ARK Venture, a prominent investment firm, predicts that the market for artificial intelligence (AI) software will surge to a staggering $14 trillion by 2030.
William Summerlin, the co-lead of ARK Venture, recently appeared on the show ‘Squawk on the Street’ to discuss ARK’s substantial investment in Tesla and Elon Musk’s noteworthy comments following the Tesla shareholder meeting.
ARK Venture holds Tesla as its top investment, accounting for over 7% of its overall ETF buy rate.
Elon Musk’s endorsement of Kathy Woods’ decision to invest in Tesla, coupled with his comments regarding the company’s future direction, has bolstered ARK’s confidence in its investment thesis.
ARK Venture’s investment strategy revolves around the concept of first principles, delving deep into understanding how new technologies evolve and develop conviction based on that analysis.
In the case of AI, the firm has dedicated considerable time to studying cost declines and the rate at which AI technology progresses.
They have found that AI costs have declined at a rate twice as fast as Moore’s Law, with a 65% decrease from 2012 to 2020.
Moreover, this decline has accelerated to 70% from 2020 to 2023.
The capabilities of AI have become increasingly apparent, surpassing human performance in various tasks.
For instance, self-driving cars powered by AI are already five times safer than human-operated vehicles.
Tesla’s Full Self-Driving (FSD) technology logs approximately one million miles per day in autonomous mode, highlighting AI’s ability to outperform humans in real-world scenarios.
The impact of AI extends beyond autonomous vehicles.
In the realm of knowledge work, where human knowledge workers are paid around $32 trillion annually for tasks like coding and legal agreement review, AI is poised to surpass human abilities.
Domain-specific models are emerging that can outperform humans in multiple knowledge-based tasks.
Software engineering, in particular, has witnessed the productivity-enhancing effects of AI assistants, with software engineers using such assistants proving to be more than twice as productive as those without.
ARK Venture’s investment portfolio includes companies at the forefront of AI technology development.
They believe that the majority of value accrual through AI will take place at the application layer.
The companies that develop AI applications enabling increased productivity for knowledge workers stand to capture substantial value.
Considering that knowledge workers generate $32 trillion in annual revenue, the potential for AI-driven productivity gains is immense.
In ARK Venture’s base case forecast, they anticipate the market for AI software to reach $14 trillion annually by 2030.
This projection underscores the transformative potential of AI across industries and its ability to disrupt traditional companies, including banks and other established entities.
As AI continues to advance, it is expected to drive efficiency, productivity, and ultimately deflation in various sectors.
ARK Venture’s investment strategy aligns with high-growth, cutting-edge technology companies, focusing on innovators in the AI space.
They believe that companies developing AI applications will capture a significant share of the value generated by AI’s disruptive capabilities.
With AI’s potential to revolutionize knowledge work and the broader business landscape, ARK Venture remains optimistic about the future of AI and its transformative impact on the global economy.