Cathie Wood on Fed, Stocks, Jobs Report, Nvidia

Summary

In this interview, Kathy Wood, CEO and CIO of ARK Invest, discusses the current economic backdrop, including the rise in unemployment rates and the loss of corporate pricing power. She expresses optimism about the adoption of technology and innovation, predicting increased productivity and new products and services. Wood also shares her insights on the equity market, the potential for a rate cut by the Federal Reserve, and her views on the future of autonomous vehicles and air taxis. She emphasizes ARK Invest's focus on innovation and long-term investment strategies, despite market volatility and regulatory challenges.

Takeaways

• 📈 The US economic environment shows signs of slowing down, with corporations losing pricing power and an increasing unemployment rate.
• 🔄 The speaker is optimistic about their investment strategy despite the economic slowdown, expecting interest rates to come down and inflation to potentially be negative.
• 💹 There are concerns about regional bank issues and commercial real estate problems, which could exacerbate the banking system's challenges.
• 📊 The speaker forecasts that the unemployment rate could rise above 5%, influenced by the current election year and potential increased government spending.
• 📉 Despite a pullback in stocks, major indices like the S&P and NASDAQ are up year-to-date, with some individual stocks like Nvidia experiencing significant gains.
• 🚫 The speaker does not believe the current equity market is in a bubble, drawing parallels to the late 90s and the tech bubble.
• 🔧 There is a potential for a correction in the chip space due to GPU shortages and over-ordering, but demand is not expected to decrease.
• 🚗 Tesla's fundamentals and challenges in the EV industry are acknowledged, but the speaker remains bullish on Tesla, expecting a significant increase in its value over a five-year horizon.
• 🛸 The speaker discusses the potential of air taxis and their investment in Archer Aviation, despite short-seller concerns and regulatory challenges.
• 💰 The speaker's firm, ARK Invest, is positioned similarly to a venture capital company, focusing on innovation and taking calculated risks in public equity markets.
• 👩‍💼 On International Women's Day, the speaker reflects on her career trajectory, emphasizing the importance of making bosses look brilliant and finding mentors in male-dominated fields.

Q & A

What is the current state of the US economic environment according to the transcript?

The US economic environment is showing signs of corporations losing pricing power and an increasing unemployment rate, which has risen from 3.4% to 3.9%.

What impact does the loss of pricing power have on the labor market?

The loss of pricing power is expected to lead to a decrease in labor hoarding, which in turn will increase the unemployment rate.

How does the adoption of technology and innovation affect productivity and efficiency?

The adoption of technology and innovation solves problems, increases productivity and efficiency, and leads to the creation of new products and services.

What is the expected future of interest rates according to the speaker?

The speaker believes that interest rates should come down and that the Federal Reserve might be surprised at how low inflation goes, possibly even negative for the year.

What are the concerns regarding the regional bank issues mentioned in the transcript?

There are concerns about the reverberations of the regional bank issues, with ongoing outflows from the banking system and increasing problems with commercial real estate, particularly office and multifamily units.

What is the forecast for the unemployment rate in the current year?

The speaker forecasts that the unemployment rate could go above 5% in the current year, considering the current economic environment and the fact that it's an election year.

How does the speaker view the current state of the stock market despite the economic backdrop?

Despite the economic concerns, the speaker notes that the S&P and NASDAQ 100 are up more than 7% year to date, and individual stocks like Nvidia have seen significant gains, suggesting a strong market performance.

What is the speaker's opinion on the possibility of a bubble in today's equity trade?

The speaker does not believe that the current market is in a bubble like the one experienced in the late 90s, as the technological foundations have been developing over the past 20-30 years and are now ready for prime time.

What is the speaker's perspective on the chip shortage and its impact on Nvidia's performance?

The speaker suggests that the chip shortage may have led to over-ordering, and as lead times for GPUs like Nvidia's come down, there might be a need to digest excess inventories, which could lead to a correction in the chip space.

How does the speaker view the future of autonomous taxi platforms and Tesla's role in it?

The speaker is optimistic about the future of autonomous taxi platforms, particularly in the US, and believes that Tesla will capture a significant share of this market due to its extensive data and AI capabilities.

