View as web page here.
Please enjoy ARK's weekly newsletter curated by our thematic analysts and designed to keep you engaged with disruptive innovation. Have a wonderful day!

Computer Graphics and AI Will Challenge Human Models

Follow James on Twitter @jwangARK


Imma AI
Source: Engadget


Meet Imma. She has pink hair, loves anime, has over 60k followers on Instagram, and is 100% digital. Thanks to the relentless advancement of computer-generated imagery, a Japanese design agency has created a photorealistic digital model. Imma follows the success of digital Instagram influencer, Lil Miquela, whose hip lifestyle has earned her over 1.6 million followers. What’s remarkable isn’t that these digital models exist, but that people take them seriously.


Currently the images are stills, but soon artificial intelligence (AI) could turn them into talking faces. A recent paper by Samsung shows how a single image can be converted to a “live” video with AI training based on videos of real people talking. Today human writers create the dialogue for these digital models. In the future, however, text generating neural nets such as GPT-2 could take over, feeding other neural nets like WaveNet and delivering realistic sounding speech.


Computer graphics and AI are converging to produce new and disruptive applications. Historically, high end studios had a lock on the creation of realistic digital assets. Soon, AI could empower many people with those superpowers.



What Could be Behind the Vision Fund’s $4 Billion Loan?

Follow Max on Twitter @mfriedrichARK


SoftBank’s $100 billion Vision Fund reportedly is borrowing $4 billion against its stakes in Uber, Slack, and Guardant Health, all of which recently IPO’d. Apparently, the Vision Fund intends to use the proceeds to return cash to investors given the lock-up periods associated with those IPOs.

Surprisingly, SoftBank now accounts for half of all the corporate bonds outstanding in Japan, with the Vision Fund adding another dimension to its leverage. While SoftBank’s $28 billion stake is in equity, outside investors hold both equity and debt: for every $100 invested in the Fund, $38 is in equity and $62 in preferred units. Saudi Arabia’s Public Investment Fund’s (PIF) $45 billion investment in the Vision Fund, for example, is split between $17 billion in equity and $28 billion in debt/preferred.


When Softbank closes the $100 billion Fund, $44.6 billion probably will be in the form of preferred stock and debt. According to several reports, the coupon on the preferred is 7%. Given the Fund’s 12 year life, split into 5 years of investments and 7 years of divestments, the 7% coupon translates into interest payments of $3.1 billion per year, or $37 billion over its life.


Even if it were only to return its capital and cover interest costs, the Vision Fund would have to generate $19.6 billion annually over the 7-year divestment period. If it were to return 10x the original capital, as Masayoshi Son committed to PIF, the Vision Fund would have to generate more than $100 billion per year over the same period. Given this heavy lift, the $4 billion loan might as well have covered coupon payments instead of “returning capital to its investors”.


Instead, the “vision” is growing. Last year, Masayoshi Son announced plans to raise 100 trillion yen, or $880 billion, in multiple Vision Funds over the next ten years. Based on the first Vision Funds I’s equity to debt ratio, SoftBank may have to tap the debt markets for nearly half a trillion USD through 2028.



Bitcoin’s Proof of Work Difficulty Reaches All Time High

Follow Yassine on Twitter @yassineARK


As bitcoin’s price eclipsed $9000 this week for the first time in more than a year, its proof of work difficulty hit an all-time high. Proof of work difficulty is a measure of the difficulty to mine a block. Difficulty is set so that, on average, the hash of a block takes roughly 10 minutes. The biggest determinant of difficulty is the hash rate of the Bitcoin network. Every 2016 blocks, the Bitcoin network reassesses its proof of work difficulty based on the global hash rate to determine whether it is consistent with the network's ability to deliver blocks every 10 minutes. A graph of Bitcoin’s historical proof of work difficulty is shown below:

Source: ARK Investment Management LLC, 2019


In December, Bitcoin's mining difficulty dropped 15%, a rate surpassed only by the 18% drop in November 2011. Initially, the magnitude of the drop created fear that Bitcoin mining had entered a death spiral. Now that difficulty has returned to an all-time high, however, the fear, uncertainty, and doubt (FUD) has been put to rest.


