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Cathie Wood on How AI Can Double GDP, Bull Case for Bitcoin $1M, Elon’s Trillion-Dollar Pay Package Podcast Episode Description
(0:00) Introducing Cathie Wood
(0:47) Cathie Wood on AI’s once in a lifetime opportunity: doubling GDP, deflation, and more
(9:23) Cathie’s bull case for Bitcoin $1M
(11:38) Opening up access to innovation for retail
(14:32) Cathie explains Ark’s strategies for bull and bear markets
(16:01) Thoughts on Elon’s trillion-dollar pay package
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Cathie Wood on How AI Can Double GDP, Bull Case for Bitcoin $1M, Elon’s Trillion-Dollar Pay Package Podcast Episode Top Keywords
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Cathie Wood on How AI Can Double GDP, Bull Case for Bitcoin $1M, Elon’s Trillion-Dollar Pay Package Podcast Episode Transcript (Unedited)
Speaker: 0
00:02
One of the most disruptive and innovative forces in the ETF world today The investor queen, Cathie Wood. The Arya Innovation ETF trading now near a fifty two week high Returned an astounding 148%.
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00:14
Returning more than a 170% last year, now has $17,000,000,000 under management. Ai conviction is so high because of what I do on a day to day basis. We are doing original research ai to figure out these companies that are going to transform the world.
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00:31
Ladies and gentlemen, please welcome Arya Invest’s Cathie Wood.
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00:47
Well, greetings. I’m so delighted to be here. My maiden voyage. And Ai here to talk about how the world’s going to transform during the next five to ten years, and how much more rapidly we will see real GDP grow and how low inflation is going to be and why. So here we go. Here is a timeline of innovation. And, you can see it goes into the seventeen hundreds.
Speaker: 1
01:20
And our chief futurist, Brett Winton, in conjunction with academics, pulled this together. And What you’re seeing here is the impact of innovation on productivity. And you can see in this ai, we’ve had two great eras. The first one was in the late 1800s, early 1900s, telephone, electricity, internal combustion engine, huge boost in GDP growth.
Speaker: 1
01:53
And in fact, prior to that, for the four hundred years prior to that, real GDP growth had been averaging about 0.6% per year. Very slow. After that, we went into a one hundred and twenty five year period of 3% real GDP growth. So a ai increase from 0.6 to 3%. You have to move, forward to today to see multiple innovation platforms evolving at the same ai, so for the first time in a hundred and twenty five years.
Speaker: 1
02:34
This time, there are five platforms, not three major platforms, and they involve 15 different technologies. This is very important in terms of how to research and analyze the world. It’s not going to be by sector or industry anymore. It is going to be by technology because technology is permeating every sector, every industry, and blurring the lines between them. So you can see five here.
Speaker: 1
03:04
We believe that the productivity uplift here is going to be so strong during the next five to ten years, and I think President Trump’s tax package is going to turbocharge this, that real GDP growth will accelerate from that 3% where it has been for the last hundred and twenty five years towards 7% plus.
Speaker: 1
03:30
And we think that could be conservative. That’s a little more than two times as opposed to the ai uplift before. So get ready. But the other thing that we think is going to happen is that inflation is going to surprise significantly on the low side of expectations. We would not be surprised to see zero percent inflation or less as we exit the tariffs here and and the way they’re, getting through the indexes and and move forward into this new age of technological explosion.
Speaker: 1
04:09
One of the reasons for this explosion is not just the five platforms, so I should have named them robotics, energy storage, artificial intelligence, blockchain technology, and multiomic sequencing. Five major platforms involving 15 different technologies. And here you can see why we think we’re going to see explosive growth. It is the convergence between and among these technologies.
Speaker: 1
04:41
So just to give you, two examples of convergence. In the autonomous mobility space, that is the convergence of robotics, energy storage and artificial intelligence. Now, each one of those technologies or platforms is following its own sai curve, and we are moving into the sweet spot of the s curve now that autonomous taxis are debuting in the case of Tesla in Austin and San Francisco.
