Q2 2026: Commentary From ARK's CIO

Market Backdrop

Markets entered the second quarter absorbing the shocks not only of the escalating conflict in Iran but also “SaaSpocalypse”fears that AI agents and usage-based pricing would disruptseat-based software economics faster than anticipated. Both over hangs began to lift during the quarter, so much so that theS&P 500 and Nasdaq-100 indices posted their strongest quarters in years and hit all-time highs. Small-cap, equal-weight, and value benchmarks also set new records.As equities were climbing the proverbial wall of worry, however, the macroeconomic backdrop grew more complicated. Following his confirmation in May, Federal Reserve (Fed) Chairman Kevin Warsh launched a task force to review the Fed’s inflation framework and data sources, a move that could signal his concern that official data is a lagging indicator of inflation and that the impact of productivity on inflation deserves more focus.Focused more on Warsh’s hard 2% inflation line, however, the market priced out rate-cut expectations as the Fed’s preferred core Personal Consumption Expenditures (PCE)¹ inflation gauge ticked up to 3.4% on a year over year basis in May.

Outlook

In our view, Consumer Price Index (CPI)- and PCE- based data are overstating inflation. According to ARK’s research, the technology revolution underway today is deflationary. Artificial intelligence, robotics, energy storage, multiomics, and public blockchains are increasing productivity and compressing the cost of intelligence, energy storage, and biological discovery at a pace that backward looking inflation gauges cannot capture. Alternative real-time data such as Truflation² are capturing these healthy, tech-based deflationary undercurrents much more effectively. While gas prices have pushed CPI inflation to 4.2% on a year over year basis recently, headline consumer inflation as measured by Truflation has decelerated to ~1.9%. In our view, Fed Chairman Warsh’s focus on alternative inflation data sources and productivity are promising indications that, contrary to consensus expectations, the Fed could become convinced that productivity gains not captured in official inflation measures have more than counter-balanced other inflationary forces.

New orders for capital goods excluding defense and aircraft broke out to a new high during the quarter, as the largest cloud platforms increased their 2026 capex (capital expenditures) guidance from ~$600 billion at the beginning of the year to more than $700 billion.³ We believe supporting this spending boom is demand, as Anthropic's annualized revenue run rate (ARR) soared more than five-fold in roughly six months, from $9 billion last December to $47 billion,⁴somewhat defusing the “AI hype”debate. Our investment thesis is that AI is a platform shift that is driving significant and increasingly diversified revenue growth.

Highlighting the power of this shift was extraordinary growth in demand for high-bandwidth memory and Dynamic Random Access Memory (DRAM) that forced suppliers to redirect fabrication capacity from consumer electronics toward AI servers. As a result, the Philadelphia Semiconductor Index soared 88%, its best quarterly return since its inception in the 1990s, as investors piled into a small number of memory specific companies that now are sold out for years. Catalyzed by AI and deregulation, multiomics staged one of the more important re-ratings across our platforms. Over the quarter, the ARK Genomic Revolution ETF (ARKG) returned 59% as investors began to realize that the convergence of AI, sequencing technologies, and CRISPR gene editing will transform drug discovery and development, molecular diagnostics, and therapeutics, translating into tangible clinical and commercial progress that could drive pharma and biotech returns on R&D(research and development) from the mid-single digits back into the 30%+ range. Looking to the second half of 2026 and beyond, the structural case for a bull market in innovation-based strategies is strong. Convergences among major platforms including AI, robotics, energy storage, public blockchain technology, and multiomics technologies are likely to push non-farm productivity growth from ~2-3% to 4–6% on a year-over-year basis, compressing unit labor cost inflation. As a result, real Gross Domestic Product(GDP) growth could accelerate significantly from 3% while inflation decelerates to -1% to 1%, creating a fertile environment for outsized investment returns.

During the second quarter of 2026, five of ARK's actively managed ETFs outperformed the broad-based global equity indexes,⁵ while one underperformed.

ARK Next Generation Internet ETF (ARKW)

The ARK Autonomous Technology and Robotics ETF increased 17.52% during the quarter, outperforming the S&P 500 and MSCI World Index, which rose 15.20% and 7.44%, respectively.

Among the top contributors were Advanced Micro Devices (AMD) and Teradyne (TER). Shares of Advanced Micro Devices rallied after the company reported strong first-quarter earnings. The company increased expectations for its data center central processing unit (CPU) total addressable market (TAM) compound annual growth rate (CAGR) from 18% to 35%, thanks to Agentic AI demand, and reiterated confidence that the company's GPU business will surpass its 80% revenue CAGR target. Shares of Teradyne traded up during the quarter, benefiting from strong AI-driven demand for its semiconductor test solutions. The company reported better-than-expected earnings alongside cautious near-term guidance. Over the quarter, demand for memory and storage for data centers helped drive shares higher.