Bitcoin’s price rally this year has been corroborated by the strong fundamentals associated with Bitcoin’s blockchain. For context, hash rate - a proxy for the network’s security - is 6x the level it hit at bitcoin’s peak price of $20,000 in December 2017.


ARK continues to believe that fears of Bitcoin’s death spiral lack substance. Bitcoin’s incentive system minimizes the probability of a mining death spiral, its self-correcting network performing as designed during the past year, as shown in the chart above.



Coming Soon: Free Robot Delivery

Follow Sam on Twitter @skorusARK

Follow Tasha on Twitter @TashaARK


Kiwibots are delivery bots that roam UC Berkeley’s campus, ferrying food to students. Restaurant workers deliver food to the robot which completes the last 200 meters of the journey.


With robot assistance, humans can handle 15 deliveries per hour, more than most people working for Uber Eats. The robots are equipped with Nvidia’s Jetson TX2s and camera-based computer vision and can navigate autonomously with the help of remote human operators located in Colombia, the home country of Kiwi’s founders. The Colombian operators work for $2 per hour, which is above their local minimum wage. Kiwi believes that it will be able to offer delivery for free next year, as it generates most of its revenue from restaurant commissions and promotional deals.


ARK has estimated that, thanks to delivery robots, consumers will pay only 6 cents per mile for delivery, down from the roughly $1.60 per mile for today’s human deliveries. Though the robots on Berkeley’s campus probably will not deliver food for $0.06 per mile anytime soon, they are taking a small step toward the fully automated delivery of food and other supplies.



Scientists Double the DNA Building Blocks of Life, Synthetically

Follow Manisha on Twitter @msamyARK


Recently, researchers led by Steven Benner at the Foundation for Applied Molecular Evolution announced the latest feat in artificial DNA engineering: an eight-letter synthetic system called “hachimoji”. Central to biology is the notion that DNA is transcribed to RNA and that RNA then is translated into proteins based on four nucleotides represented by the letters A,C,G,T. These four letters form two unique bond pairs, DNA’s double helix structure, which was discovered 65 years ago by Francis Crick and James Watson. Now, scientists have created two more unique base-pairs represented by the letters P,Z,S, and B, expanding DNA's information storage capacity dramatically. In computing terms, this transition is like the transformation from 2-bits to 4-bits.


The four synthetic nucleotides have thermodynamic properties similar to the four naturally occurring nucleotides. By analyzing the roles of shape, size and structure in hachimoji DNA, this work is expanding our understanding not only of the molecules that might store and transmit information but also new protein properties that could provide therapeutic breakthroughs.

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.



3 East 28th Street, Floor 7
New York, NY 10016 United States

You received this email because you are subscribed to Research Newsletters from ARK Investment Management LLC.
Unsubscribe from ARK emails or choose the types of emails you want to receive. Unsubscribe from all.

This Newsletter is for informational purposes only and does not constitute, either explicitly or implicitly, any provision of services or products by ARK Investment Management LLC (“ARK”). Investors should determine for themselves whether a particular service or product is suitable for their investment needs or should seek such professional advice for their particular situation. All content is original and has been researched and produced by ARK unless otherwise stated therein. No part of the content may be reproduced in any form, or referred to in any other publication, without the express written permission of ARK. All statements made regarding companies, securities or other financial information contained in the content or articles relating to ARK are strictly beliefs and points of view held by ARK and are not endorsements of any company or security or recommendations to buy or sell any security. By visiting and/or otherwise using the ARK website in any way, you indicate that you understand and accept the terms of use as set forth on the website and agree to be bound by them. If you do not agree to the terms of use of the website, please do no access the website or any pages thereof. Any descriptions of, references to, or links to other products, publications or services does not constitute an endorsement, authorization, sponsorship by or affiliation with ARK with respect to any linked site or its sponsor, unless expressly stated by ARK. Any such information, products or sites have not necessarily been reviewed by ARK and are provided or maintained by third parties over whom ARK exercises no control. ARK expressly disclaims any responsibility for the content, the accuracy of the information, and/or quality of products or services provided by or advertised on these third-party sites.