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It's Monday, November 18th, 2019. Please enjoy ARK's weekly newsletter curated by our thematic analysts and designed to keep you engaged with disruptive innovation. Have a wonderful day!

Microsoft’s Azure Has Selected Graphcore’s AI Chip  

Follow James on Twitter @jwangARK


UK based artificial intelligence (AI) chip startup Graphcore announced that Microsoft will use its AI accelerators on Azure, its cloud platform. Founded by ex-Nvidia engineers, Graphcore has raised more than $300 million in venture funding to build a next generation AI chip that can replace graphic processing units (GPUs) for both training and inference workloads.


According to preliminary benchmarks, while Graphcore’s chip delivers strong performance in image recognition and financial modeling inference workloads, it is not exceptional, at least not yet. In training the demanding BERT language model, for example, its chip’s performance was comparable to but did not surpass that of Nvidia GPUs.


This week at SC19, the annual high-performance computing conference, we expect Nvidia, Cerebras, Groq, and others to announce their roadmaps. Stay tuned for our conclusions.



Single-Cell Sequencing Is Increasing Our Understanding of Tumor Biology

Follow Simon on Twitter @sbarnettARK


Single-cell DNA sequencing (SCS) is growing rapidly in oncology research. Scientists use SCS to study the genetic differences between and among individual tumor cells instead of analyzing entire samples at once. Tumors can be heterogeneous, composed of subpopulations of cancer cells with distinct genetic mutations. Armed with the data from SCS, oncologists should be able to predict more accurately how a tumor will respond to therapies over time.


SCS’s obstacle is the small amount of usable DNA inside individual cells. Because researchers must copy the DNA many times to analyze tumor cells as reliably as possible, they often have to deal with “amplification bias” that causes inaccuracies in the data.


A recent study in Cell outlined a novel SCS technique that combines microfluidic devices, high-speed cameras, and novel bioinformatics tools which together limit the amplification bias. Using this approach, researchers should be able to capture more accurate information on tumor diversity, enabling them to predict how patients will respond to various therapies.

POWSWAP Introduces Trustless Bitcoin Hashrate Derivatives  

Follow Yassine on Twitter @yassineARK


This week, Bitcoin Core Contributor Jeremy Rubin announced the launch of POWSWAP, a trading platform enabling non-custodial Bitcoin hashrate derivatives. POWSWAP uses Bitcoin’s scripted language to settle a proof of work difficulty derivative between two peers. Leveraging smart-contracts, it detects changes in Bitcoin’s hashrate and payout contracts. If successful, POWSWAP could add predictability to the economics of mining.


Exposure to hashrate derivatives could allow miners, who inherently are “short difficulty”, to hedge against difficulty. All else equal, if mining difficulty increases, a miner’s expected payout decreases. A hashrate derivative would allow miners to hedge against sudden increases in proof of work difficulty.


Finding the other side of the trade, however, could be the challenge. Zap founder Jack Mallers suggests that, without a natural two-sided trade, pricing a hashrate derivative would be difficult. While a miner is inherently short difficulty, a bitcoin holder who might take the other side of the trade is not necessarily long difficulty. Because the derivative would be settled physically in bitcoin, buying insurance by shorting difficulty probably would not be an effective hedge against a crash in the price of bitcoin.


POWSWAP is in the early stages of development and should be available for alpha testing in the not too distant future.

Facebook and Google Want to Satisfy Your Bank Needs 

Follow Max on Twitter @mfriedrichARK


After months of Libra scrutiny, this week Facebook unveiled Facebook Pay, a unified payment solution to be offered across its Messenger, Instagram Marketplace and WhatsApp platforms. In some sense, the announcement was a rebranding, as Facebook has offered peer-to-peer payments on Messenger for years, with little success. Indeed, earlier this year it shut down Messenger payments in France and the UK to “focus…on experiences that people find most useful”.


We believe Facebook Pay on Messenger is unlikely to compete effectively against Venmo and Cash App in the US but could find success on WhatsApp elsewhere in the world, and perhaps on Instagram. WhatsApp has cultivated a large global user base that needs a cheap and fast way to transact inside home countries and across borders, an important unmet need that AliPay and WeChat Pay also are aiming to satisfy. With help from PayPal, Facebook also is trying to leverage Instagram into a social commerce marketplace with Checkout and Facebook Pay. Limited to a small number of large accounts today, however, Facebook Pay will have to accommodate smaller accounts on Instagram to have a chance at broad based success.


Also this week, the Wall Street Journal reported that Google will launch checking accounts next year, perhaps to incentivize users to hold funds in its less than successful Google Wallet. Through natural language processing, Google is getting better at understanding search requests, more so perhaps than comparison websites such as Kayak. If Google can deliver a better user experience and find lower prices than other third-party websites, users might be willing to hold balances on Google Pay in order to purchase products directly on Google.


All that said, consumers may not be willing to adopt the fintech offerings sponsored by big tech companies. According to a recent McKinsey survey, little more than 30% of consumers trust Facebook and fewer than 60% would trust Google to handle their financial needs.

In Other Innovation News

Disney+ Intensifies the Streaming Wars! 
On Wednesday, Disney launched its highly anticipated streaming service, Disney+, which by the end of its first day had signed up 10 million users. At a fraction of Netflix’s 158 million paying subscribers, Disney now must step up its focus on content development.


To grow their users, Disney, Netflix, Apple, and Amazon have committed billions of dollars to content generation during the next few years. Clearly, content will be the most important weapon as the so called ‘Streaming Wars’ heat up and play out during the next few years.



One of CRIPR’s Inventors Acknowledges an Unfortunate Anniversary 
This week, one of the inventors of CRISPR-Cas9, the revolutionary genome editing tool, wrote an editorial in Science Magazine with her thoughts one year after Dr. He announced that he and his team had used CRISPR to edit germ-line cells of twin girls born in China.


Jennifer Doudna urged, “Stakeholders must engage in thoughtfully crafting regulations of the technology without stifling it.” ARK believes that, properly regulated, CRISPR genome-editing will transform healthcare, turning chronic diseases into cures.



Ford Might Have a Credible EV Platform After All 

Ford unveiled its electric Mustang crossover on Sunday night, the car’s specs leaked ahead of time. On paper, it seems comparable to Tesla’s Model Y. ARK will be following the Mustang EV, evaluating how well its specs conform to reality, how much it will cost relative to the competition, and how quickly it will be able to scale in production.



Daimler Puts the Brakes on Autonomous Spending

This week CEO Ola Kaellenius told reporters that Daimler will “right size” its spending on robotaxis. Kaellenius explained, “The full-scale deployment would tie up a lot of capital with some uncertainties around the earnings potential” and reinforced early findings that the safety of robotaxis on urban roads has been more challenging than the company had anticipated.


Could heavy German regulation now be a deterrent to robotaxis, or is Daimler responding to the predictable politics in its consortium? Ridehailing firms and Tesla’s Autopilot certainly have faced significant regulatory pushback in Germany while Daimler has been saddled with many different partners. Perhaps it is throwing in the towel until the regulatory and political roadblocks disappear, if ever.



Fintech Companies Want Banking Charters

On October 30, 2019, Interactive Brokers submitted an application for an Industrial Loan Charter. This comes one month after it eliminated commissions for its retail focused service IBKR Lite. ARK believes fintech companies like Square, LendingClub, Rakuten and Interactive Brokers could save meaningful amounts of money and offer a full suite of banking services to their existing customer base, if their respective charters are approved.  

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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