Transcription
Greetings everyone. It is time for ARCs big ideas 2026 and I'm pretty excited about it and I have to tell you right up front I'm standing on the shoulders of the research team and actually the marketing team and compliance and you know really almost all the teams at ARC uh especially Katie Keith and Walker who spent eight hours to 16 hours a day in the last few days to uh really make this the final push. So very happy to introduce it to you again.
Uh and so I'll go very quickly uh through uh what hit me uh as we have been going through our research this past year and how we crystallized it in big ideas. I'd like to start with uh a section we're calling the great acceleration. uh and what we're uh trying to communicate is that AI is in early stages still and that it has miles to go. Uh sure it feels like it's a hype cycle because capital spending in the tech and telecom uh sectors as a percent of GDP is nearly as high now as it was during the tech and telecom bubble. Uh but if you will remember the tech and telecom bubble laid fiber and most of it remained dark. Uh today uh the GPUs are driving this cycle and uh and I'll steal from uh Brad Gersonner at Altimter. He's saying those aren't dark. They're in short supply and they are being used. Uh and we agree completely with that.
uh we compare this capital spending cycle uh to the railroads in the 1800s that got up to five to six% of GDP and then uh the automobile uh explosion in the early 1900s that got up to 3 to 4% of GDP and then we get to the tech and telecom bubble that when you added software and hardware comm equipment together. That was about the same size as the auto capital spending cycle. And uh we're about there now with in this cycle with AI, robotics, energy storage, uh multiomic sequencing, blockchain technology. But we think we're going a lot higher. we think we will go up to our capital spending as a percent of GDP will rise to 12%. Uh and I'll get into some of the reasons why but key is productivity as usual economics productivity. Uh so uh we've we believe we're fairly early in this cycle.
So let me uh before I go on to some of the productivity gains that we see uh also highlight that as a result of this investment boom uh and the increased productivity that we see we believe that real GDP growth will accelerate towards the 7% plus range uh by 2030. uh the ingredients are all there and it is also a hallmark of technology revolutions that we see a step function change in GDP. Uh the 400 years until 1900 for example uh global GDP averaged 0.6%. And then in the late 1800s, early 1900s, of course, we had the railroads, uh we had telephone, electricity, the internal combustion engine, a technology revolution. Uh that 0.6% real GDP growth went to 3% for the last 125 years. Uh and so that was a fivefold step up in GDP growth. We're saying maybe a two and a half uhfold step up, but I actually think that's conservative uh given the five innovation platforms evolving at the same time. Robotics, energy storage, artificial intelligence, uh multiomic sequencing, and blockchain technology. Uh and those innovation platforms are converging. uh and that's what's causing the great acceleration here.
So I'll take you through uh a few of the stats and and the aha moments we've had this year uh as we were doing our research. So Frank and Joseph on the uh AI infrastructure side. Uh so we believe that the data center uh in uh infrastructure cycle which uh is at about 500 billion now up from up two and a half times from prej chat GBT that that is actually going to 1.4 trillion dollars per year uh by 2030. Thank goodness we had the chat GBT moment because that was the aha moment for all of us uh as we're saying wait a minute look what I can do with this this is a miracle and now we see as we've done the analysis and you'll find this in uh in big ideas that that $20 subscription that each of us pays here at ARC uh well actually Arc pays for it but the $20 per seat um subscription and in uh a few cases the $200 uh per month subscription uh for those heavy users uh the $20 we're paying off in about a half days uh work. So the payoff time is almost nothing uh as we are able to do our research and leverage our time enormously.
Uh we also think and this is this is somewhat controversial because software stocks have been going through a very difficult time ironically through this AI boom and it is because of the disruption that AI is going to cause uh to the in particular SAS uh but all legacy software. Uh we think that uh software will grow the market will grow at roughly 19% in our bare case to uh I think it's 54% per year in our bull case uh up from 14% per year over the last 5 to 10 years. Uh but you have to get on the right side of change. A lot of those software companies are in the private markets, uh, OpenAI, Anthropic, XAI, uh, and and in the public markets. The real success story of course has been in the platform as a service part of the tech stack and that of course the poster child there is Palunteer. So again, have to get on the right side of change. I'm not saying that all the SAS providers are going to be crushed. It's going to be like all legacy players. You'll probably have, you know, the market consolidate and there'll be one very big player. You know, Walmart in retail, for example, uh is is um is how we're thinking about this. or as we get into fintech and blockchain technology and DeFi disrupting the traditional financial world, JP Morgan's probably going to be fine. It is harnessing these technologies and it probably will consolidate the market.
Um, I'd like to flip back to the consumer side. So, I've just given you more the enterprise side on the consumer side. So uh Nick and Vika have done this work and I think they might have been two years ago the first ones to even think about this concept of an AI purchasing agent or now we're calling them AI assistants uh or and and other such things uh but based on that work and you can see it in big ideas they believe that the advertising market is going to go uh to 65% uh in this AI space AI generated space uh and that shopping commerce will be I I think that that it will be 25% of it will be powered by the AI space. Uh so stay tuned to uh or definitely take a good look at their blogs and uh their big ideas chart.
