Quarterly Thematic Commentary – Q1 2025

In today’s rapidly evolving market, investors need to stay on top of the latest trends and themes that fuel growth. In this quarterly publication, we offer our market commentary across our themes, covering new opportunities and potential challenges. By providing a deeper understanding of our themes, we aim to help you make more informed investment decisions and achieve your investment goals.

Innovation

Broad-based global equity indexes ended the quarter lower as a shift in investor sentiment created volatility, tempering early optimism about potential tax cuts and deregulation, including more accommodative policies on mergers and acquisitions. As the quarter progressed, concerns about tighter financial conditions and economic crosscurrents weighed more heavily on markets. In ARK’s view, structural policy shifts supporting innovative breakthroughs in autonomous mobility, multiomics, and digital assets should withstand and ultimately overwhelm economic uncertainty and near-term volatility.

The convergence between supportive policy shifts and technological innovation should create meaningful investment opportunities. Lower regulatory barriers and increased market incentives should stimulate disruptive innovation and economic growth. ARK Invest remains committed to identifying and supporting innovation leaders. Through our open-source research and investment strategies, we are committed to positioning our investors on the right side of change to participate in one of the most exciting periods in technology and innovation history. ^{1, 2}

Artificial Intelligence & Robotics

Broad-based global equity indexes ended the quarter lower as a shift in investor sentiment created volatility, tempering early optimism about potential tax cuts and deregulation, including more accommodative policies on mergers and acquisitions. As the quarter progressed, concerns about tighter financial conditions and economic crosscurrents weighed more heavily on markets. In ARK’s view, structural policy shifts supporting innovative breakthroughs in autonomous mobility, multiomics, and digital assets should withstand and ultimately overwhelm economic uncertainty and near-term volatility.

When the economy and companies face hard times, innovation generally takes share. We are starting to see signs of companies embracing innovation. For example, Spotify’s CEO Tobi Lutke released an internal memo titled “AI usage is now a baseline expectation” that said, “before asking for more Headcount and resources teams must demonstrate why they cannot get what they want done using AI.” ³

Genomic Revolution

The multiomics space continues to be one of the most understood areas of the market, in our view. As the healthcare landscape shifts from treatments to cures, Wall Street appears to be struggling with how to appropriately value curative technologies. This disconnect is creating significant opportunities for forward-looking investors. Encouragingly, even the FDA is signaling a more progressive and innovation-friendly stance. Recently, the FDA announced a plan to phase out the animal testing requirement for monoclonal antibodies and other drugs, which will be replaced with the likes of AI-based computational models of toxicity and cell lines and organoid toxicity testing in a laboratory setting (so-called New Approach Methodologies or NAMs data). Companies like Recursion, Absci, and Schrodinger benefited from this news as all three companies have been early adopters of AI, positioning themselves at the forefront of this regulatory and technological shift. ⁴

Circular Economy Enablers

Global investment activity in circular economy initiatives remained robust in the first quarter of 2025. Key trends we observed included new venture capital rounds for recycling and sustainable materials startups, major corporate commitments to circular projects, several strategic acquisitions, and government financing initiatives to spur circularity.

Ingka Group (the largest IKEA retailer) intends to recycle as many products as it sells by 2030 and committed EUR 1 billion to recycling infrastructure – its largest circular investment to date – focusing on textiles, mattresses, plastics and wood. CEMEX Ventures also co-invested in Terra CO₂ to integrate circular materials into its cement operations. Meanwhile, eBay expanded its Circular Fashion Fund to support textile reuse and recycling innovations. Government funding continued with the US Department of Energy allocating $12.5M for circular supply chains and Canada launching a national Circular Textiles Consortium. The EU also announced EUR 165M in upcoming calls for circular bioeconomy projects. The call will fund R&D and pilot projects across 13 topics, from bio-based materials and recycling of bio-waste to innovative bio-refineries, under the EU’s Horizon Europe framework. ^{5, 6, 7, 8, 9, 10}

Environmental Impact

In February, leading energy efficiency firm Schneider Electric reported double-digit sales growth in its smart power division, driven by strong demand from data centres. Meanwhile, the EU issued new guidance clarifying EU Taxonomy criteria in March and stayed steadfast in raising renewable energy ambitions via directive revisions. Major economies also doubled down on climate commitments; Germany’s new coalition reaffirmed its 2045 net-zero goal and plans to accelerate renewables expansion, emphasising a pragmatic approach that balances environmental needs with economic growth. Climate adaptation gained attention too, as early-2025 wildfires underscored the need for resilient infrastructure and prompted utilities to invest billions in protective measures.