What is the speaker's stance on the potential for an Ether ETF approval by May?

The speaker is optimistic about the Ether ETF approval by May but notes that the biggest obstacle is the issue of staking, which regulators may not allow in the first round.

Outlines

00:00

📈 Economic Outlook and Corporate Pricing Power

The discussion begins with an analysis of the current economic backdrop, highlighting the transition from a period where corporations had strong pricing power to one where they are losing this advantage. The unemployment rate is noted to be on the rise, moving from 3.4% to 3.9%. The panelists express concern about the impact on corporate margins and predict that this will lead to a decrease in labor hoarding post-COVID and an acceleration in technology adoption, which could improve productivity and efficiency. They remain optimistic about their investment strategy in this environment, anticipating lower interest rates and a potential negative inflation rate.

05:02

💹 Federal Reserve's Response and Unemployment Forecast

The conversation shifts to the Federal Reserve's actions, with the panelists discussing the rapid increase in interest rates over the past year and its systemic shock. They mention regional bank issues and commercial real estate problems, suggesting that these challenges are not well understood and could exacerbate regional banks' difficulties. The panelists forecast a potential rise in the unemployment rate above 5%, considering the current economic climate and the upcoming election year's potential for increased government spending.

10:03

📊 Equity Market Analysis and AI Impact

Despite a pullback in stocks, the S&P and NASDAQ 100 have shown significant year-to-date gains. The panelists discuss the possibility of a market bubble, comparing the current situation to the late 90s tech bubble. They argue that the technological landscape has matured, and the seeds for today's growth were planted in the 20 years following the tech bubble. They also address the chip shortage and its impact on companies like Nvidia, suggesting that lead times for GPUs are decreasing, which may indicate over-ordering and the need for inventory digestion.

15:07

🚀 AI Revolution and GPU Market Dynamics

The panelists delve into the AI revolution, emphasizing the significant productivity lift it will bring. They discuss the role of Nvidia and its competitors, including AMD, and the evolving chip strategies of hyperscalers like Tesla. The conversation highlights the potential for specialized AI chips and the broader implications for the GPU market, suggesting that while Nvidia is a leader, the market is not solely its domain.

20:08

🚗 Tesla's Future and Autonomous Taxi Platforms

The discussion focuses on Tesla's prospects in the electric vehicle (EV) industry, despite recent challenges and a 30% drop in stock value. The panelists express confidence in Tesla's long-term potential, with expectations for a 5 to 10-fold increase in value over a five-year horizon. They discuss Tesla's autonomous taxi platform and its potential to capture a significant market share, backed by its extensive data collection and AI capabilities.

25:09

🛫 Investing in Archer Aviation and Regulatory Considerations

The panelists share their investment strategy in Archer Aviation, a developer of air taxis, despite the company's share price dropping by 30%. They discuss the potential for air taxis to alleviate future congestion and the regulatory environment, particularly the FAA's role. The panelists express confidence in Archer's prospects, citing partnerships with Boeing, Stellantis, and United Airlines, and their belief in the company's ability to navigate regulatory challenges.

💼 Women in Finance and Entrepreneurship

In honor of International Women's Day, the panelists reflect on the journey of women in male-dominated fields, including the experiences of the guest, Kathy Wood. They discuss the importance of making bosses look brilliant, seeking mentorship, and identifying unmet needs in the market. Kathy Wood shares her own path, from co-founding a firm to starting her own investment company, and the challenges and successes she has encountered along the way.

Keywords

💡Economic backdrop

The economic backdrop refers to the current state of the economy, including factors like growth, inflation, and employment rates. In the video, the speaker discusses the macro environment and its impact on investments, mentioning the recent jobs report and the unemployment rate as part of the economic backdrop.

💡Pricing power

Pricing power is the ability of a company to set the prices of its goods or services without losing significant market share. The speaker mentions that corporations are losing pricing power, which is affecting their margins and could lead to an increase in the unemployment rate. This concept is crucial as it influences corporate strategies and economic forecasts.

💡Unemployment rate

The unemployment rate is a measure of the number of unemployed people as a percentage of the total labor force. The speaker discusses the recent increase in the unemployment rate from 3.4% to 3.9%, indicating a potential economic slowdown. This statistic is significant as it reflects the health of the labor market and can impact consumer spending and overall economic growth.