David in uh the Bitcoin realm uh it's been controversial this year because uh we had the draw down after the flash crash 1010 uh in October. We think that a lot of the deleveraging associated with really that was a software glitch I think at Binance uh that that deleveraging automated deleveraging um caused 28 billion dollars of carnage. Uh we think we've worked through that now and I think the main question on uh Bitcoiners minds is okay are we finished with the traditional four-year downdraft every four years a downdraft in uh the cycle uh we're beginning to think we are uh although we could base here in the 80 to 9,000 range for a while but we do believe the next inflection is up. And while I know I got we got a lot of publicity this year because we talked about stable coins usurping uh one of the roles we expected Bitcoin to play. Uh now we expected this 10 years ago before stable coins happened on the scene. Um but uh in terms of remittances uh and emerging market uh activity, we're seeing stable coins usurp that role that we thought uh Bitcoin uh would would provide. That doesn't take away though from what we think ultimately will happen to Bitcoin. Bitcoin's role as digital go gold has miles to go. Interestingly, and you'll see this in my New Year letter, the correlation between Bitcoin and gold has been almost non-existent over Bitcoin's life.14.
Um, nonetheless, we do think it is not only a riskon asset thanks to the new technology, uh, but it is also a riskoff asset. It's a hedge against inflation. Uh, its growth rate is lower than gold's growth rate. And I'll bet gold miners are doing their darnest to get more of that stuff out of the ground now that they're being paid so much more. That can't happen with Bitcoin. Uh, and Bitcoin miners mathematically metered to top out at 21 million units. Uh so uh we do think it will be a very important store of value going forward uh particularly as we go through the intergenerational wealth wealth transfer that we expect during the next um during the next 5 10 15 years.
Um, we also uh had a lot more on DeFi and tokenized assets. Uh, stable coins, just a little bit more uh on that. I think we passed $300 billion globally in stable coins. We saw a a very large increase in the in tokenization on on public blockchains up to uh 19 billion. Now that's a large increase. I think that was a tripling or maybe even more in the last year. But we ultimately think that's going to 11 trillion uh highlighted by public equities, sovereign debt and bank deposits. So it's going to be a very big market and we are putting out a DeFi quarterly now uh to uh accompany our Bitcoin quarterly. Uh so stay tuned pay a lot of attention there uh because there's a a lot of excitement brewing and there will be a lot of dislocations uh in the financial sector uh because of this wholesale shift uh really to a new technology uh and so we're pretty excited about that.
Um, the other thing we'd like to highlight is you know these these companies their their productivity the companies that are emerging their productivity is astonishing. Uh Tether for example last year uh we believed uh I believe uh delivered uh $50 million per employee. Um that is unheard of unheard of. Uh but we think the the capitalizing uh on all of these new technologies is going to drive productivity gains much higher than people can even postulate right now. And with that while many people are afraid given the robotics movement of you know and AI everyone being thrown out of jobs we disagree. We think this is going to be one of the greatest opportunities for the entrepreneurial spirit in history. Especially because you can go to chat GBT or Grock and and say you know I think there's a huge unmet need for this that or the other product or service. Think about it. And I would like to start that business. Boy, when we started Arc there, I would have loved to have a starting point like that. And you can work with uh ChatgBT uh XAI, Grock, uh to build your business. Try it. If you're looking for a job, uh figure out what's that unmet need. I'm going to try and start that business. And uh believe me, starting a business very exciting, exhilarating actually uh but full of risk. Remember, 90% of all startups fail. So just go in soberly that way. Make sure you're addressing a real unmet need. And then harness AI, harness blockchain technology, harness any of these new technologies.
Now when we get to multiomics normally I start glazing over but uh I think multiomics which is life sciences and really the convergence among sequencing technologies uh artificial intelligence and new technologies like crisper gene editing. What are we doing? We're diagnosing cancer in stage one or before stage one. Polyps also shed into the blood. And this is just with blood tests. We're collapsing the cost of drug discovery and development. We think it could drop from 2.4 billion for one drug uh to roughly 700 million over the next four years. And that of course includes the failures along the way. And then most provocatively and and Sheay uh has done an amazing job of documenting uh what a cure is going to be worth and I have to give Brett Winton uh incredible credit as he partnered with Sheay uh on this project to try and figure out how much is a cure worth. And we think while the cure for HE, which is a very rare disease, uh would be worth $11 million. One and done. You get this treatment and you're done. That's Intellia's um trial right now and it's in vivo. You don't have to go through any excruciating preconditioning. um it could be worth 11 million. That's how much it would save the system. But they'll probably be able to charge three million. And believe me, insurance companies, they will have no problem with that. So take a look at that section. It's it's fascinating. It's the best one we've ever done.
