Several innovative projects that were mistakenly killed by the market, as Ark's Cathie Wood believes crises can create opportunities

ARK Invest founder Cathie Wood, known for investing in innovative industries, recently stated in a market commentary that various indicators currently suggest that the market presents an excellent opportunity to allocate capital towards highly differentiated strategies, highlighting several innovative projects overlooked by the market.

Analysis and Outlook of the Macro Environment

Cathie Wood mentioned that in her 45-year Wall Street career and over 30 years of investment portfolio management experience, 2022 is by far the most chaotic and challenging year, resulting in disproportionately large losses for innovation-focused companies' stocks. Currently, the declining money supply, deteriorating commodity prices, reduced inventories, disruption of innovation in the traditional world order, all point to lower inflation, even deflation. Signals from the bond market seem to confirm this outlook, with the 10-year U.S. Treasury yield below 3.5%, and the yield curve inversion continuing, indicating that long-term U.S. bond rates are lower than short-term bond rates. Both indicators suggest that actual growth and inflation this year may be lower than expected.

Despite this, stock market concerns have surged significantly due to entrenched inflation and fears of rising interest rates. According to the latest survey of U.S. bank fund managers, investors are currently holding a significant amount of cash, the highest level since the 9/11 crisis in 2001; investors are increasing bond holdings for the first time since April 2009; in December last year, the Chicago Board Options Exchange (CBOE) put/call open interest ratio hit a historical high, surpassing levels seen during the dot-com bubble and the global financial crisis. Post-analysis showed that those were excellent opportunities to allocate funds to highly diversified strategies. Wood believes that the current market conditions provide an opportunity for innovative strategies to thrive when the market rebounds. Fear of the future is evident, but crises can create opportunities.

Innovative Projects Wrongly Undervalued by the Market

Wood listed several innovative and promising industries for the future, including the next generation of the internet, automation technology and robotics, and the genetic revolution. Here are a few examples to share.

• ChatGPT: The recent sensation, ChatGPT, is at the top of the list. Artificial intelligence (AI) is advancing at an unprecedented pace, and ChatGPT registered 1 million users in just five days. ChatGPT's scores on the SAT exam have exceeded the national average, indicating its potential to fundamentally change the way we engage in knowledge work.
• Blockchain Technology: Despite the collapse of the cryptocurrency exchange FTX, underlying public blockchains like Bitcoin and Ethereum have not been disrupted in processing transactions, highlighting their transparent, decentralized, and auditable ledgers as potential solutions to fraud and mismanagement associated with centralization. After the FTX collapse, decentralized exchange trading volume increased from 8.35% to 11.44%, a 37% increase. Cryptocurrency exchange total trading volume decreased by 66% year-on-year, from $10 trillion in 2021 to $357 billion in 2022, but the impact of these events increased Coinbase's share in fiat trading volume, excluding Binance International, from 22% in June to 40% in December.

• Autonomous Driving: In 2022, General Motors' Cruise expanded its autonomous taxi service to most areas of San Francisco, the first major U.S. city to do so, and later expanded to Phoenix and Austin by the end of the year. It compressed the commercialization time from 9 years in San Francisco to 90 days in Austin. In addition, Tesla expanded permission for its FSD Full Self-Driving beta software to all eligible car owners in North America, reflecting Tesla's confidence in its features.
• Space Exploration: In 2022, SpaceX nearly doubled the number of rockets launched to 61. It reused the same rocket within a short 21 days, a significant improvement from the 356 days needed for the first rocket reuse.

Recent Frequent Additions to Coinbase

The U.S. compliant cryptocurrency exchange Coinbase is a stock that Ark Invest has been frequently adding to recently, with three funds making purchases, accounting for 3.87% of Ark's assets, making Ark one of the major shareholders of Coinbase with a 2.95% stake. Despite the recent aggressive buying, Ark's average cost of holding Coinbase remains at $254.65, indicating a long road ahead for profitability.