Sam Korus, Analyst, ARK Investments and Emerge Canada ETFs' Lisa Langley join us to talk about the representative sub-sectors of investment in two new ETFs, EAXP, and ARKX that were launched simultaneously at the end of March.
We discuss the latest foray from Cathie Wood's ARK Investments (sub-advisor to Emerge ARK ETFs which offers a Canada listed lineup of ETFs) lineup of disruptive innovation ETFs shows that it's space exploration strategy involves a much wider swath of technology and industrial company positions from across the market involved directly and indirectly in space exploration.
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Pierre Daillie: [00:00:00] Welcome everyone. Thank you very much for joining us. I'm Pierre Daillie, Managing Editor, AdvisorAnalyst.com. And joining me today are Lisa Langley, CEO of emerge, Ark ETFs in Canada and Sam chorus analysts that Ark invest today. We're going to be talking about the simultaneous launch of two new ETFs ARKX and EAXP. Sam, Lisa, welcome to the show.
Congratulations on the launch of your new space exploration ETFs.
Sam Korus, ARK Investments: [00:00:30] Thank you, Pierre. And thanks for inviting us on to. Talk and dive into it.
Lisa Langley, Emerge Canada ETFs: [00:00:36] Thank you, Pierre. We're happy to be here. And it was a great opportunity. It was wonderful to have Ark give us the opportunity to launch at the same time. It was very exciting.
We didn't really know how it was all going to work together and we. Hoped for a good outcome. And actually, I think both launches were very successful.
Pierre Daillie: [00:00:56] I'm intrigued.It's a very exciting development. You're not only enabling investors to participate in the whole, , space exploration sector.
But looking at the portfolio it's interesting because you're also shedding light on, on the sort of myriad opportunities that exist in the space. It's just being obviously a lot of talk about Spacex, Elon Musk, watching these new rockets take off, deliver payload to the international space station.
And then, the actual rockets land back in. In the place where they took off, I think it has ignited the interest of investors at large. And so to see how the portfolio is segmented is also very interesting because it actually shows that behind the scenes, there's been a whole lot more going on in the space exploration space.
I think,
Sam Korus, ARK Investments: [00:01:44] to your point, Yeah. The first launch where they were trying to land the rocket. I remember everyone gathered in the office, we're all watching it and now it's just become a very commonplace, which is in itself remarkable when you take something so incredible. And then you make it commonplace.
And I think I remember just three, three, four years ago, you talked to other aerospace companies. This was before, Spacex demonstrated capability. And you asked them about the economics or what they thought about Spacex, trying to do reusable. And almost everyone said, this is a crazy idea.
It's not going to work. And now, three, four years later, everyone was developing their own rocket reusability plans. And it's clear that, this can be a path forward and a way to lower launch costs by another order of magnitude and potentially two orders of magnitude. If you can really get the reusability down and, refurbish those rockets quickly.
Pierre Daillie: [00:02:45] Remarkable, but so there's a lot more going on in the space, right?
There are areas of space exploration that are really not yet viewed that way, just because they're ancillary or they're tied to the to the whole. Space exploration, but maybe you can talk about some of those other areas beyond the rockets.
Sam Korus, ARK Investments: [00:03:05] Sure. I'll touch on, one of those key enablers and my partner analysts, Tasha Keeney this is one of her core areas of focus.
So she's definitely the expert on this, but that's 3D printing and 3D printing really transforms. A lot of elements for both aerospace and space. And so 3D printing, we size it to be a roughly $500 billion market for end use parts. So those are parts that you're making and then they're going into the end product.
And aerospace is the killer application for 3D printing because it's relatively low volume, highly complex, and weight matters so much. And the ability to make these parts in novel ways. I it's hard to imagine here maybe I'll pull up a picture or something, but, companies are starting to use artificial intelligence to design these components.
And a human would never come up with the shape of some of these structural components. But a machine you give it the inputs you say, instead of be able to hold this amount of weight, this much. Tortured intention, et cetera. And it's, it shows, this is the best way to do it.
And so you're seeing, one example we have in our big ideas that is this so you've sat satellite bus. So pretty much the body of a small satellite. And they took 125 parts and 3D printing. It's now one part. And so it's lighter. It's actually stiffer and it has fewer points where it could have a critical failure.
So I it's really just taking off and the applications are incredible already. And we talked to all of these different space companies and almost all of them are utilizing additive manufacturing in some capacity.
Pierre Daillie: [00:04:52] I was fanatical about, about space travel. When you know, you look at what was accomplished in the sixties and seventies and the space shuttle in the eighties. And when you look back at those at, at the lunar landing modules, for example, they were these metal things with tinfoil and scotch tape, it looked like they had, they had things stuck to the outside.
They were very tin pot, hashed together because they needed to be a certain weight and there was limitations on what they could do. And they, of course the engineering capabilities didn't exist. You didn't have 3D printing. You couldn't just design a part and then spit it out of out of a printer in the materials, in the exact materials you needed to do that with.
