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Tesla CEO, Elon Musk's role in the Trump administration has grown rapidly since the inception of the Department of Government Efficiency, but with Tesla shares having one of the worst weeks since the election, investors are wondering if Musk's role in Dodge is pulling him away from Tesla. For more, we're bringing in Kathy Wood, CEO and CIO of Ark Invest. Kathy, always great to see you. Trump Tesla is still your top holding in your Ark Invest ARK, as we like to call it. That's the ticker. Um, and you know, we've got obviously Musk very visible in Washington, but not only that, Time Magazine put him on the cover behind Trump's desk as a sort of de facto president, if you will. Now, we have talked before, Kathy, about Musk's multitasking, but this is sort of next level, Kathy, in terms of where he is putting his attention. Is it a concern for you as an investor?

Well, it's interesting. Uh, we were on his earnings call last week and I don't think I've ever heard him more engaged or more into the details, answering in detail analysts questions. So, um, as as I've said before, I think, uh, he's an amazing CEO in that he is a troubleshooter. He figures out where the pinch points are, the gating factors, and he goes right at them. Uh, and I think he's doing it very effectively.

I mean, at the same time, the stock has taken a big hit. I mean, he may be figuring out those points, but at the same time, we got a lot of reports recently about Tesla shares Tesla sales, excuse me, being down, deliveries being down in places like China and Germany.

Yeah, uh, what's happening is the Model Y, which is the largest selling car in the world, um, is going through a refresh cycle. And I can tell you personally, I went to buy a Model Y and at the at the showroom, they said, no, no, no, no, wait, the whole thing's going to be refreshed. This was several months ago. And lo and behold, this is where we are. So I'm happy they told me that and I think I understand, uh, why why we're seeing sales lag here a bit.

So what turns it around, Kathy? What's the catalyst that moves the stock higher?

Yes, a couple of things. Uh, I think they're going to come out with their lower cost car this year, so that will increase access to Tesla's cars. Elon's always talking about affordability, uh, certainly working on that one. And then of course, autonomous. Uh, we do think that Tesla is getting ready to launch is its autonomous service. We know they will launch, they announced the launch in June in Austin. And the question then is how quickly will they roll out to other cities? And we think it will be more quickly than many think.

Another headline that we saw today is that the Trump administration, as predicted, or as expected perhaps, is halting the government's $5 billion program to build out a national charging network. Is that a wash for Tesla? Is that a negative for Tesla if people don't have as many places to charge? Does it benefit Tesla because they're building their own network? How do you view that?

Yeah, I I think, uh, well, a lot of auto companies have already signed on to Tesla's standard. Uh, and so why not and why not use the charge charging the Tesla charging network instead of duplicating expenses with government subsidies on top of that. So, um, I I think it will benefit Tesla. I think it will be good for the entire ecosystem.

Kathy, the you know, we're making our way through earning season that mega AI trade and trend, Kathy. Uh, some names are reporting perhaps some disappointment. I'm curious what you've learned this earning season looking at those reports, listening to conference calls. Has it changed at all how you want to invest, where you want to put money to work in that AI trade?

Well, uh, as we know, Palenteer has been a huge beneficiary of this earning season. I think many many people are beginning to understand that hardware, of course, is important, cloud is important. Uh, but uh, in order to deserve the valuations they're getting, there have to be beneficiaries beyond that. Uh, and we think platform as a service is going to take increasing share of the tech stack. And so that does benefit companies like Palenteer, GitLab, and others that uh, developers are signing on to.

I'm curious though, Kathy, why you know, yes, those those companies will benefit. I'm curious why you're not in the hyperscalers. You know, we've talked before about you not being invidia. I'm curious why you all have made the choice to go that the route that you have with Palenteer and the other names you mentioned versus some of the other magnificent seven, for example.