And then we get into reusable rockets. And it is astonishing. SpaceX 10 years ahead. of any competitor. It landed its first reusable rocket in 2015 and now it owns twothirds of the satellite market and something like 85% of all of the upmass uh put into orbit. And of course now uh we've discovered a new use case and it couldn't happen without reusable rockets uh data centers in space and this is a fairly new introduction to you know our line of thinking and of course inspired by Elon himself. So take a look at uh at our reusable rocket uh section and be inspired by that whole new world that's being developed. Many people when they're talking about automation and AI and unemployment. One of the things I say is wait a minute there are two new worlds evolving here. Outer space a completely new world. All kinds of jobs are going to be associated with that. And then in the digital realm now thanks to blockchain technology we are seeing immutable property rights in the digital realm for the first time. The the best way to lift people and countries out of poverty is with immutable private property rights. and that's what we have and it's just starting. So we're pretty excited about that.
Um, and then we've got distributed energy. We've done a lot with nuclear uh power this past year. Daniel and Sam uh Chorus who've also done our uh reusable rocket work. It's excellent research. they uh have done our work on nuclear power as well and it is shocking uh to see how regulation stunted the growth of nuclear in the mid-70s. If regulation had not stopped the cost declines for developing nuclear plants from continuing, electricity costs today would be 40% lower than they are now. So we have high hopes that nuclear power is going to help us uh once again uh as they scale drive down the cost of electricity and be a counterforce to the demands that AI and data centers are are placing on our grid right now. So take a look at that work.
And then of course of course Tasha Keiny and Daniel again on um other autonomous vehicles. So we've got robots and rockets uh other autonomous vehicles of course robo taxis and we believe that we are in uh the midst of the birthing of the robo taxi market. and uh you've seen our work there. We've updated it uh uh to show that Tesla's competitive edge over Whimo is is has well at least according to our estimates increased. We used to think that their cost structure Tesla's cost structure would be 35% lower than Whimo's. but as we have refined our analysis, we now believe it's going to be 50% lower. And it is very interesting uh to watch Uber and others uh trying to insinuate themselves into this space. They know it's important, but we have been saying all along and still believe that Uber and others will be lead generators for Tesla and Whimo, which will probably be number two as they scale throughout the US. And one of the most interesting piece of pieces of work uh that Tasha and Daniel did this year was on uh the percent of urban miles uh that Uber covers right now in the United States. It's about 1%. And so we did a calculation. How many autonomous vehicles uh would Tesla have to produce or Whimo uh to cover 1% of urban miles? That would be 140,000 units. Now what uh what would be the number? How many vehicles would it take to cover all urban miles? And that number is only 24 million. That is less than 10% of the installed base of v of autos uh in the US today. So that is a US uh that is US analysis. And uh we know that auto sales right now they're at roughly 15 million uh per year. That gives you a sense of how much the auto market in terms of vehicles produced could shrink and yet we could still cover with autonomous vehicles which obviously have much higher utilization than personal vehicles. We drive our cars four to 5% of the day whereas an autonomous vehicle could be 50 60% of the day. So you get the sense of how much the vehicle market could shrink and still we'd be able to satisfy 100% of all the urban miles in uh the United States today. and we do think that uh and we still think that the autonomous vehicle market will drive 30 I think it's 35 billion 34 trillion sorry billions trillions um 34 trillion dollar in market cap uh by 2030 in 2030 trillion for the global ecosystem system, not only the auto providers and the lead generators, but most importantly the platform providers and they will get the lion share of the economics as Tasha and uh Daniel show you and then finally autonomous logistics uh autonomous trucks will cut delivery costs by 60%. Drones and rolling robots are also going to cut delivery costs dramatically. Did you know there are already 4 million deliveries per year by drones? Now to be sure, Zipline, uh one of the companies in our venture fund, uh is responsible for, I think, half of those. But uh we believe that the cost to deliver by drone uh will cut delivery costs. Right now Door Dash $15 per uh to less than a dollar. So a 90% reduction over time. So this is a hu another huge market uh percolating out there.
And um we're so excited because we believe we're now in the prime time for the reason I founded ARK. I founded ARC in 2014 for this reason. I felt that ARC's research would fulfill an unmet need. And I'm very proud of the research we're doing. It's the kind of research that investment banks used to do when the M&A market uh was much more vibrant than it has been for the last four years. In the under the last FTC, it was shut down. So, our research has met or fulfilled an unmet need. And we're so happy to see our research in the startup decks of so many startups out there. Because what are startups doing? They're heads down trying to innovate as fast as they can. And what are we doing? We're helping to size the markets they're going after. I think that the wall of worry that we have been facing in the last few years around innovation is great. I think it's great because of course there are risks associated with innovation. But we think that the flywheel now is in place so that this innovation age is unstoppable. And uh we'd welcome you to read our big ideas 2026.