there because what are startups doing? They're heads down trying to innovate as fast as they can. And what are we doing? We're helping to size the markets they're going after. I think that the wall of worry that we have been facing in the last few years around innovation is great. I think it's great because of course, there are risks associated with innovation. but we think that the flywheel now is in place so that this innovation age is unstoppable.
28:04 And we'd welcome you to read our big ideas 2026.