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It's Monday, January 6th, 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!


Nvidia Announces Its Next Generation Self Driving Chip 

Follow James on Twitter @jwangARK


Last month Nvidia announced Orin—the successor to its Xavier chip for autonomous vehicles. Capable of 200 trillion operations per second, Orin is almost seven times faster than Xavier and will ship in a variety of configurations ranging from one to four chips.


Orin is roughly 40% faster than Tesla’s Full Self Driving (FSD) but won’t ship in production cars until 2022, the main reason Tesla chose to design its own AI chip. Had it waited for a third-party chip supplier, Tesla’s self-driving program would have been delayed for at least three years.


Nvidia’s Orin and Tesla’s FSD highlight how horizontal and vertical business models can impact performance and delivery timelines. Orin is faster and more feature rich but needsmore complex specifications to support dozens of customers with varying requirements. Tesla’s chip is much simpler because it has only one customer—its internal software team—and as a result will ship one generation faster than comparable third-party suppliers.


Like ARM and Apple in the mobile market, both Nvidia and Tesla can be winners in autonomous driving. We believe the losers will be traditional OEMs as the automotive value chain shifts from engines and gearboxes to silicon and software.



As Margin Pressure Mounts, Automation Could Save Food Delivery Providers 

Follow Tasha on Twitter @TashaARK


Recently food delivery firms have been consolidating, a trend likely to accelerate as Google threatens them with disintermediation. Recently Google enabled users to order and pay for restaurant food in Google Search, Maps, and Assistant, skipping delivery provider apps altogether. As a result, Google is likely to pressure delivery company margins even more than recently has been the case.


To survive, food delivery platforms are likely to integrate with dark kitchens, robotic food preparation, and autonomous delivery. This week, for example, Michigan-based startup Refraction AI began offering food delivery in Ann Arbor using rolling robots to undercut the fees that GrubHub and other food delivery services charge restaurants. Refraction’s co-founder explains, “We’re not spending Bentley money to drive around your tacos.”


Across the logistics space, ARK expects purpose-built autonomous vehicles on the ground and in the skies to enhance the productivity and consumer delight associated with food delivery.



Tesla’s Manufacturing Productivity Has Surpassed That of Traditional Auto Manufacturers 

Follow Sam on Twitter @skorusARK


In 2017, Tesla needed nearly 12 months to ramp Model 3 production to 3,000 vehicles per week, as shown here. At the time, bears were convinced that Tesla never would scale manufacturing, relegating it to a niche existence.


Two years and nearly 460,000 Model 3s later, Tesla built its Shanghai Gigafactory in 12 months and ramped manufacturing to 3,000 vehicles per week in just 3 months. For context, Toyota took four years to build a manufacturing plant in Texas with initial capacity similar to that of Tesla’s Shanghai Gigafactory.


Decades of manufacturing no longer seem to be a competitive moat in the automotive market. Quite the contrary, traditional auto manufacturers still are struggling to produce electric vehicles that can compete with the first Model S that Tesla produced in 2012.



Oxford Nanopore Technologies (ONT) is Gearing Up for Clinical Adoption 

Follow Simon on Twitter @sbarnettARK


While investors were focusing on Illumina’s (ILMN) acquisition of Pacific Biosciences (PACB), Oxford Nanopore Technologies (“ONT”) quietly announced key hardware and software upgrades during its Nanopore Community Meeting (“NCM”) in December. Prior to these upgrades, clinical diagnostic providers had shunned ONT sequencers because of their lower accuracy, frequent update requirements, and lower sample throughput.


During the NCM, ONT announced a new nanopore architecture. These new nanopores measure voltage instead of changes in electric current, aiming to improve the accuracy of reading the difficult stretches of DNA involved in oncology. ONT also discussed chemistry improvements that could increase throughput to 7TB of data per run, slightly outperforming Illumina’s NovaSeq 6000. Finally, it announced Q-Line, a special class of ISO-regulated instruments built for diagnostic sequencing tasks.


While preparing to penetrate the clinical sequencing market once again, ONT has had a history of over-promising and under-delivering on an “Illumina-Killer” for roughly a decade. If successful in any way, however, ONT will introduce more competition into the sequencing space, perhaps incentivizing Illumina to accelerate its own cost declines and increasing access to whole human genome sequencing.


Scientists Increase the Persistence of Antitumor T-Cells with the Help of CRISPR-Cas9 

Follow Manisha on Twitter @msamyARK


Adoptive Cell Therapies (ACT) - including CAR-T, TILs, and TCRs - have emerged as promising treatment options to cure various cancers. According to ARK’s research, 67% of all new cancer diagnoses are solid tumors, while approved T-cell therapies and most of those in clinical development are targeting liquid tumors. T-cells have had difficulty infiltrating solid tumor cells for two main reasons: the harsh microenvironments associated with solid tumors and the inability of T-cells to live long enough and populate enough to fight tumor activity.


To impact solid tumors, T-cells not only need to live long enough but also must differentiate into cytotoxix CD8+ cells that persist until tumor cell death. Using CRISPR-Cas9, scientists at St. Jude’s Hospital characterized 3,000 T-cell genes and identified four that increase CD8+ cell persistence. By deleting the gene known as REGNASE-1, they found that CD8+ T-cells not only lived longer but also infiltrated solid tumor cells at 2,000 times the rate of CD8 T-cells with REGNASE-1.


After the longstanding debate on whether or not CAR-T cells work in solid tumors, this paper points to early signs of their viability.  While only in mice studies as of now, these promising results should turbocharge research targeting solid tumors.


The Financially Underserved Are Gravitating to Fintech Products 

Follow Max on Twitter @mfriedrichARK


A recent study suggests that financially underserved consumers in the US are abandoning expensive financial products such as payday loans for cheaper solutions offered by fintech companies like Square (SQ) and LendingClub (LC). According to the Financially Underserved Market Study, low-income, unbanked or underbanked consumers and those with credit scores below 600 spent a combined $189 billion on financial products in 2018. Credit cards, auto loans, and overdrafts were among the top spending categories.


Fintech products enjoyed the highest growth rates in these categories while expensive – sometimes predatory – products such as payday loans declined. With annualized percentage rates (APRs) of up to 400%, storefront payday loans declined at a compound annual growth rate (CAGR) of 16.2% and online by 10.2% between 2015 and 2018. Accessing cheaper credit, consumers are shifting to personal marketplace loans which generated revenue growth at an 18.9% CAGR, while non-bank small business loans, as offered by Square Capital and PayPal (PYPL), generated revenue growth at a 27.3% CAGR. Reflecting the success of free peer-to-peer applications like Square’s Cash App and PayPal’s Venmo, the revenue associated with in-person domestic money transfers dropped 13% at an annual rate between 2015 and 2018.

In Other Innovation News

Bitmoji TV is Coming to a Smartphone Near You
Snapchat’s newest feature, Bitmoji TV, will be a personalized cartoon series. Starting in February, users will have access to short-form cartoons starring their own Bitmoji daily or weekly.


Over the past few years, Instagram has copied many of Snapchat’s innovative features, hurting its user engagement. Its hope is that Bitmoji TV will differentiate Snapchat with features focused on and around the camera, stimulating more user engagement.



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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