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Cathie Wood Profile picture
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26 Oct, 4 tweets, 2 min read
Inflation has flared in response to COVID-related supply chain bottlenecks and oil supply constraints but, IMHO, the powerful and converging deflationary forces associated with AI, energy storage (EVs!), robotics, genomic sequencing, and blockchain technology will bend the curve.
If they expect lower prices, most consumers/businesses will defer purchases, exacerbating a decline in the velocity of money. Despite the burst in cyclical inflation during the last year, velocity is hovering at low levels. If @ARKInvest is correct, the next leg will be down.
I am struck by the behavior of millennials who, at the margin, are sacrificing short term consumption to pay down student loans or invest in crypto and other assets. Bank loan growth also is tepid which would not be the case if velocity were increasing.
The consensus view is that inflation will remain an issue and could get worse, suggesting that the equity and fixed income markets are incorporating it into discount rates. Deflation would be the bigger surprise. @ARKInvest is open minded and would like to continue this dialogue!

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More from @CathieDWood

Cathie Wood Profile picture
25 Oct
In 2008-09, when the Fed started quantitative easing, I thought that inflation would take off. I was wrong. Instead, velocity - the rate at which money turns over per year - declined, taking away its inflationary sting. Velocity still is falling.
Now we believe that three sources of deflation will overcome the supply chain-induced inflation that is wreaking havoc on the global economy. Two sources are secular, or long term, and one is cyclical. Technologically enabled innovation is deflationary and the most potent source.
Artificial intelligence (AI) training costs, for example, are dropping 40-70% at an annual rate, a record-breaking deflationary force. AI is likely to transform every sector, industry, and company during the 5 to 10 years.
Read 13 tweets
Cathie Wood Profile picture
2 Oct
Today, $TSLA announced that in the third quarter it sold 241,300 vehicles globally, up 73% year over year (YoY) and 20% quarter over quarter (QOQ). Meanwhile, $GM blamed the ~33% YoY decline in its US sales on chip shortages. What? #EVs require 3-5x more chips per car produced!
In @ARKInvest’s view, traditional auto manufacturers have been building chip inventories since April when their US sales peaked at more than 18 million units and then dropped more than 30% (65% at an annual rate!) over the next five months to 12.2 million in September.
Addressing the chip shortages in the last two weeks, the Biden Administration has threatened to invoke a traditional war-time measure, the Defense Production Act, which would force companies to disclose supply chain information, including chip inventories.
Read 10 tweets
Cathie Wood Profile picture
17 Aug
Most bears seem to believe that inflation will continue to accelerate, shortening investment time horizons and destroying valuations. Despite what we believe has been a supply-chain related/short term burst in inflation, both equities and bonds have appreciated since March➡️
Unlike the tech and telecom bubble, this equity bull market has broadened beyond the innovation strategies that boomed last year to value and other stocks that had trailed. The bull market has strengthened, setting the stage we believe for another leg up in innovation strategies.
The equity market is likely to reward disruptive innovation strategies once again when headline inflation breaks and/or fears of recession increase. If the bond market is correct, one or both will be obvious during the next 3-6 months.
Read 8 tweets
Cathie Wood Profile picture
11 Apr
In the late 1800’s and early 1900’s - as telephone, electricity, and the automobile were emerging - the US equity market cap relative to GDP appears to have been 2-3 times higher than it is today. We need to verify this difficult-to-get data but, if true, I have a hypothesis.
Telephone, electricity, and the automobile were the three major technology-enabled platforms during the 50 years that ended in the Roaring Twenties. Technology-enabled platforms are deflationary thanks to learning curves, or Wright’s Law. The Gold Standard also was in force.
As deflation pressured an increasingly difficult-to-measure nominal GDP (the denominator), exponential unit growth and rapid productivity gains increased the quality of earnings while low interest rates boosted their capitalization (the numerator).
Read 9 tweets
Cathie Wood Profile picture
6 Apr
GDP statistics evolved during the Industrial Age and do not seem to be keeping up with the digital age. Thanks to productivity, real GDP growth probably is higher and inflation lower than reported, suggesting that the quality of earnings has increased significantly.
The technologically enabled innovation evolving today is dwarfing that during any other period in history. It is creating “good deflation” and explosive demand. Battery technology is a good example. In @ARKInvest’s view, EVs will scale 15-20 fold in the next five years.
If deflation limits the long term Treasury yield to low single digits, the discount factor used to present value future cash flows probably will fall to surprisingly low levels during the next few years, a massive head fake in the face of higher inflation expectations.
Read 8 tweets
Cathie Wood Profile picture
23 Dec 20
Happily for $TSLA investors, @tim_cook missed the reincarnation of $AAPL when @elonmusk approached him while experiencing “production hell” with the Model3. An #EV is the ultimate mobile device.
#Tesla took a leaf from #Apple’s business plan when it designed its own #AI chip. Apple designed its own smartphone chip when #QCOM was catering to Motorola, Nokia, and Ericsson, none of which understood that phones could and would become smart.
#Tesla dropped $NVDA, not because its GPUs missed the move toward #autonomous, but because the design cycle of $GM, $BMW, & #TM was 4-5 years longer than that for Tesla. Catering to large auto manufacturers, Nvidia was not moving fast enough for Tesla.
Read 4 tweets

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