💡Technological innovation

Technological innovation refers to the development and application of new technologies that solve problems and improve efficiency. The speaker is optimistic about the adoption of technology, which they believe will increase productivity and create new products and services. This concept is central to the video's discussion on how technology can drive economic growth and change the business environment.

💡Interest rates

Interest rates are the cost of borrowing money and are determined by central banks like the Federal Reserve. The speaker anticipates that interest rates will come down, which can influence investment decisions and the overall economy. Lower interest rates typically encourage borrowing and spending, which can stimulate economic activity.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. The speaker mentions the possibility of negative inflation, which would be a rare event indicating a decrease in the general price level. This concept is important as it affects the value of money and the cost of living.

💡Equity trade

Equity trade refers to the buying and selling of shares or stocks in companies. The speaker discusses the performance of the S&P, NASDAQ, and individual stocks like Nvidia, indicating a strong market despite some concerns about a potential bubble. Equity trade is a key aspect of financial markets and investment strategies.

💡Bubble

A bubble in financial terms refers to a situation where the prices of assets like stocks or real estate become inflated to levels significantly above their intrinsic values. The speaker dismisses the idea of a bubble in the current equity market, drawing a comparison to the late 90s tech bubble. Understanding the concept of a bubble is important for investors to assess market risks and avoid overvalued assets.

💡AI Revolution

The AI Revolution refers to the significant impact that artificial intelligence is having on various industries, leading to transformative changes in productivity and efficiency. The speaker is optimistic about the broad-based benefits of AI, particularly in the GPU (Graphics Processing Unit) market. This concept is central to the discussion on how technology is shaping the future of business and investment opportunities.

💡Regulatory arbitrage

Regulatory arbitrage occurs when companies or investors take advantage of differences in regulatory environments across different jurisdictions. The speaker mentions this concept in the context of the FAA's potential slow response to the development of air taxis, suggesting that innovation may move to countries with more favorable regulations. This concept is important for understanding how global regulatory differences can affect the pace of technological adoption and business strategies.

💡Crypto assets

Crypto assets refer to digital or virtual assets that use cryptography for security, such as Bitcoin and other cryptocurrencies. The speaker discusses the potential of crypto assets as a new asset class and the institutional interest in the ARK 21 Shares Bitcoin ETF. Crypto assets are significant in the context of the video as they represent a growing area of investment and technological innovation.

Highlights

The US economic environment is showing signs of corporations losing pricing power and an increasing unemployment rate.

The unemployment rate has risen from 3.4% to 3.9%, indicating a potential shift in the labor market.

The loss of pricing power is expected to lead to a decrease in labor hoarding and an acceleration in technology adoption.

There is optimism about the investment strategy in the current environment, with expectations of lower interest rates and a potential negative inflation rate.

The Federal Reserve's aggressive interest rate hikes have had a significant impact on the economy, and there are concerns about regional bank issues and commercial real estate.

The unemployment rate could potentially rise above 5%, influenced by the current election year and possible increased government spending.

Despite a pullback in stocks, major indices like the S&P and NASDAQ are still up significantly year-to-date.

There is skepticism about the current equity market being in a bubble, drawing comparisons to the late 90s tech bubble.

The chip shortage and GPU lead times are suggesting a potential over-ordering issue that needs to be addressed.

The AI revolution is expected to be broad-based and benefit many companies, not just those in the GPU space.

Nvidia's stock has seen significant gains, but there are concerns about the company's future and the competitive landscape in AI chips.

The investment in Coinbase was made as a strategic move, despite regulatory challenges, due to its potential growth and less crowded market.

Tesla's stock has faced challenges, but there is a long-term bullish outlook based on the potential of autonomous taxi platforms and AI technology.

The shift in focus from electric vehicles to autonomous driving technology is expected to significantly change Tesla's market position.

Archer Aviation, a developer of air taxis, has received significant investment despite facing short calls and market volatility.

The FAA's regulatory approach is a critical factor in the development and adoption of air taxi services in the US.

The potential for air taxi services is seen as a solution to future congestion problems, with Archer Aviation being a key player in this space.