Uh, well, I think uh, well we've we are in all of them in various of our portfolios. You're asking about ARKK, the flagship. We do own um Amazon. And we do think uh after listening to the call last night, especially, you know, the cloud is a central part of this story. So uh love what they're doing there. We were concerned for some time that maybe agenti personal agents uh were going to disintermediate Amazon on the retail front as our personal agents go shopping around the web for us. But you know, I do believe that uh Amazon's uh got, you know, they said last night a 14% advantage in terms of lower prices vis-a-vis other online shopping sites on average. So we're less worried about that. And uh as you know, we post our our holdings and trades at the end of every day. So we have been building that one. Nvidia we do own in other portfolios. Uh we think there is huge demand going forward. But again, just listening to Amazon's call last night and to others, there's more competition brewing uh on the chip side of the equation. Amazon has two Graviton and Inferentia, oh no, I'm sorry, Trainium and Inferentia. Uh, so on the supply side, there is more competition brewing. And uh and we are also seeing with deep seek, for example, uh there is a possibility that more of the large language models are going to be built on high-end workstations, maybe not so much dependent on the cloud. High-end workstations depend on fewer GPUs. Uh, all of that said, this is all at the margin. The whole space, we think is is going to be vibrant uh for years. This we are so early in the journey here and we're pretty excited about it.

On on Amazon though, Kathy, you know, the stock did come under pressure today because AWS sales um showed no acceleration. So as a as a believer, as a shareholder, as a bull, is your bet there listening those capacity constraints, they're going to ease and and the AI rollout is simply early days still?

Yes. We do believe uh that the capacity constraints will ease. Amazon said second half of this year. So yes, yes, we do.

How close do you think we are to that agenti AI future that you were just talking about where, you know, I have an agent and I tell it to go buy me something and it just goes and searches the web for that thing.

We think it's going to be here sooner rather than later. In terms of a genetic right now, we're seeing uh coders, for example, well AI large language models, you can give them a coding project and uh and and we're seeing that they can accomplish 80, 85% of the task with no human intervention. That's uh the beginning of agenti. And we think it's going to push into every sector uh very quickly. You know, AI training costs are dropping 75% per year, AI inference costs, which is what would be used uh for this personal uh shopping agent, they're dropping 85 to 95% per year. So the cost of innovation is collapsing and we think more innovation is going to happen, especially around this agenti AI opportunity.

Kathy, you know, as uh I always do ahead of us talking, I go and I look at how the various ETFs have been doing, not just um ARKK, but the others as well. And I know you like to be judged on a longer time horizon. So I'm looking at three years, I'm looking at five years, I even looked at 10 years. On all of those metrics, especially the benchmark ETF is lagging the S&P 500. We've talked about this before. What do you tell investors, clients when they come to you and they they say Kathy, what's going on here? When am I going to be getting these big returns that should be coming from these big innovation plays?

Well, we have just come from facing three major headwinds over the last few years uh that have turned into tailwinds. Um but before I mention those, I should say over the last 10 years, Morningstar uh has uh who who ranks all ETFs, uh we are in the top, I think we're in the top 7%, 7 and a half percent of uh of their rankings in terms of uh where they classify us, which is in mid-cap growth because we do tend to be smaller cap than the broad-based benchmarks. Uh so over a 10-year period, top 10%, we'll take that. That said, these three headwinds, what were they? And they they really started uh uh after COVID. First was um the uh the uh concentration in the markets towards the Meg 6. I think after the the fallout from COVID and uh and uh the sorting out of the market, you know, people have been scared and saying, you know, they value cash very highly as interest rates went up, and uh they liked to dabble in the larger cap, that's the safer part of the market. So uh that the the broadening out of the market that we are expecting now should really benefit us. So the first headwind was concentration in the markets. The market is beginning to broaden out. We see that since the election. Uh the second headwind, I mentioned it was interest rates. We went through a shocking increase in interest rates up 24fold in little more than a year's time. All long duration assets were plastered by that, including bonds that that are supposed to be the safest asset class. They had some of their worst years in history. So concentration, interest rates, and then the last headwind we faced, especially in early 21 as uh the COVID had bid up our kind of stock to, you know, incredible heights from a valuation point of view. Uh we had to work work or grow into that valuation. Uh and in the carry trade uh period last year, so last July, August, uh what we saw our portfolios uh based on an adjusted enterprise value to EDA ratio drop towards uh a market multiple. We had we've worked with S&P to um to develop this index. So uh the the the valuation headwind is gone as well. So concentration, interest rates, valuation have turned from headwinds into tailwinds.

Kathy, always good to see you. We covered a lot of ground in a short amount of time. Appreciate it.

Thank you so much.