Cathie Wood: Disruptive Innovation Is the Best Hedge Against Value Traps

The ARK Invest founder and CEO discusses the latest developments in AI, EVs, and crypto, and explains why she thinks her flagship fund is now a deep value portfolio.

Cathie Wood, founder and CEO of ARK Invest, joined Morningstar to discuss her latest report, Big Ideas for 2025, and share her views on artificial intelligence, electric vehicles, cryptocurrencies, and ARK's strategies in Europe.

Cathie Wood, founder and CEO of ARK Invest, joined Morningstar in a wide-ranging interview, covering her latest report Big Ideas for 2025, artificial intelligence, electric vehicles, cryptocurrencies, and ARK's strategies in Europe.

Cathie's latest report outlines her strongest investment convictions, with artificial intelligence being the biggest one. A couple of weeks ago, Chinese company DeepSeek launched its much cheaper AI, sending shock waves through the market.

Cathie and Morningstar's Valerio Baselli discussed the lesson learned from this and whether it could be a game changer for the sector.

Cathie said that they looked at DeepSeek's model and learned that it is moving down the cost curve associated with this new technology at a rapid rate, but not much different from the rate at which OpenAI and Anthropic are also riding down the cost curve.

She added that inference models, the cost to develop them, are dropping 85% to 95% per year.

Cathie said that the big question with DeepSeek is whether it really cost $6 million to develop that model. She said that is up for grabs, compared to ten times that or more from OpenAI and Anthropic.

She added that there is a big question mark there, because we don’t know how much pre-training there was done before developing that model on a high-end workstation.

Cathie said that the drama was really around, wait a minute, is it going to cost much less because AI model development is moving to the edge to high end workstations instead of cloud providers? That’s where the question marks are. And we don’t have all the answers. But in terms of the cost declines that we’re seeing both on training and inference, DeepSeek is just following that pattern.

Baselli then asked Cathie about the consequences on her investment strategy and where she sees value right now across the artificial intelligence industry.

Cathie said that it all started with hardware, Nvidia (NVDA) and TSM (TSM), and they’re still involved with those in a number of our funds.

She added that they have been evolving their portfolios in terms of weightings, towards software and what we call embodied AI.

Cathie said that software is more platform-as-a-service, like Palantir (PLTR), and embodied AI would be Tesla (TSLA), moving towards autonomous mobility, which could not happen without artificial intelligence.

She added that also, importantly, they’ve been focused on the multi-omics or genomic space, where the convergence between sequencing technologies, artificial intelligence and Crispr gene editing, that convergence is beginning to cure diseases.

Cathie said that while the most, while the biggest opportunity in the next 5 to 10 years from a revenue generation point of view might be autonomous mobility, the most profound applications, we think, could be in the health care space as we move towards curing disease and increasing human longevity.

Speaking about that, when Baselli and Cathie spoke almost a year ago, she was very bullish on electric vehicles and especially robo-taxis.

Since then, several car makers have been rethinking their commitments to EVs, as sales have in general failed to meet expectations, and there has also been a shift in policies concerning electrification of cars, for example in the US.

Baselli asked Cathie if her view on that has changed and, if so, how.

Cathie said that electric vehicles are facing macro headwinds, just like internal combustion engine vehicles.

She added that if you look globally last year, I believe electric vehicle sales were up 12% while internal combustion engine related sales were down by 1%.

Cathie said that if you look at the gas-powered vehicle sector, as recently as 2019, gas-powered vehicle sales globally accounted for 92% of all sales. Today, they account for only 72% of sales.

She added that they do think the shift towards electric, and a bit of a jog towards hybrid, certainly here in the US, but I think that was true around the world, might be distorting the pure battery electric vehicle space.

Cathie said that they do think as costs associated with electric vehicles continue to fall, and we think they will, Tesla is rumored to debut a car for somewhere in the $25,000 range this year. And robo-taxis, we think, could drop to a cost of