The institutional interest in the ARK 21 Shares Bitcoin ETF is growing, with discussions ongoing with state treasurers and public pension funds.

The approval of an Ethereum ETF is anticipated, but concerns about staking and regulatory hurdles may delay the process.

Kathy Wood's advice for women in male-dominated fields is to make their bosses look brilliant and seek good mentorship.

ARK Invest's strategy is based on identifying unmet needs and focusing on innovation, which is expected to transform the world and create wealth.

Transcripts

let's talk about the economic backdrop

because your roots right when you

started out you are an economist and you

think about things the macro environment

the jobs report today um some strength

maybe some concerns about things

starting to slow down what does the US

economic environment look like to you

the business environment as well and

what it means for some of your

Investments sure uh it uh it looks like

the um that corporations are losing

pricing power and we are now beginning

to see the unemployment

rate move up it it went up to 3.9% in

this latest report uh from a low of 3.4%

so undeniably it's on its on its way up

now and we do think it's uh because

corporations are losing pricing power

their margins are getting hit it's going

to uh it's going to cause a couple of

things one uh the labor hoarding that

we've seen since covid uh is going to

diminish and and that will increase the

unemployment rate but then the second

thing is it will will accelerate the

adoption of Technologies Innovation

solves problems and one of the things

that it does is increase productivity

increase efficiency uh and create new

products and services so uh we're we're

pretty optimistic about our strategy in

this environment because uh interest

rates should come down I think um I

think that the FED even the FED is going

to be surprised at how low uh inflation

goes we think it could be negative this

year well so CA so Kathy let me ask you

that that's interesting I mean if the

expectations at least according to um

Traders right now is that the First Rate

cut comes in June is that too late in

your view for the FED to start cutting

rates well I think the 24-fold increase

in interest rates in little more than a

year has shocked the system uh we're

beginning to see a reverberation of the

Regional Bank uh issues uh we don't

think they are going away deposits are

still outflowing broadly from the

banking system and uh there are

increasing problems with commercial real

estate most people know about the office

uh problems but

multifamily uh units uh multif Family

Apartments uh we're beginning to see

some distressed sales there as well uh

so I think that's uh uh that problem

isn't as well um understood I think and

uh it's going to cause the regional

Banks even more problems Kathy how

quickly do you think unemployment can go

up this year what are you forecasting

over at ARC well we I wouldn't be

surprised to see uh the unemployment

rate go above 5% um now I'm saying that

knowing that this is an election year

and uh that this Administration probably

will try and spend more than um is

currently in the budgets uh through

executive order or what have you uh so

but but above 5% would not surprise us

uh all right so above five% well that's

interesting all right so we have a good

idea of of your economic and kind of

macro backdrop having said that so here

we are sitting at a day where we're

seeing a little bit of a pullback in

stocks but year to date the S&P still up

more than 7% we're looking at a NASDAQ

100 that's also up more than 7% um you

look at something like the socks is up

around 20% year to dat pick an

individual name like an Nvidia out more

than 80% and I could go on and on and on

um there are many who talk about a

bubble some liking it back to 99 2000

anything in today's Equity trade that

says bubble to

you uh we do not believe we are in a

bubble anything like we were in the late

90s I was there and the Technologies

weren't ready the costs were too high

too much Capital Chase too few

opportunities too soon the seeds for

what is happening now were planted

during the the 20 years that ended in

the Tekken Telecom bubble and they've

been germinating for 25 uh or 30 years

so we're we we believe we're ready for

prime time the one place where we could

see a correction and it's just a

correction we're not calling it the end

of this at all uh is in the chip space

whenever I hear the word shortage and we

started hearing about GPU shortages uh

about this time last year uh as chat GPT

was capturing the imagination of both

businesses and consumers uh so for about

a year we've heard that word and now

we're seeing lead times We Believe come

down for gpus uh for Invidia in

particular uh from the 8 to 11 month

range to the 3 to four month range so

that is uh suggesting uh that there was

probably a lot of uh double and triple

ordering uh as the word shortage was

making the rounds uh and that those

inventories will have to be digested but

is that also because of an increase in

Supply in terms of output or is it

because you think demand is going down

which one is it oh I don't think no no