Despite near-term volatility, improving corporate earnings, supportive policy, and ample sustainable capital point to a bullish yet balanced outlook. We are particularly excited about energy efficiency and climate adaptation companies, which remain well-positioned to deliver growth while advancing pressing climate goals in the coming quarters. ^{11, 12, 13}

Global Sustainable Infrastructure 

Infrastructure equities appear to be entering a favourable regime. Amid trade tensions, rising volatility, and recession concerns, investors are rediscovering the asset class’s resilience and relative defensiveness.

The Rize Global Sustainable Infrastructure UCITS ETF (“NFRA”) tracks a diversified portfolio of companies poised to benefit from this shift — spanning digital infrastructure, the energy transition, and resilient transport networks. Over the past year, its underlying index has not only outperformed global equities but has done so with significantly lower volatility and beta. Looking ahead, structural megatrends — AI-fuelled data centre growth, grid modernisation, and climate-resilient infrastructure — are converging with a step-change in public and private sector investment. In the U.S. private capital is ramping up as fiscal tightening reduces federal spending, while Europe accelerates with large-scale public outlays. As monetary policy divergence narrows, infrastructure emerges as a compelling global opportunity — offering both income and growth. NFRA’s fossil-free, high-dividend, and lower-beta profile makes it a timely tool to navigate uncertainty while remaining exposed to long-term secular themes. ¹⁴

Sustainable Future of Food

Sustainable food equities saw modest declines in Q1 2025 which fell in line with global food and agriculture benchmarks. Several developments underscore the long-term case for sustainable food.

Oat milk leader Oatly reported improving margins and said it expected “2025 to be its first full year of profitable growth as a public company,” significantly boosting investor confidence. Agricultural technology and logistics were bright spots. In the UK, online grocer Ocado surged 16% after JP Morgan upgraded the stock highlighting improving prospects for its robotics and e-grocery platform. Cold storage warehouse REITs (Lineage and Americold) remained in demand as food suppliers prioritised resilient, efficient supply chains. Farm input firms had a nuanced quarter: fertiliser prices jumped (urea hit ~$455/ton in February) benefiting producers like Yara, though high energy costs and inventory adjustments pinched short-term margins. Sustainability initiatives also accelerated worldwide. Europe’s new packaging rules (effective Feb 2025) require all packaging to be recyclable by 2030, a tailwind for the fund’s packaging holdings (e.g. glass and metal container makers). Innovation in food waste reduction also advanced, with companies rolling out tech to extend shelf life and upcycle waste. ^{15, 16}

Cybersecurity and Data Privacy

Cybersecurity stocks proved resilient in Q1 2025, reinforcing their status as a more defensive segment within technology investing.

Demand growth in the sector moderated slightly from its highs in 2024, but remained positive as persistent threat activity, high-profile breaches (such as a ransomware attack on DaVita, a major U.S. dialysis provider) as well as increasing regulatory requirements kept cybersecurity at the top of CIO agendas. Network and cloud security were among the stronger-performing segments, with companies such as Palo Alto Networks and Fortinet benefiting from ongoing infrastructure upgrades.

Earnings across the sector were broadly in line, with standout performers balanced by softer forward guidance from a few leaders, including CrowdStrike and Palo Alto Networks. A major industry milestone came with Alphabet’s $32 billion agreement to acquire cloud security specialist Wiz — the largest cybersecurity deal on record — which reaffirmed the sector’s strategic relevance and sparked renewed investor interest in M&A potential across the space. Despite the more subdued start to the year, the long-term investment case remains compelling. The structural growth drivers remain firmly in place, from the proliferation of attack surfaces and cloud migration to AI-enhanced threats and tightening data regulation. ^{17, 18, 19}