AI Should Increase Knowledge Worker Productivity Dramatically
According to ARK’s research, AI should increase the productivity of knowledge workers more than 4-fold by 2030. At 100% adoption, AI spend of $41 trillion could increase labor productivity by -$200 trillion, dwarfing the $32 trillion in knowledge worker salaries and rivaling current projections for global GDP in 2030. If vendors were to capture 10% of value by their products, AI software could generate up to $14 trillion in revenue and $90 trillion in enterprise value in 2030. 

Eoin Treacy's view

Here is a link to the full report.

ARK is big on big on ideas. They don’t typically pay too much attention on where the money is going to come from to fund all that growth. The investment in the computing power necessary to achieve the heady goals of artificial intelligence and all it promises does not happen on its own. It requires sustained access to capital and cashflows to make it worth the cost of foregoing other potential opportunities. Microsoft is attempting to fill that void with its investment in OpenAI.

One of the most important lessons from big bull markets is there is a difference between the market cycle and the technology cycle. Stocks prices can go up and down but that does not interfere with the trajectory of technological innovation.

We had a massive bull market in the 1990s because of enthusiasm around the internet and mobile communications. Prices went up and collapsed, but the promises of the 1990s have largely been delivered; even if personalized medicine is still a wooly concept.

The question for investors is not whether the promises will be delivered but rather how to make money from them. The bad news is the market does a wonderful job of pricing in future cashflows. Very low interest rates allowed cashflows from very far into the future to be dragged forward and the pandemic sped the process up.

Google IPOed in 2004 and sidestepped the Nasdaq crash in the process. It also successfully captured a significant segment of global advertising spend and its operating system is used by about half of the global mobile handset market.

The question in front of us today is whether OpenAI, which remains privately held, has the same potential for disruption of existing norms as Google? The answer can only be potentially. The market answer is funding that expansion is going to require cashflows and debt financing which is much easier with low interest rates.
The ARK Innovation ETF is full of companies long on promises and short on income. It does well when perceptions of interest rate cut potential improves and vice versa.