demand is not going down though there is

something we expect that uh I don't hear

discuss very much and it hearkens back

to the early days of the internet um

there was a moment when the internet was

taking off when Cisco was all the rage

and uh and then Enterprises started

thinking seriously about uh the need to

spend aggressively on this new thing

called the internet and the backbone uh

and they they paused as a lot of

competition started to make the rounds

and uh Cisco went down 50% plus as as

Enterprises were pausing now why are

Enterprises likely to pause or at least

uh go through through an assessment they

have to integrate all of their data

first proprietary data is the secret to

AI success and they have to map out in

excruciating detail their workflows

internally and with uh suppliers and and

customers and so forth uh and this is

going to take time uh so we think this

is this movement is real is going to be

massive uh but we think there's been a a

little bit too much too soon well it's

interesting to hear you say that Kathy

because you and at ARC were very early

uh to acknowledge the impact of AI yet

your Flagship Arc Innovation ETF has not

held shares of Nvidia in about a year um

you do own some of it in your other ETFs

do you have any regrets about not having

held on to the stock or actually

increasing your exposure in the last

couple of years after more than 530 per

gain since 2022 since the end of

2022 yes uh so you're right uh we were

very early into Nvidia 10 years ago when

it was $5 now it's roughly

$800 um and uh we wrote it uh most of

the way up but I'll tell you what we did

and this is as a portfolio manager it's

not one action but the uh the what what

it causes in terms of another action

last year uh we sold uh in the flagship

in Nvidia and put it into coinbase uh

coinbase I believe is up as at least as

much as Nvidia and it is much um less

well

understood uh the whole crypto uh

movement the crypto asset movement

Bitcoin as a new asset class and so

forth is not well understood or or

completely accepted out there so we

prefer to go where others uh are are not

traveling as much and you know as we

were moving out of uh Nvidia we were

saying okay Regulators are trying to

crush uh coinbase here and we were

buying it on every dip Nvidia Happ to

happened to be uh one of the sources uh

for for that purchase so it's not just

what we do on the sell side it is what

we do on the buy side that uh uh that

you have to look at um and yes we do

hold it in the more specialized funds

but we've been taking profits there as

as well for reasons I just described

yeah and to be fair you're right

coinbase is up about 620 per since the

end of 2022 so that compares with about

53% gain in Nvidia is there anything

though Kathy in the Nvidia story um that

would make you rethink the name and want

to become more aggressive on

it yeah if the price came down a lot uh

we would you know the the rate of return

expectations we split would a split do

it cuz I know we've been no no no that

wouldn't change that wouldn't change

anything no the the no split adjusted

than than the price um so you know if

you look at our portfolios what we're

trying to capitalize on with a paler for

example uh are the next stages of this

AI Revolution um what we're seeing in

the GPU side of things is NVIDIA all

praise to Jensen one I mean just

unbelievable uh company execution vision

and so forth and and it's not over it's

going to last a long time but there are

there are going to be many other

companies benefiting from AI the

productivity lift alone is going to be

massive the most massive productivity

lift uh in history we believe and so

this AI Revolution is going to be

broad-based and is going to benefit a

lot of companies in the on the GPU side

of course we have AMD as competition but

many people do not understand that

there's a lot of other surreptitious

competition evolving out there uh each

of the hyperscalers uh is evolving its

own chip strategy you have a Tesla that

uh has designed its own chip for AI chip

for the specialized more specialized

autonomous driving opportunity and I

think you're going to see a lot of

companies developing more specialized

chips um we know that uh Nvidia of

course will segment the market as well

so um we we just think that a lot of the

assumptions for NVIDIA you know that

this is nvidia's market and it's alone

that those are changing well we're

speaking with Kathy Wood if you're just

joining us she's the founder and CEO and

chief investment officer of Ark invest

she joins us from St Petersburg Florida

so it's interesting Kathy too that you

know right everybody seems to be out

there making chips and it's funny we had

a uh conversation yesterday with Chris

Miller who wrote the book chip Wars and

we talked about tsmc that everybody can

kind of design what they want but

ultimately right now they've got to come

back to tsmc as the fabricator to make

them so as you say that I mean you guys

and one of your funds I think late last

month was selling shares of

tsmc um I am curious about then you're

thinking around tsmc there's a story

today too about tsmc winning more than

five billion in Grants for their us chip

