The word from the manager: Ark Invest Europe

'Tesla is leading the way in many areas'

Also of interest are Intellia Therapeutics, for its pioneering work in gene editing, and Coinbase, a dominant player in cryptocurrencies

by Isabella Della Valle

30 November 2024

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3' min read

Key points

Is there no risk of overvaluation of technology stocks as a whole?
What topics are you following most closely at the moment?
Could you indicate the titles you find most interesting and why?

3' min read

The role of the US in innovation will remain central, applications of artificial intelligence in genomics will be among the main topics to follow, while on the future of the electric car the game will be played on cost containment. Rahul Bhushan, managing director and global head of Index at Ark Invest Europe, explains.

Artificial intelligence has become the central theme for all activities. But what are the further growth areas for this sector?

The big opportunity for the future is artificial intelligence software. In the last period it is the infrastructural side of AI that has dominated the headlines, but the real transformation will in our opinion be software applications. AI will enter virtually every sector, from healthcare to manufacturing, creating winners that are not yet apparent. This is where the next phase of innovation and even returns will come from.

Is there not a risk of overvaluation of technology stocks as a whole?

Of course, technology stocks today have high valuations, but scepticism in this regard is not new. Many of those who are wait-and-see today are the same ones who predicted a US recession from 2022, or who dismissed Bitcoin as a scam. Trying to do market timing often leads to missed opportunities.

I COMPARABLES

What issues are you following most closely at the moment?

One of those we are watching closely is the intersection of AI with genomics. The ability of AI to revolutionise healthcare, from drug discovery to personalised treatments, will transform healthcare in this decade. Another theme is the energy transition, which is now a sleeping giant. Some investors see Trump's re-election as a setback for sustainability, but we think the market's enthusiasm will catalyse innovation, investment and new solutions. We are entering a historic phase, over the next two decades, where we will tackle the energy transition head-on.

And which countries do you think offer the greatest opportunities for investment in new technologies?

The United States remains the undisputed leader in innovation. It is where the best ideas, talent and capital converge. Innovation drives higher expected returns, which is why we continue to see capital flowing into the US. The US innovation ecosystem is unparalleled globally.

IL TITOLO IN BORSA

Lately, there have been significant outflows from some ETFs on robotics, automation and Ia. How do you explain this disaffection on the part of investors?

We have indeed seen significant outflows from robotics and automation ETFs, but precisely towards those ETFs that are more focused on pure artificial intelligence. This reflects the trend I mentioned earlier: investors are moving from hardware to software. Hardware was the initial driver of AI, but now the focus will shift to software applications. This is a natural evolution in allocation, within the broader theme of EI and automation.

The electric vehicle segment is also struggling to take off. What are the opportunities and critical issues in the sector?

The challenge remains that of costs. However, we are talking about a long-term secular trend here, so we do not have to look at monthly sales cycles. The penetration of electric vehicles continues to grow every year, surpassing internal combustion engine vehicles in relative terms. By the end of this decade, this will change completely, as economies of scale will drive down costs, infrastructure will improve, and adoption should accelerate. Secular growth topics like electric vehicles do not develop overnight: they require patience and perspective.

IL CONFRONTO

How can the new US presidency address the technology sector?

We expect a pro-growth and pro-innovation agenda under the Trump administration. We are already seeing renewed enthusiasm in the marketplace, and while there may be some challenges along the way, the broader trajectory speaks to a strong push for innovation, particularly in areas such as artificial intelligence, alternative energy and space technologies. The key will be to translate rhetoric into action with policies that concretely promote entrepreneurial activity.

Could you indicate the titles you find most interesting and why?

Among the most interesting stocks, Tesla is now a leader in robotics and automation technologies, with a unique combination of capabilities in artificial intelligence and large-scale manufacturing. Its advances in autonomous driving and energy solutions position it at the forefront of several areas that are transforming the world. Regarding the genomics revolution, we find Intellia Therapeutics, which stands out for its pioneering work in gene editing based on Crispr technology, interesting. This technology has the potential to cure genetic diseases and change the rules of personalised medicine. Finally, Coinbase, as the dominant player in the cryptocurrency industry, should benefit from the growing adoption of digital assets. With greater regulatory clarity, it is well positioned to maintain its market leadership.

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