And now you can. And so that's an interesting, that's a really interesting perspective on 3D printing that probably most people have never even considered. There's been so much talk about 3D printing in negative ways. And so to know that, that is enabling. A degree of engineering that was impossible to me just five or 10 years ago is remarkable.
So what else is going, what else does besides 3D printing? What else is going on? There's agricultural uses there, satellite there's, we've got the Starlink story is unfolding with space-based internet for the unreachable parts of the world. Are those, some of the areas that are encompassed in.
In your strategy.
Sam Korus, ARK Investments: [00:06:17] They definitely are ending. It's funny because we're doing the modeling on these and then, we released the portfolio and there's a lot of meetings going around questioning, why it's John Deere, why's Netflix in this portfolio. But I think, what you're saying is exactly spot on.
So precision agriculture is something that's been in the works for awhile and really utilizing satellite imagery or using drones to really map out your fields whether it's for autonomous tractors or to understand, the level of sunlight and amount of water that you need to give to different parts of the field.
Timing for. Harvesting, all of these things can play a big impact and adjust those margins. And then, you know what you were just talking about, the satellite internet connectivity is really transformational. There's just a video today interviewing it's I believe it's a tribe in Washington state.
That was one of the first areas to receive the Starlink beta. Yep. And obviously the last year made it very clear, but internet connectivity is a necessity. If you're gonna try and work or do anything really, even for education, and connecting activities become a core backbone here. And if you have had, one megabit per second up or download, you're not doing any video call it's taking you.
A huge amount of time to really do anything. So in the U S it's estimated that roughly 40 million people don't have access to broadband internet and that's
Pierre Daillie: [00:07:53] that's crazy remarkable. And that's a startling. So I guess that means they can't watch Netflix.
Sam Korus, ARK Investments: [00:07:58] Exactly. It's, it sounds ridiculous and, we need like that people write it off and they're like, Oh, that's ridiculous.
You know why you've been thinking about that? Yeah. We've had people laugh at us in the past for our research and projections. I think that has worked out well for us. We like to be a step ahead and do the research that other people aren't doing. And hopefully they laugh and then they look at, and then they learn and, then they see the opportunity, that's exactly right.
40 million people is a huge percent of the population in the U S and then you'd look internationally. And that number is close to 3 billion. Obviously, there's a huge difference between the price point that you can charge in the us versus internationally. But we think that, with all of the technologies we look at, they tend to be on this cost decline curve.
And so when we're thinking about this satellite internet connectivity, it makes sense to us that this would start in the U S in Canada these more developed areas where, you know, even if you're in a rural area, you could afford a higher price point. And then that kind of helps you come down this cost curve and then access more and more of the addressable market internationally.
Pierre Daillie: [00:09:09] I think we take so much of that for granted, because, especially if you live in an urban area or, an urban setting, it's just, you have access to the internet, but when you get out into the more rural areas but now there's so much, there's so much that, that leads to right.
It enables so much more in terms of just when you give areas of the world that have had no internet. They suddenly have internet just the way mobile phones enabled so much commerce and entrepreneurism in places like India and China in the earlier days now enabling internet in parts of the world in, in, in some of the poorer parts of the world, let's say Africa or rural parts of the world that opens up an entire.
Other half of the world into e-commerce into education.
Sam Korus, ARK Investments: [00:09:58] Absolutely. I think it's hard to under state how transformative it can be. At the same time, it's also hard to understate the difficulty in achieving it. We're not here to say it's going to be easy and it's a straightforward path to do.
It's it seems as though the technology is well on its way from the cost of clients that we're looking at, we've got the. Rocket launch cost declines that are in a great spot right now and making it economic. We've got those satellite costs. Clines and then this, the third cost decline that still really needs to come into that sweet spot is the antenna.
So that's like the satellite dish that the end user would point up at the sky. And that's, one's still working its way down the cost decline curve. So I don't want to say, this is a guarantee but I think we're on our way there. And as you said, it can really transform the global economy in a very profound way.
Pierre Daillie: [00:10:52] So Sam, how do you classify, can you just classify what the sort of the, for the main sub sub segments that you're focused on? I know there's orbital suborbital. Yep.
Sam Korus, ARK Investments: [00:11:05] So we've got the orbital suborbital then we've got the key enablers and the aerospace beneficiaries, and then a weak part of the reason. Yeah. For doing it like this is, a lot of times people think just satellites, just rockets. But really it's all of these things. It's so complex and they're taking so many different technologies and bundling them together to make these services work.
And when we're investing in this theme, we want to be able to factor where we think value will accrue. And so I think, framing it, like this gives a full picture of the type of environment that you know, we're moving into.
Pierre Daillie: [00:11:45] Yeah. I that's the part, I think people don't, I think people may not realize it yet.
Just how. Broad the opportunity is it's not just, Oh, we're going to go to Mars or another trip to the moon, or we're going to put people in space for, a tour around the planet. I think your holdings reflect the the vastness of the opportunity.