plant so money you know certainly being

devoted to them um why maybe pull back a

little bit on tsmc or what is your case

for tsmc in the long run well uh the

case for tsmc is yes it is the

manufacturer of these Merchant chips so

um a very big story there but this is

simply a cyclical call and and it has to

do with that word shortage and tsmc for

example broadcom reported last night

listen to that call in the semiconductor

Solutions part of their business uh they

were up only 4% AI up 35% but everything

else down um so there there are some

cyclical phenomenon out there phenomena

out there that we think are um not

they're not being integrated into the

shortterm um expectations for a number

of stocks hey including includ yeah so

Kathy I want move on to Tesla because

you brought it up a moment ago um you've

been a longtime Bull on Tesla you have

been buying shares recently uh after

selling them for most of 2023 the stock

down about 30% so far this year we

covered the news this week that shipin

from Tesla's Shanghai Factory sank to

the lowest in over a year in February

the challenges facing the EV industry

have been well documented we've talked

about those a lot um why do you still

like Tesla considering all of the

challenges in the EV space and also what

many critics would say are disappointing

fundamentals uh so yes you're right we

were selling last year as it was uh in

the 300 to $400 range it's back to

175 um and this is what portfolio

managers do we have a five-year

investment time Horizon uh for Tesla and

our uh price

expectations uh from here I mean we see

roughly uh a s to 10 fold increase um I

know we're in the process of revising

our model so I'm um not at Liberty to

give you the new number but would that

new number be higher or lower than

2000 well we're pushing it out a year

and uh and therefore it will be higher

because the autonomous taxi platform uh

opportunity will be in full force we

think and then and we believe that Tesla

will get the Lion Share of that market

here in the US if not elsewhere W uh

autonomous taxi platforms are SAS models

uh Tesla's current gross margin is well

it's in the teens right now because it's

been cutting prices but we think

normalized the EV margin is in the 30%

range SAS margins are in the 80% range

most analysts focusing on the stock have

nothing in uh their models or very

little for autonomous our confidence

that autonomous is is um is going to

happen has increased because it has

happened uh we see way more successful

we see a lot of success uh and

Commercial Success that is in China it

can be done uh we think Tesla will

launch a national service and Tesla this

is where AI comes in Tesla has orders of

magnitude more data than all of the

other Auto and tech company companies uh

going after this Market combined and

what's important important about that is

is that it has Corner cases that nobody

else has rare rare occurrences in uh on

the roads that that uh that it has

recorded and it is prepared for but

others aren't they just don't have I I

just want to jump in it's it's kind of

like a running joke with with the Tesla

Community because Elon Musk says every

year we're going to have uh this

autonomous driving technology and every

year since he started saying it what

2017 2018 it has it has failed to

materialize why are you so confident

it's going to happen in the near future

well because it has happened as I just

said uh and so it's not it's not if it

is when that's the most important uh

reason interestingly in in his last

conference call Tesla's last conference

call Elon said yeah I know I've been

wrong about it so I'm not even going to

make a projection I actually thought

that was good and maybe it has a better

shot now uh and we're looking at some of

their hiring and their post job postings

and and seeing Rumblings in different

cities that they're starting to to get

ready hey Kathy something I know I

brought up this with you before but I

think back to our our you and my first

interview back in May of 2014 so almost

10 years ago but you brought up Elon

Musk when he wasn't a household name or

what his company was doing and you

likened him to Thomas Edison and I guess

what I want to ask you you know this

individual you talk with him you

followed him obviously for a long time

do you ever feel you know do you feel

that way still about him in terms of

likening to someone like Thomas Edison

and and how do you find Clarity and feel

comfort in some of the questionable and

controversial things that that Elon

comments on or that he

says yes um well we

um we we are focused on the technology

and we're and as is he uh he is the

inventor of our age and this age is a

very special age because uh the five

major Innovation platforms around which

we have centered our research um are

converging and three of them he is

helping to converge this autonomous taxi

platform opportunity is the convergence

of Robotics autonomous vehicles are

robots uh energy storage they will be

electric right and artificial

intelligence where those are three

separate es curves feeding each other uh

and and and should lead is super

exponential growth he has understood

