Please enjoy ARK Disrupt Issue 105. This blog series is based on ARK Brainstorming, a weekly discussion between our CEO, Director of Research, thematic analysts, ARK’s theme developers, thought leaders, and investors. It is designed to present you with the most recent innovation takeaways and to keep you engaged in an ongoing discussion on investing in disruptive innovation. To read the previous issue, click here.
1. Baidu’s Project Apollo Enhances its Autonomous Driving Ecosystem
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This week NXP partnered with BaiduBIDU for its open-source autonomous vehicle ecosystem, Project Apollo. NXP NXPI will supply it with BlueBox, a semiconductor platform that aims to compete with Nvidia’sNVDA DrivePX to become the “brains” of autonomous vehicles. With Project Apollo, Baidu will gain access to massive data lakes, and partnerships with both Nvidia and NXP could add to its moat as its autonomous driving software becomes compatible with multiple hardware platforms.
Last week, the Financial Times reported that Chinese government plans to prevent foreign companies from creating high definition maps for autonomous driving. As a result, Baidu will enjoy another barrier to entry in the autonomous ride sharing space and should be able to attract more foreign partnerships to Project Apollo.
ARK’s research suggests that China will be one of the largest markets for autonomous ridesharing platforms. With widespread data partnerships, Baidu will be in an excellent position to gain traction and gain market share in what, region by region, should be enormous “winner takes most” markets.
2. Another Company Targets Solid State Batteries for Electric Vehicles, Perhaps Mistakenly
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Slowly but surely the auto industry is beginning to understand that the days of the internal combustion engine are numbered. This week NGK Spark Plug NGKSF, the world’s largest maker of spark plugs, announced that it is intensifying its focus on solid state batteries for electric vehicles. NGK’s senior general manager of engineering and R&D noted that, “it was inevitable that the industry would at some point shift from the internal combustion engine to battery EVs, and that ultimately this could make our spark plug and oxygen sensor businesses obsolete.” NGK is in the company of ToyotaTM, BoschBSWQY, BMWBMW.DE, and Dyson, all of whom are working on solid state batteries, most aiming for commercialization in the early 2020s.
Unlike these companies, ARK does not believe that EVs will be the first use case for solid state batteries. According to our research, by the time that solid state batteries commercialize, EVs will be at or near price parity with gas powered cars. In other words, the first solid state batteries will be more expensive than traditional lithium-ion batteries and will not be economic for EVs.
Instead, the first solid state batteries should aim for a less price sensitive application in which traditional lithium-ion batteries are suboptimal. According to ARK’s research, that application could be drones.
3. Bitcoin Just Had an Incredible Month and a Terrible Week
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Bitcoin just had an incredible month and a terrible week. Having rallied from less than $8,000 just before Thanksgiving to a high of nearly $20,000 a week ago, bitcoin traded as low as $10,400 last week, before rebounding to more than $13,000 this weekend.
Among the signs of irrational investor behavior around bitcoin, publicly traded companies have rallied by multiples after nothing more than a name change which included “blockchain”, former global macro hedge fund investors have forecast that bitcoin’s price could quadruple in 12 months, and speculators have gone on margin to invest in bitcoin. Historically, these signs have marked the top, either cyclically or securely, for an asset class.
That said, institutional adoption of bitcoin is nascent and could burgeon given the launch of futures markets on the CBOE and CME during the last two weeks, potentially heralding another era of financial innovation. If blockchain technology truly is as fundamental a breakthrough as was the internet—as we, at ARK, believe—then institutions will take the baton from retail investors during the next six to nine months. As of today, as shown below, the number of blockchain articles published in the US is a fraction of those covering the internet at its peak in 2000. The bitcoin price may have become highly volatile, but the market for bitcoin is in very early days.
4. Softbank Continues to Invest in Insur-Tech
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Already an investor in China’s online-only insurance agency, ZhongAn, SoftbankSFTBY just led a $120 million round of funding for New York-based insurance startup Lemonade. Lemonade is an online-only renters and home insurance service, processing claims with chatbots and enhancing policy management tools with algorithms.
Optimized for smartphones and designed to be fast, affordable and hassle free, users can make small claims via Lemonade’s app with no deductibles and rapid reimbursements. Lemonade takes 20% of the premiums and pays claims with the remaining 80%, donating anything left over to a charity of a client’s choice. Lemonade self-reinsures through Lloyd’s of London.
Lemonade aims to revolutionize the personal insurance industry with frictionless coverage. We are focused on Lemonade’s potential, encouraged further that Softbank has placed its bets on this innovative company.
4. Genomics and Blockchain Converge to Understand and Overcome Disease
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Led by former executives from DNA sequencing powerhouse, Illumina ILMN, Luna DNA is harnessing the power of blockchain technology to incentivize individuals to contribute their DNA and medical history to a distributed database. Hosted on Ethereum’s blockchain, Luna DNA rewards data contributors with Luna Coins and partial ownership of the genomic database.
In general, blockchain technology creates a low-friction way to incentivize data-sharing while allowing the decentralized ownership of data, offering both privacy and trust. Specifically, in the case of Luna, once it collects a critical mass of anonymous genomic data, pharmaceutical companies will be able to query similarities and differences among patient cohorts and surface new therapeutic leads, paying for the information with Luna Coins, as shown below.
Luna DNA is planning a token sale totaling $40-50 million sometime during the first quarter of 2018. ARK will be paying close attention to this important convergence between health care and technology.
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.