Among the top detractors were Kratos Defense & Security (KTOS) and Palantir (PLTR). Shares of Kratos Defense & Security detracted from performance during the quarter as part of a broad-based pullback in defense stocks and concerns that defense spending may have peaked, compounded by growing prospects for a ceasefire in Iran. The company reported better-than-expected first-quarter results, raised its full-year 2026 guidance, and received an Other Transaction Agreement valued at up to $446.8 million for the Resilient Missile Warning and Missile Tracking Ground Management and Integration program. Shares of Palantir traded down during the quarter, despite a strong earnings report that showcased an impressive 85% year-over-year revenue growth, 133% year-over-year growth for US Commercial Revenue, and a raised full-year guidance. Despite the positive operational updates and new partnerships, such as their success in manufacturing via ShipOS, the stock faced valuation concerns, which likely tempered investor enthusiasm.

ARK Next Generation Internet ETF (ARKW)

The ARK Next Generation Internet ETF increased 20.27% during the quarter, outperforming the S&P 500 and MSCI World index, which rose 15.20% and 7.44%, respectively.

Among the top contributors were Advanced Micro Devices (AMD), for reasons discussed above, and Robinhood (HOOD). Shares of Robinhood rallied on a multitude of drivers. The company launched a Trump Accounts app, unveiled AI-powered agentic trading and credit card offerings, and continued to compound adoption of its Gold product. First quarter revenue grew 15% year-over-year, thanks to strong Robinhood Gold adoption and record prediction market trading volumes amid a weaker crypto backdrop. Despite announcing a 10% workforce reduction to flatten its organizational structure, the company reported strong May monthly metrics, including total platform asset growth of 48% year-over-year to $377 billion and net deposits growth of 27% on an annualized basis to $5.6 billion.

Among the top detractors were Circle Internet Group (CRCL) and Palantir (PLTR), for the reasons discussed above. Shares of Circle Internet Group traded down amid a broader sell-off across crypto-related equities and modestly lower investor confidence associated with the near-term passage of the CLARITY Act. Additionally, shares were pressured following the announcement of OpenUSD (OUSD), a new stablecoin backed by a consortium including BlackRock, Visa, Stripe, and others. OUSD's low-fee model and partner-first share raised investor concerns that it could compete with Circle in the market for institutional stablecoins when it launches in 12-18 months. Consortium-based models suffer from poor incentives and weak economics, making them difficult to scale. USDC, by contrast, has become the trusted liquidity layer for the onchain economy, backed by years of compliance, distribution, and network effects across its $78 billion supply. With a full-stack ecosystem that now includes bridges, applications, wallets, and the Arc Layer 1, USDC has built a defensible infrastructure moat that we believe competing stablecoin networks will struggle to replicate.

ARK Genomic Revolution ETF (ARKG)

The ARK Genomic Revolution ETF increased 59.06% during the quarter, outperforming the S&P 500 and MSCI World Index, which rose 15.20% and 7.44%, respectively.

Among the top contributors were Twist Bioscience (TWST) and Absci (ABSI). Shares of Twist Bioscience climbed following a late May investor day that generated enthusiasm for the company's growing business focused on AI-based drug discovery. Shares of Absci surged after the company reported positive interim Phase 1 data for its investigational anti-PRLR antibody, ABS-201, for the treatment of androgenic alopecia, a form of hair loss, in addition to the closing of a $100 million financing round anchored by Eli Lilly.

Among the fund's weakest performers were Arcturus Therapeutics (ARCT) and Prime Medicine (PRME). Shares of Arcturus Therapeutics detracted from fund performance this quarter, despite no meaningful company-specific news. Technical factors and the ongoing assessment of previous earnings and pipeline updates likely were the primary drivers of negative price action. Shares of Prime Medicine appreciated during the quarter, lifted late in June when the U.S. Food and Drug Administration (FDA) granted Regenerative Medicine Advanced Therapy (RMAT) designation to PM359, its Prime Edited stem-cell therapy for chronic granulomatous disease, based on Phase 1/2 data published in the New England Journal of Medicine. Days earlier, New Zealand regulators cleared the clinical trial application for PM577a, the company's first in-vivo prime-editing therapy, in mutated Wilson's disease, enabling a Phase 1/2 start in the second half of 2026.

ARK Blockchain & Fintech Innovation ETF (ARKF)

The ARK Blockchain & Fintech Innovation ETF increased 3.77% during the quarter, underperforming the S&P 500 and MSCI World Index, which rose 15.20% and 7.44%, respectively.