Speaker: 1
05:16
Waymo has been there for a while. Just think about that. One s curve feeding another s curve, feeding another s curve. That’s why we’re gonna see explosive growth. Another example is in the health care space.
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05:32
While the autonomous mobility space might be the biggest revenue generator in the short term, we believe that the most profound application of AI is in healthcare, and that’s the convergence of sequencing technologies and artificial intelligence and technologies like CRISPR gene editing.
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05:55
And I think this is the sleeper. It’s the most inefficiently priced part of the market. So you can see why it’s going to be so important to set up research departments by technology, not by sector or industry. And on this last page here, here is what we think is going to happen to the equity market in terms of valuations.
Speaker: 1
06:18
So you can see in the turquoise there, that’s the MAG-six. The MAG-six, it used to be called the MAG-seven, but they threw Tesla out when it wasn’t behaving like the rest of the MAG-six. So you can see from 2019 to 02/2024, the MAG six tripled. They tripled in valuation in the market market cap.
Speaker: 1
06:47
Whereas truly disruptive innovation in the purple at the bottom there went up only 30%. And that’s because investors were playing it sai, and they were, they were investing only in the largest, most cash rich stocks in the market. That was a very difficult time for innovation, for venture capital generally. And you can see what we expect to happen between, well, really the next five years.
Speaker: 1
07:18
The, Meh sai, some of them will do well, some are facing headwinds. Apples in the AI space are well meh. And now we think it is truly disruptive innovation’s time to shine in the market. I feel as though a rubber band has been stretching for the last four years, and it let go with the election of Donald Trump.
Speaker: 1
07:45
That’s when truly disruptive innovation started to to shine and the stock market started to broaden out from the very concentrated meh six strategies into much more widespread disruptive innovation. In other words, risk appetite and time horizon is starting to extend here. And I think the tax package, especially the corporate tax cuts, which most people haven’t focused on, full depreciation of structures, first year they’re put in service, full expensing of equipment, r and d domestic and software in year one.
Speaker: 1
08:29
These are huge, huge incentives to invest now, and I think that’s exactly what’s going to happen. When you can see the difference here, the truly disruptive innovation we would expect now we did this chart at the end of last year, during the next five years to deliver a compound annual rate of return of roughly 50%.
Speaker: 1
08:51
Now we’ve had some of that, so maybe it’s 40 to 45% compound annual rate of change. And this is in the public equity world. In the private world, just wait until you see. With that, disclosures, of course.
Speaker: 0
09:10
They know the disclosure.
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09:11
They know the disclosure. Ladies and gentlemen, Cathy Wood. Cathy, join us.
Speaker: 0
09:15
Thank you. Keep watching, Meh. Thank you sai much for coming. I know you’re very busy.
Speaker: 1
09:26
My pleasure.
Speaker: 0
09:27
You’re projecting in five years, Bitcoin hits 3,800,000.0 per coin. That’s five times the market cap of gold, which is hitting all time high. Walk us through the math here.
Speaker: 1
09:40
So, I’m going to just correct that a bit.
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09:43
So,
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09:45
our official for a bull case is 1,500,000.0.
Speaker: 0
09:50
Okay.
Speaker: 1
09:50
Now what what got us to that 3.8 is using modern portfolio theory. If we were to include, Bitcoin in portfolios at its optimal weight, so maximizing the Sharpe ratio, that would have provided that increment to 3,800,000. Now, believe it or not, that position ai, when we did that analysis, was 19% of a diversified portfolio.
Speaker: 0
10:28
That’s a lot.
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10:29
That’s a lot. Yeah. I have more in ai.
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10:32
Well, you swing for the fences. When your cousins, your when civilians ask you, hey, how much Bitcoin should I own? What’s the number you would say in private to a family member?
Speaker: 1
10:44
To a family member?
