Every year, Cathie Wood's ARK Invest releases its "Big Ideas" report. The purpose of this report is to identify technology areas that could especially make a splash.
The latest "Big Ideas" report identified five consumer trends that could create a $22.5 trillion opportunity by 2030. Here are those trends -- and my picks for the top stocks to buy now to profit from each one.
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1. Connected TV
Connected TV (CTV) is the delivery of video content via the internet to connected devices. ARK Invest's recent report noted that around 85% of U.S. households have access to at least one CTV device. However, CTV only represents 23% of total U.S. TV advertising spending.
CTV obviously has a tremendous growth opportunity. ARK Invest projects that advertising spending on CTV will increase by 20% annually over the next five years.
In my view, one CTV stock stands out above all others -- The Trade Desk (TTD -0.54%). Despite facing a tough advertising market, the company has delivered impressive revenue and earnings growth. Spending on the Trade Desk's platform soared more than three times faster than the industry average last year.
Granted, The Trade Desk stock is pricey, with shares trading at nearly 57 times expected earnings. I think, though, that the company's tremendous growth prospects justify a premium price for this stock.
2. Social platforms
ARK Invest noted in its "Big Ideas 2023" report that "social platforms with the best recommendation engines are likely to dominate ad budgets." It singled out two social media apps that close to 40% of Generation Z consumers (individuals born between the late 1990s and early 2010s) prefer -- TikTok and Instagram.
TikTok faces a potential ban in the U.S. because of concerns that its owner, ByteDance, could be sharing user data it collects with the Chinese government. If the U.S. does ban TikTok, it could provide a major catalyst for other social media apps, especially Instagram.
Instagram, Facebook, WhatsApp, and Messenger are all products in Meta Platforms' (META -10.56%) portfolio. The company hasn't received as much publicity lately for its artificial intelligence (AI) leadership, but Meta's generative AI efforts are already paying off.
Don't write off the company's metaverse bet just yet, either. I think that Meta stock has significant upside potential over the long term.
3. Online sports betting
Online sports betting has been an explosive growth market in recent years. ARK Invest mentioned in its latest report that online sports betting volume in the U.S. and Canada made up 17% of total sports betting in 2017. In 2022, that figure was 86%.
ARK predicts that online sports betting in the U.S. and Canada will grow at an annual rate of 27% over the next five years. If Wood's company is right, that would represent a $330 billion market.
While there are several sports betting stocks, Flutter Entertainment (FLTR -0.34%) (PDYP.Y) stands out. The company operates FanDuel, the most popular online sports betting site in the U.S.
It also has other sites in the U.S. and other countries around the world. Flutter is particularly strong in the U.K. and Ireland, as well as in Australia, where its SportsBet site ranks as the market leader in online sports betting.
4. Video gaming
ARK Invest also expects a resurgence in the video gaming market. The company projects that video gaming revenue will increase by 10% annually over the next several years. ARK thinks that video games that offer virtual experiences similar to the physical world will be the primary growth driver.
I view Nvidia (NVDA 3.71%) as a no-brainer winner from this trend. The company's graphics processing units (GPUs) are the gold standard for gaming apps. Nvidia is also becoming an artificial intelligence powerhouse. AI is likely to be the company's biggest growth market.
The stock's sizzling returns so far this year have some investors worried that Nvidia has grown too fast too quickly. It won't be surprising if the stock pulls back in the not-too-distant future. Over the long run, though, I look for Nvidia to deliver great returns.
5. Digital ownership and nonfungible tokens (NFTs)
The final consumer trend that ARK Invest is really bullish about is digital ownership and nonfungible tokens (NFTs). ARK believes that global NFT transaction volume could skyrocket more than 5x over the next five years to $120 billion.
Cloudflare (NET -1.05%) should be a key beneficiary if this prediction comes true. The company's network helps customers connect to the Internet more securely, reliably, and at faster speeds. Cloudflare Stream enables live and on-demand video streaming from the Cloudflare global network. It also supports NFTs for digital ownership of videos.
The potential explosion in NFTs isn't the only reason to consider Cloudflare stock. The company also has significant growth opportunities in cybersecurity and content delivery.
