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Waymo Reports Way Mo’ Driver Disengagements, Indicating Struggles on the Road to Autonomy

Follow Tasha on Twitter @TashaARK


This week the California Department of Motor Vehicles (DMV) published disengagement reports from automakers testing autonomous vehicles on its public roads. These reports detail how often safety drivers take over the wheels in autonomous vehicles. Waymo reports two types of disengagements, those initiated by safety drivers and those by the autonomous system itself. Arguably, the former is the more important rate, including failures that the system would have not detected on its own.


As shown in the graph below, Waymo drivers took over their vehicles more often in 2018 than in 2017, suggesting either increased difficulty in solving for full autonomy or increased caution on public roads. Supportive of the latter explanation, Waymo reinstated safety drivers in Arizona in late 2018.  Moreover, because there have been public attacks on Waymo cars in Arizona, safety drivers may be taking the wheel more often to override the slow, grandmother-like behavior of Waymo’s autonomous system.

Screen Shot 2019-02-17 at 10.27.45 AM 

Because it does not use prototype autonomous vehicles, Tesla is not required to submit data to the DMV in California. Ironically, Tesla’s customer fleet is an order of magnitude larger than the fleet of any company’s autonomous prototypes and generates significantly more data, as shown below. As of October 2018, Waymo had logged 10 million miles compared to Tesla’s 6 billion on vehicles equipped with the first and second generation of Autopilot.

Screen Shot 2019-02-17 at 10.28.11 AM 

As Waymo struggles to reach Level 4 autonomy, Tesla could leapfrog it thanks to its data advantage.



Electric Vehicle Demand is Growing

Follow Sam on Twitter @skorusARK


This week, both Mercedes and Audi suggested that they are enjoying strong demand for their electric vehicles (EVs). Mercedes claimed that it would not be able to meet demand in 2019 but did not specify its plans for production capacity. Audi announced that more than 20,000 customers made reservations for the e-tron.


While Tesla received more than 400,000 reservations for the Model 3, they included all versions starting at $35,000, whereas the Audi e-tron has a $74,800 MSRP. On Tesla’s fourth quarter earnings call, Elon Musk indicated that he expected Model 3 demand to be 700,000-800,000 globally, putting its reservations at roughly 50% of the annual addressable market. The e-tron’s price point is closer to that of Tesla’s Model X which is selling at a rate of roughly 50,000 per year. If the annual market for the e-tron were in line with that of the Model X, then its 20,000 reservations are approaching a more respectable 40% of the annual market.


According to ARK’s research, the EV market will scale dramatically during the next five to ten years, suggesting that multiple players will thrive. Perhaps, Audi will convince buyers loyal to its brand that EVs are superior to gas powered cars, turbocharging the shift of transportation to the grid.


Square’s Cash App is Banking the Unbanked

Follow Max on Twitter @mfriedrichARK


Square’s Cash App is giving the unbanked an opportunity to participate and thrive in the US economy. 20 million people in the US are unbanked today, the highest rates of which are in southern states like Mississippi and Louisiana, as shown below.  At the same time, peer-to-peer (P2P) digital wallet applications like Square’s Cash App and PayPal’s Venmo have become widely popular, having been downloaded more than 85 million times as of January 2019.


When comparing the FDIC’s unbanked rates and Google Search Trends for Square’s Cash App, the geographic overlap is striking, as shown below. The Cash App dominates in the southern states where the rates of the unbanked are highest.


Source: Google Search Trends, FDIC


The overlap between the Cash App and the unbanked probably has its roots in a feature called Direct Deposits which Square introduced in 2018. Direct Deposits give Cash App users routing and account numbers, like those for normal checking accounts, that they can pass on to their employers to facilitate direct deposits. With Cash App’s own Visa-powered debit cards, the users then can purchase goods and services anywhere where Visa is accepted - without bank accounts.


Cash App is banking the unbanked.



OpenAI’s Latest AI Breakthrough


Follow James on Twitter @jwangARK


This week’s artificial intelligence (AI) breakthrough starts with a short fiction story:


In a shocking finding, scientist discovered a herd of unicorns living in a remote, previously unexplored valley, in the Andes Mountains. Even more surprising to the researchers was the fact that the unicorns spoke perfect English.


The scientist named the population, after their distinctive horn, Ovid’s Unicorn. These four-horned, silver-white unicorns were previously unknown to science. Now, after almost two centuries, the mystery of what sparked this odd phenomenon is finally solved.


Dr. Jorge Perez, an evolutionary biologist from the University of La Paz, and several companions, were exploring the Andes Mountains when they found a small valley, with no other animals or humans. Perez noticed that the valley had what appeared to be a natural fountain, surrounded by two peaks of rock and silver snow.

Perez and the others then ventured further into the valley. “By the time we reached the top of one peak, the water looked blue, with some crystals on top,” said Perez. Perez and his friends were astonished to see the unicorn herd. These creatures could be seen from the air without having to move too much to see them – they were so close they could touch their horns.


While examining these bizarre creatures the scientists discovered that the creatures also spoke some fairly regular English. Perez stated, “We can see, for example, that they have a common ‘language,’ something like a dialect or dialectic.”