this idea that Technologies are going to

converge with one another and that is

the way he's been thinking his first

principal's research just because

something's been done one way for a very

long time think Autos doesn't mean it's

going to remain that way and that's why

he's going to win do you ever feel

though that he gets distracted or is or

or can be too much yeah he is so laser

focused on technology um and and he in

in the case of Tesla the electric

vehicle side that is on automatic pilot

they are just scaling and what he is

doing is becoming you know the

manufacturer of factories uh he's trying

to figure out how to automate and

continue to drive down the cost there

his focus is on autonomous now certainly

and uh of course you can say on X he's

distracted but he's really more focused

on the innovation how can I go back to

the future where I started which was in

the payments app space sold to PayPal uh

how can I turn this into not only a

payments app uh but an everything app

and I think he's hard at work doing that

in ways that we don't know yet we are of

course talking with Kathy Wood she's the

CEO CIO and of course founder of Arc

invest joining us from Florida hey Kathy

you're talking about the future of

Transportation uh we got to talk about

Archer Aviation uh one of the most read

stories today is about the company that

you've been buying up uh it's a

developer of air taxis Archer Aviation

your stake around 10% across several of

your ETFs um you're the third largest

investor in the name we should note

shares down roughly 30% so far this year

as our own Sam Potter writes today you

are once again on the other side of a

short call made by Grizzly research last

time you were in a similar spot

regarding a different name too simple

you lost a lot and eventually sold most

of your position so talk to us about why

you believe

in Archer and does it ever worry you to

go against these short

sellers um so uh our um our investment

process is centered around research and

original research um I I'll start with

two simple uh we sold two simple after

the uh CEO who was the techn technology

Visionary left and um so Grizzly got

that right I don't think for the right

reasons although we were in the teeth of

a massive bare Market as well if that

CEO had not left I don't think we would

have sold that stock in the case of

Archer we have a high degree of

confidence in Archer one thing to

understand about Arc is we are the

closest ARC is the closest you'll find

to a venture capital company in the

public Equity markets um and we tread

where others in the traditional Asset

Management world will not go at least on

the public side um when we see a real

opportunity as we're doing our work on

uh autonomous vehicles we concluded that

the cost is going to drop so much that

roads are going to become very congested

in the future much more congested if you

can imagine New York City um and so we

then started doing work about uh uh

transportation in the skies is it

possible yes it is possible the FAA is

the gating factor from a regulatory

point of view there are two companies uh

the FAA is working very closely with and

and I think because of successes

elsewhere in the world uh other

companies are having success uh when

where Regulators have not been as strict

I think there's been a little more

pressure on the FAA uh to pay close

attention here and the two are Archer

and and Joby our confidence went up up

when Boeing which was suing it for

patent

infringement um settled the case and

actually took an ownership position in

Archer as uh as has

stellantis and United Airlines so three

very deep pocketed uh Partners who are

also trying to figure out the future of

Transportation uh and and we know um

that uh they're on their way both Joby

and our to faa's certification seems

like the process is in motion and uh we

haven't had a hiccup and and it has anou

with Abu Dhabi to launch an air taxi

service in 26 and it pending regulation

it has

anou with interglobe to launch an air

taxi service in India both of those have

been much better from a regulatory point

of view but how big of a concern is it

to you that Reg ators here in the US

could drag their feet we did speak with

an airline executive recently uh who is

concerned that the FAA is moving slower

uh than other regulatory bodies when it

comes to this type of

Technology yes and that is why we pay a

lot of attention to regulatory Arbitrage

we've seen Innovation move abroad to

other countries even Amazon uh you know

the FAA wouldn't let Amazon fly its

drones ninth generation uh nearly 10

years ago on its own property property

outside so it went to India and

elsewhere I think the pressure is on the

FAA now uh and I I also think that the

bare Market of 21 and 22 eliminated a

lot of other competition that was

brewing just the funding markets were

closed uh and so I think this Market is

um is uh much more um is that both Joby

and Archer are going to have much more

share than otherwise would have been the

case so we're pretty excited uh about

the possibilities here hey Kathy as you

said you know one of the things about

Arc it's certainly and it's a DNA is

that you go places and take positions