Speaker: 0
10:45
Yeah. You you sana protect them. You’re not like, hey, we’re we’re swinging for the fences. This needs to be our home ai. But just
Speaker: 1
10:52
I’ll tell you what I’ve told my children for a long time now is average in I mean, you know, average in, you know, every month, every just average in. And, and and then I would leave it to them in terms of their comfort factor.
Speaker: 0
11:08
Got it.
Speaker: 2
11:09
Kathy, can I ask you about Yes? So Arya has this ability to be a vehicle for a lot of folks that are just living their normal day to day lives. And they want the answer to what it’s gonna do well in the future. Yes. And they can go and they can they can buy your ETFs and then they can participate in that future.
Speaker: 2
11:28
There’s a lot of people that are frustrated, palpably frustrated with an inability to sort of get ahead and break through. Build wealth. First, what is economically happening in in America that prevents so many people? What do you see? Number one.
Speaker: 2
11:45
And then number two, what characteristics and responsibility do retail investors have? If they’re sana YOLO this and if they’re gonna buy this other thing and they’re gonna try to go further out on the risk spectrum, what is their responsibility so that there’s no crying in the casino?
Speaker: 1
12:03
There are ways to access innovation. And one of the question, many ways, of course, we have packaged it up. We don’t look anything like a traditional benchmark. So if they’re diversifying, we’re a very good, source of diversification, especially in trying to, get exposure to innovation. We also have a venture fund.
Speaker: 1
12:28
One of the questions I get regularly from retail investors used to be, why can’t we access the private markets? We know more about those technologies than most of the institutions who are buying them. They have no idea. We’re passionate about it. And so we’ve gotten more vocal and this administration is certainly, becoming more vocal and and and, more more focused on this this particular idea because it is un American.
Speaker: 1
12:59
Right? You have to meet
Speaker: 2
13:00
this Well, you use ChatGPT every day, but you can’t buy OpenAI.
Speaker: 1
13:03
Exactly.
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13:04
But you can buy a lottery ticket. Or you can bet on sports.
Speaker: 1
13:06
And it makes no sense. Right.
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13:08
And
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13:08
I do think it’s going to change. And I think this administration
Speaker: 0
13:11
will change. Should we just have and I’ve advocated for this before on the pod, and I believe you’ve talked about it. 6% of the country, 6% are accredited. You got a small number who are QPs. Should we just have a test? You know, you get a license to own a gun or drive a car, cut hair in this country. Why not just have a simple accreditation test? You understand diversification.
Speaker: 0
13:32
You understand private versus public assets, how to read a balance sheet. Wouldn’t that just solve the problem
Speaker: 1
13:37
real quick? I mean, I used to say, you know, it would be what we’re doing in the investment world right now would be the equivalent of saying you can’t drive because you don’t make enough money or you do not have enough net worth. Take a test.
Speaker: 0
13:54
Take a test. And we we have this big question in the country about polarization of wealth. 60% of the country has some exposure equities, but the people who don’t, they tend to trend towards socialism or handouts. Maybe they don’t feel they’re part of what we experience, which is we meet great founders and you get to do public and private and we get to say, Yeah, you know, I drove in a FSD car when Tesla was private or whatever it is and or I looked at Coinbase when it was private or Uber.
Speaker: 0
14:25
Yeah, I got the sense I sana put one or 2% into that. Yes. Yeah. It does feel profoundly unfair, doesn’t it?
Speaker: 1
14:32
Yes. Yes.
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14:33
Cassie, there’s a lot of, market signals right now that are flashing green. There’s a lot of market signals that are flashing red. Do you feel that you have to position actively to all of those things or do you say, you know what? I can’t control this. I need to look five years out. So how do you manage the risk and how do you view the markets today?
Speaker: 1
14:50
Yes. So the risk question, obviously, we get a lot because our portfolios are volatile. They don’t look like the benchmarks. And, when markets get, into a bearish period, investors tend to hug their benchmarks, and we’re moving in the opposite direction. So I just sana sai, we do what we do. And, yeah, you know, that’s what our ai expect. They don’t expect us to raise cash or or do anything.