Among the top detractors were Circle Internet Group (CRCL), for reasons discussed above, and Bullish (BLSH). Shares of Bullish traded down as weakness across digital asset markets and falling industry-wide trading volumes pressured exchange activity and transaction revenue. Furthermore, the market digested Bullish's $4.2 billion acquisition of Equiniti, a leading global transfer agent. The transaction comprises roughly $2.35 billion in Bullish stock and $1.85 billion of assumed Equiniti debt, raising investor concerns on two fronts—meaningful dilution from the stock consideration and added leverage from the assumed debt. Bullish's acquisition of Equiniti arguably positions the company as the industry's only full-stack tokenization platform, combining digital transfer-agent infrastructure, token issuance, and secondary-market trading in one integrated offering. With Equiniti's relationships across 12,000+ issuers, Bullish could potentially migrate a massive existing issuer base onto blockchain rails, creating an end-to-end platform for compliant issuance, ownership recordkeeping, trading, and settlement.

Among the top contributors were Advanced Micro Devices (AMD) and Robinhood (HOOD), for the reasons discussed above.

ARK Space & Defense Innovation ETF (ARKX)

The ARK Space & Defense ETF increased 16.59% during the quarter, outperforming the S&P 500 and MSCI World Index, which rose 15.20% and 7.44%, respectively.

Among the top contributors were Advanced Micro Devices (AMD), for the reasons discussed above, and Rocket Lab (RKLB). Shares of Rocket Lab pushed higher as space stocks rallied following the successful launch of Artemis II and anticipation of SpaceX's June 2026 Initial Public Offering (IPO). The company reported better-than-expected first-quarter results and raised guidance, citing strong execution across its launch and space systems businesses. At quarter end, Rocket Lab announced its acquisition of Iridium Communications (IRDM). Expected to close in mid-2027, the transaction will create a vertically integrated space company spanning launch, satellite manufacturing, and satellite communications.

Among the top detractors were Kratos Defense & Security (KTOS), for the reasons discussed above, and L3Harris Technologies (LHX). Shares of L3Harris traded down as part of a broad-based pullback in defense stocks and concerns that defense spending may have peaked, compounded by growing prospects for a ceasefire in Iran. The company reported strong first-quarter results but guided below expectations for full-year earnings. L3Harris was also selected as one of 14 companies eligible to compete for contracts under a new $1.8 billion procurement for satellites and supporting technologies to monitor activity in geosynchronous orbit.

ARK Israel Innovation Technology ETF (IZRL) and The 3D Printing ETF (PRNT)

Among ARK's self-indexed ETFs, the ARK Israel Innovation Technology ETF increased 13.30%, outperforming the MSCI World Index, which rose 7.44%, while trailing the S&P 500 index, which rose 15.20%. The 3D Printing ETF increased 20.81% during the quarter, outperforming the S&P 500 and MSCI World Index.⁶

Shares of SimilarWeb were the largest contributor to IZRL's performance following first quarter 2026 results, which included strong revenue growth and an upward revision of full-year guidance. Shares rallied after the company announced multi-year contracts and $300 million in Annual Recurring Revenue, reflecting robust demand and enhancing the growth narrative. Shares of Wix.com were the largest detractor from IZRL's performance as the stock experienced significant volatility following a major restructuring announcement and a reset of the company's 2026 growth outlook. In early June, Wix disclosed a ~20% workforce reduction and organizational realignment, alongside lower bookings and revenue expectations and signs of a slowdown in its Partners business, which amplified investor concerns that elevated marketing spend may signal a more sustained deceleration in growth and profitability.

Shares of Xometry were the largest contributor to PRNT's performance after the company reported better-than-expected earnings results, thanks to robust marketplace growth and improved profitability. Xometry also announced a strategic partnership with Siemens to embed its tools directly within Siemens' design-to-manufacturing software ecosystem. Shares of PTC were the largest detractor from PRNT's performance amid a broad pullback in engineering and design software, as concerns that AI agents could reduce demand for seat-based design tools weighed on the group.

Core inflation is a measure of long-term price trends that excludes volatile food and energy costs from headline inflation data (CPI or PCE).

Truflation is an independent, real-time economic data provider that calculates daily inflation metrics using over 13 million data points from more than 30 sources. It offers a high-frequency alternative to traditional, slower government metrics (like CPI), designed to provide a more accurate and immediate ("true") reflection of consumer cost-of-living changes.

Nicole-Schwarx. 2026. “The Tech Download: Can hyperscalers justify their huge AI capex?” CNBC.

Anthropic. 2026. “Anthropic expands partnership with Google and Broadcom for multiple gigawatts of next-generation compute.

Broad-based global equity indexes are defined as the S&P 500 Index and the MSCI World Index.

IZRL underperformed its benchmark, The ARK Israel Innovation Index. PRNT outperformed its benchmark, The Total 3-D Printing Index.

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Market Commentary

ARK’s statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. ARK and its clients as well as its related persons may (but do not necessarily) have financial interests in securities or issuers that are discussed. Certain of the statements contained may be statements of future expectations and other forward-looking statements that are based on ARK’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those expressed or implied in such statements.