that other people maybe don't do um and

one of the things though that

increasingly I feel like the financial

establishment again is interested very

much so is in crypto and I want to talk

about your spot Bitcoin ETF if I may the

arc 21 shares Bitcoin ETF what can you

tell us about institutional in interest

in it is there or is it mostly uh the

funds that are going into it are mostly

from the retail

side um well we are we know there's

institutional interest because um we're

talking to a lot of Institutions

including State treasures and uh and

public Pension funds and why why is this

because uh they're trying to figure out

if this truly is a new asset class and

if it is they must have a point of view

as a fiduciary uh uh if if there's a new

asset class which is uncorrelated or

shows very low correlation in terms of

returns relative to other asset classes

then what uh What uh an asset allocator

does is it will take a position to

increase returns per unit of risk that's

what happens with low correlation of

returns so definitely now are they

moving Whole Hog not yet and nor are the

big uh wirehouses like Morgan Stanley's

and ubs's Wells Fargo maril Lynch BFA um

they are all waiting to see who are the

winners in terms of the ETFs because

they do not want to commit to an ETF

that will close down uh and uh and sense

and right so and they they they're going

to give it what from what we're hearing

three to six to nine months so

everything the net inflows that we've

seen and um

uh are uh away from those two spaces

really it's uh part of it is our client

base switching from

gbtc into and other client bases into

the ETFs which are much lower fee all

right but I do want to also then go to

the next level and that is um an ether

ETF um being approved maybe in May uh

are you optimistic that it's going to

happen by that may deadline or what

obstacles might be still out there that

it won't make that deadline yeah so the

the biggest obstacle is staking and I

don't think The Regulators will allow

staking in this first round if they

allow the first round at all now um we

and one other firm are are our we'll see

our final deadline in May if they reject

if they reject uh our filings then we'll

have to refile but my guess is um my

guess is they will move more now to a

first come first serve when this next

round goes through so if it's May it'll

be without staking if it's later there's

a better chance for staking if we if

it's in uh I would say 2025 because I

think legislators uh and legislation is

uh starting to get involved here and

taking it away from Simply The

Regulators hey Kathy I I don't want to

leave without that asking you it is

international women's day and I think

about your path um we Tim and I have

been talking a lot to um many women who

have made their way in male-dominated

fields and I'm just curious um how you

think about your trajectory from where

you started and what you've achieved you

started two firms or helped co-found one

and and started your own F firm um how

you think about that path and what is

top top of Mind in terms of um those

other individuals and other women that

are out there that are trying to do the

same yes well I think the most important

thing um in early years is to make your

own bosses look brilliant uh because

younger people younger people coming

into the business know so much more

about technology and where the world is

going almost innately than shall I say

more seasoned investors so just make

your bosses look brilliant and uh

educate them and you know uh generate

enthusi enthusiasm excitement energy

around around ideas uh and and make sure

you have good mentors if they're not

giving you a good shot after you've made

them look brilliant you know time to

move on so that's one thing uh as far as

starting um a business I would

say um make sure there's an unmet need

in our case in the case of Arc um what

we saw was the traditional world going

more passive or Ben Mark sensitive uh

when we saw an explosion of innovation

thanks to the five major Innovation

platforms around which we have centered

our research and investing and so I said

to myself you know someone has to do

this and um uh so we went off and

honestly I think most people thought we

would fail for a couple of reasons one

we put a truly active fully transparent

Equity portfolio inside an ETF rapper

and that had not been done at scale at

all and uh no one no one it was a

passive world that we had entered and

then the second was we're Benchmark

agnostic um you can put us against any

Benchmark and you're going to have to

give us some time after the massive

interest rate shock that we went through

and now we're on the other side and and

you know performing better as a result

over the last year um yeah but over time

these these Innovations are going to

transform the world and create massive

wealth uh with AI as back to back to

that topic as the main catalyst so we

couldn't be more optimistic about

Innovation all right gon to leave it

there Kathy as always so appreciate all

the time that you do give us have a

great weekend Kathy Wood of course the

founder CEO and CIO of AR invest joining

us from Florida Kathy thank you