Speaker: 1
15:21
They might. That’s their decision. Right? In terms of what we do to control risk during arya will concentrate towards our highest conviction names. We have a scoring system based on management, execution, moat or barriers to entry, product service leadership, valuation importantly, and thesis risk. So, with those scores, we concentrate.
Speaker: 1
15:46
During bull markets, which I do believe we are in a bull market that is broadening out, we tend to diversify because the IPOs start appearing again, and, we have more information on some of the companies we’ve sold during the bear market.
Speaker: 2
16:02
Give us the read on Elon’s trillion dollar pay package.
Speaker: 1
16:05
You know what’s so interesting about it? And this happened with the first model we put out. We put out a model, once a year of Tesla and with our price target five years out. We looked at his first package, and we said, that looks like our model. And we looked at this one, and we said, that looks like our model, and our model is public.
Speaker: 2
16:30
Your ten year forecast has Tesla, 8 and a half, 9,000,000,000,000.
Speaker: 1
16:33
Well, right. And we we put out there five years.
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16:37
Five years.
Speaker: 1
16:37
Yeah. Yeah. So, and I think if he delivers on humanoid robots the way he thinks he is, we don’t have enough in there. So our price target is 2,600. I think it’s at $3.30 today,
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16:52
something like that. Exactly.
Speaker: 1
16:53
Yeah. 2,600. And and we have very little for humanoid then. But what Elon is capitalizing on is this convergence that I meh, robotics, energy storage, and AI. That convergence in the robotaxi space is pretty much the same convergence in the humanoid robot space.
Speaker: 2
17:15
Do you underwrite compensation as part of your model? Meaning, like, when you look at a package like that, if you compare it to other CEOs, Zuck or whomever, different styles of compensation, Bezos famously took no compensation post the IPO. How do you think about that as a motivating factor or necessary condition in 2025 to get results?
Speaker: 1
17:34
I think it’s huge. I mean, I I wish more CEOs would do this. Elon’s not gonna be paid unless unless he reaches these milestones either. So I think it’s very motivating to him. I think it also, you know, it’s, kind of an incentive to, you know, shoot for the stars, but do it in a very first principles way.
Speaker: 1
17:58
You know, everything’s physics based and everything’s milestone based, and he’s very disciplined. If people do not know that, they should. And when a milestone misses
Speaker: 2
18:08
By the way he’s in there on the floor. Ai quick question. As a stock picker, do you care where the companies are incorporated? Like, do you look at Delaware now and say there’s fundamental business risk? I need to sort of and or and or do you cajole these folks now to maybe reincorporate in different places?
Speaker: 1
18:23
We’re not an activist investor. I have to be very careful and say that. We are moving out of Delaware.
Speaker: 2
18:30
You as your own business. Yeah.
Speaker: 0
18:31
Why? Ai own business. You don’t trust them to be predictable? Is that the issue? They’re not predictable now and they’re activist?
Speaker: 1
18:37
Activist. Activist. It’s
Speaker: 0
18:40
In a bizarre way. There was What business do they have overriding the shareholders of Tesla when it comes to a pay package and all those shareholders who did that drive by lawsuit Twice.
Speaker: 2
18:49
They did it twice.
Speaker: 0
18:50
Yes. I mean, it’s unbelievable. That guy owned 10 shares. He he did a 20 act 20 bagger, and then he’s got the right to take away It’s like
Speaker: 2
18:57
Jake Haus doing Uber, Kathy. It’s ai like Kathy Wood. Kathy Wood.
Speaker: 0
19:02
Thank you sai much for sharing so much knowledge.
Speaker: 1
19:05
Of course.
Speaker: 0
19:06
You’re amazing. Thank you so much for taking the time. Thank you.
Speaker: 1
19:09
Awesome. Great to
Speaker: 2
19:09
see you.