Sam Korus, ARK Investments: [00:12:07] Correct. And I think, one of, one of the difficulties in explaining it to people that, hopefully podcasts like this help. But, all already the satellite and, space infrastructure is like a key backbone to so many systems that operate on, or, I think we take for granted GPS and the role of DPS in, transactions and FinTech and all of this.
But really, it's out of sight out of mind. But it plays a huge impact in our lives already. And, we think this is only going to increase in the future.
Pierre Daillie: [00:12:42] We walk around with these computers in our pockets and we don't realize, how much of the technology that's being used in, in, in our devices is actually already coming from space such as GPS, for example, which, we maybe we do know that but it's still fascinating all the same, but to be able to.
Hone in on the investment opportunities in that area and their impact in the future is is actually, is it's extremely exciting.
Sam Korus, ARK Investments: [00:13:10] It is. And, personally as well, some of the things that I'm excited about both as a consumer and an investor are air taxis as well. And these electric, vertical takeoff landing type of vehicles Yeah, we've done a bunch of research on this and the batteries technology is coming into play square.
It's making it possible. You've got autonomous technology that's on its way. And you have regulators who are coming around and really supporting these efforts. And the ability to go from downtown Manhattan to JFK. No, it's a. Maybe, I think it's 12 miles as the Crow flies and it'll take you, hour and a half in a car.
Maybe two hours depends on your luck on that day. And it's not cheap either. If you're going to take a taxi or an Uber and, in the future, we could have these air taxis that could pause roughly $75. So pretty much the same cost as that, Uber and get you there in 15 minutes.
As opposed to the hour and a half, two hours. Incredible new markets opening up with this technology that benefit consumers and improved quality of life as well.
Pierre Daillie: [00:14:24] Yeah it has expanded very rapidly. Like I, anybody like just to go back one, just to go back one step in our conversation, anybody who saw the movie interstellar.
You know what I've seen? Like it's life imitating art, isn't it? We, we have all these new technologies that are happening and a lot of them have already been previewed in movies. The, if you look at the look and feel of some of these air taxis, they look like.
They look a lot. They look very similar to the vehicles in blade runner, for example, we've seen these things. They were fantastic ideas and, they've been featured in movies and it's remarkable to see these things come to life and actually become, Something commercial and useful something viable.
Sam Korus, ARK Investments: [00:15:12] I actually, so it is incredible and I guess more, more philosophical than anything else. It is amazing. Just the power that side by writers, creators, the power that they have. Cause really, you can imagine a future and inspire, young people to pursue that vision. And, I think we're seeing that take place and.
It is amazing that you can imagine a future and build towards it. And I think, in, in a time of accelerated change, we're seeing that teachers come to us far faster than ever before in the past, I think.
Pierre Daillie: [00:15:47] Yeah, I think it was actually, I remember when they announced that they were closing down the space shuttle program, for example, That was really disappointing.
And so to see it revived it this way is very exciting. I think, to also be, like looking at the at your view and you guys are doing such a terrific job of educating the public and investors on this exciting new, area. And it's also going to, it's also going to raise awareness for future generations, right?
In terms of reopening. That opportunity reopening that view on, on, on what's possible. That's, what's so inspiring about it.
Sam Korus, ARK Investments: [00:16:25] And I guess here you could also, draw a comparison between a mosque with electric vehicles and with rockets and aerospace as well.
He served as the catalyst to get. The auto industry said, Oh, we need to really accelerate our plans on electric vehicles. And I think he did something similarly in the aerospace rocket industry as well. And you look at the first Falcon nine, the price point on the first stop of nine was not revolutionary.
It just looked revolutionary because before that, you had decades of duopoly in the space industry and ballooning costs with, costs and costs plus programs that, as those programs go longer and longer, the costs just tend to escalate. And, you came out with the rocket.
That was pretty much the exact same price as when you know, those original programs started their rockets. So he said, this is a bloated industry. Like we're just going to come in and try and do it better. And then now it's remarkable because you had decades of rising costs and now we're seeing a transformation to lower and lower costs.
So very exciting. And this is really what technology does to industries. It puts them on those cost decline curves, and opens up that opportunity.
Pierre Daillie: [00:17:40] Definitely Elon Musk, hasn't just, reinvigorated the area. He has actually revolutionized it. He has shown. He has shown engineers.
He has shown the world that it's possible. And I think that's really, that's probably really a big part of why the Tesla brand is so big and why, that's probably going to be true for Starlink and for SpaceX as well. I'm excited to see what happens with this Sam and Lisa.
Congratulations. Congratulations to you both
Lisa Langley, Emerge Canada ETFs: [00:18:07] again, thank you so much for having us on. Thank you. Pleasure looking forward
Pierre Daillie: [00:18:13] to it. I hope we can. I hope we can continue the conversation in, in, in six months or a year.
Sam Korus, ARK Investments: [00:18:19] Definitely. I hope that in six months, there's going to be a lot of exciting things to talk about.
Pierre Daillie: [00:18:24] Yeah. Maybe we could dig deeper into it. Thank you so much.
Sam Korus, ARK Investments: [00:18:27] Thank you, Pierre.