So, why is this passage interesting? In case you didn’t guess, a neural network wrote every word after the first paragraph. Until now, neural nets could complete single sentences but could not write coherent, long passages. OpenAI’s latest GPT-2 neural net can write multi-passage texts across a wide range of domains with human-like fluidity and flair.

One of the holy grails of artificial intelligence is mastering human language. For decades, traditional AI researchers tried to teach computers language with intricate rules of grammar, sentence structure, and databases. It didn’t work.


OpenAI’s GPT-2 was fed with eight million web pages and learned English on its own, giving it the ability to read, write, answer questions, and reason. The network is so powerful that OpenAI has not released the full data set and code, fearing it might be abused by malicious actors.


The tasks beyond the reach of AI continue to shrink. Impressively, OpenAI did not invent any new technology: it simply created a much larger dataset and scaled existing technology. While deep learning skeptics have focused on the limits of scaling up data, OpenAI’s latest results suggest that those limits are nowhere near to be seen.



Is JPMCoin the New Bitcoin?

Follow Yassine on Twitter @yassineARK


This week, JPMorgan announced the launch of JPMCoin, the first “cryptocurrency” developed by a major U.S. bank. Several major news outlets reported it as a threat to existing cryptocurrencies, with Barron’s proclaiming “JPMCoin just killed the Bitcoin dream.” To others, news of the launch came as a surprise given CEO Jamie Dimon’s condemnation of cryptocurrencies in the past.


But is JPMCoin really a threat to bitcoin? Is it a cryptocurrency at all?


Upon closer inspection, JPMCoin is not a cryptocurrency but an internal accounting system to settle existing customer balances. According to its FAQ, “The JPM Coin isn’t money per se. It is a digital coin representing United States Dollars held in designated accounts at JPMorgan Chase N.A.” After customers deposit dollars into their accounts, dollar-pegged JPMCoins are created and, once used, destroyed.  Perhaps in their most important role, JPMCoins will reduce the settlement times associated with traditional business-to business wire payments.


While JPMCoin is not a cryptocurrency like bitcoin, it could validate and stimulate interest in cryptocurrencies. As Linda Xie, partner at Scalar Capital, notes:

Source: Twitter


UC Berkley Snags the Foundational CRISPR Patent

Follow Manisha on Twitter @msamyARK


Soon, the United States Patent Office (USPTO) will grant UC Berkley the valuable patent for the revolutionary gene-editing technology, CRISPR-Cas9. Given the notice of allowance posted last week, the UC will be granted patent ‘859 with broad claims for the invention of CRISPR-Cas9 in all cell types of all living organisms.


Now, companies hoping to use CRISPR for human therapeutics will have to license it from both the UC and the Broad Institute. ARK had predicted this outcome in its CRISPR IP white paper published in 2018 at a time when most other research teams believed it was game over for the UC system.


The UC and the Broad Institute have been embroiled in a heated patent fight since 2014 when the first CRISPR patent was awarded to the Broad Institute. Because it published its CRISPR journal article before the Broad Institute, the UC appealed the decision. The patent trial and appeal board (PTAB) favored the Broad, citing that there was “no interference in fact” with the UC’s CRISPR application. In other words, the PTAB concluded that the two patents did not interfere with one another.


While the UC has been awarded the foundational CRISPR-Cas9 patent, investors are worried that the Broad will file an appeal resulting in litigation for years to come, an outcome we believe unlikely. Instead, UC Berkley and The Broad Institute probably will strike a cross-licensing deal, benefitting the public companies with exclusive licenses from the Broad and the UC system: Intellia Medicine (NTLA), Editas Medicine (EDIT), and CRISPR Therapeutics (CRSP). Any other company using CRISPR for human therapeutic purposes will have to pay royalties to these companies.



All-Inclusive NIPT Test May Help Improve Access to Prenatal Genetic Screening

Follow Simon on Twitter @sbarnettARK


Like liquid biopsies for cancer, non-invasive prenatal testing (“NIPT”) is a technique that tracks genetic alterations via DNA in the bloodstream. Procedures such as amniocentesis and chorionic villus sampling also allow mothers to screen their children for birth defects during pregnancy, but they are invasive and offer limited information compared to next-generation sequencing (“NGS”) technology.


While NGS cost reductions have expanded the cost-efficacy of NIPT, reimbursement schemes have limited access to high-risk patients, primarily because each genetic mutation requires a different test. Large chromosomal alterations, copy number variants, and small, single nucleotide polymorphisms, for example, require different sequencing chemistries and analyses.


One recent study sought to create an all-inclusive NIPT test that could screen for all of the variant classes without sacrificing clinical accuracy in an attempt to encourage more favorable reimbursement decisions. The researchers developed an algorithm that optimized sequence coverage across the genome, increasing the sequencing depth for complex variant types and decreasing it for simpler variant types.


Overall, this process reduced the average sequencing coverage, the primary determinant of test costs. Moreover, it was modular enough to be improved continually with larger training datasets, pointing to lower costs in the future and encouraging broader based reimbursement.

ARK's statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. For a list of all purchases and sales made by ARK for client accounts during the past year that could be considered by the SEC as recommendations, click here. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. For full disclosures, click here.



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