ARK Disrupt Issue 138: GPUs, Crypto, Fintech, Mobility, and Disease

Please enjoy ARK Disrupt Issue 138. 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. Is Apple’s Autonomous Car Project Alive and Well?

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This week we learned that analyst Ming-Chi Kuo, noted for his reliable supply chain contacts, estimates that AppleAAPL could release an autonomous car sometime between 2023 and 2025. Kuo thinks that the Apple Car will be “the next star product”, a compelling one based on Apple’s ability to integrate hardware, software, and services. Apparently, 5,000 employees, roughly 4% of its base, are aware of Project Titan, and nearly 8%, or 2,700, are core to the project. Important to note, Doug Field, who spent five years in a senior engineering position at Tesla, has returned to Apple to join the Project Titan team.

The Apple Car will be late to market. GoogleGOOG plans on launching Waymo commercially in Phoenix this year, and TeslaTSLA is planning a fully autonomous Autopilot update in the next one to two years. Tesla has an enviable database thanks to customer cars that have collected more than 10 billion miles of data, and Google has substantial machine learning expertise.

ARK projects that autonomous cars will have high utilization rates, traveling over 100,000 miles per year, offering a data advantage compared to any company late to market. Geographic-specific data libraries also could create regional monopolies, preventing Apple and many traditional automakers from gaining traction.

That said, though late to market in mobile phones, Apple did create the winning user interface in that space and could do so in autonomous vehicles, the ultimate mobile devices. While details are scarce and competition fierce, the autonomous mobility-as-a-service market is in very early days.

2. Micro Mobility Will Not Be as Disruptive as Many Think

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Trips of six miles and under account for ~60% of total car trips in the US. As a result, many are questioning why cars should remain as ubiquitous in the US as one or two cars in every garage. Surely, the majority of trips could be accommodated by micro mobility, including electric scooters or bikes.

The answer is that 63% of car miles and 85% of person miles traveled in the US exceed the range of micro mobility alternatives, as shown below. In other words, electric scooters and bikes may disrupt personal car ownership but not personal cars in the near term and mobility-as-a-service in the long term.

ARK Disrupt Issue 138 Graph 1

3. Nvidia’s “Turing” Ray Tracing GPU Opens New Large Markets

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At the Siggraph 2018 conference, NvidiaNVDA announced its “Turing” graphics processing unit (GPU) designed specifically for ray tracing—the main algorithm used by the visual effects industry to generate photorealistic computer graphics. Ray tracing is used extensively for special effects in movies, animated pictures, and computer aided design.

Turing will be able to perform graphics, deep learning, and ray tracing operations simultaneously, a first for any processor. The Turing GPU can perform 10 billion operations per second, enabling ray tracing in real time. In addition, it is capable of 125 trillion deep learning operations and 16 trillion graphics operations per second.

Nvidia and other chip companies rarely dedicate hardware to a specific algorithm in the absence of a large market opportunity. Nvidia posits that the $2,000 Turing ray tracing GPU will target 50 million artists and designers globally. A 10% hit rate would create a $10 billion market, nearly matching Nvidia’s annual revenue today.

4. Bitmain’s Botched Trade Could Impact Its Upcoming IPO

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The release of Bitmain’s pre-IPO investor deck has fueled speculation around the future of the company. One of its most controversial disclosures was Bitmain’s cryptoasset holdings.

In January 2018, Bitmain reportedly swapped 70% of its bitcoin (BTC) for bitcoin cash (BCH), increasing the latter by 20%. As of March 2018, Bitmain held 22,082 BTC and 1,021,316 BCH. Given its average BCH cost of roughly $900, Bitmain has accumulated nearly $350 million in paper losses at today’s price, posing a threat to its book value, the risk of which is compounded by bitcoin cash’s lack of liquidity.

For a number of years, Bitmain has pushed a narrative in favor of bitcoin cash, betting perhaps that it would become the dominant cryptocurrency. Bitmain’s critics speculate that the IPO may be an attempt to compensate for its BCH losses by transferring some of the liability to shareholders while still advocating for bitcoin cash.

5. Online Marketplaces Are Reshaping the Distribution of Financial Services

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Aggregators and online marketplaces like Lending TreeTREE are becoming the top layer of the financial services stack, connecting customers to a variety of products like loans, insurance, and credit cards. These platforms are reducing the friction consumers face, thanks to personalized recommendations, financial education and, perhaps most important, price comparisons.

LendingTree, AmazonAMZN, Credit Karma, and Nerd Wallet are re-shaping the way we choose financial services. While Amazon is planning to provide an insurance comparison platform in the UK, Credit Karma is expanding its suite of mortgage offerings in the US with its acquisition of Approved.

Credit Karma is a platform with 80 million users, 25% of the US population, that offers free credit scores in exchange for extensive data on its customers’ demographic profiles. Thanks to that data, more than 80% of the credit card applications that Credit Karma recommends for approval are accepted, each one accruing $100-300 to its revenue base.

6. Using Genomic Sequencing to Identify Disease

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Thanks to the UKBioBank’s repository of more than 500,000 patients’ genomic sequencing data, researchers have identified sub populations at risk of myocardial infarction (MI) that otherwise would have been undetected with traditional cholesterol surveillance. Based on an analysis of 6.6 million single nucleotide polymorphisms (SNPs) and combinations of mutations causing MI, the polygenic model identified roughly 5% of the population as “high-risk”, 10 times more than the percent that would have been detected through cholesterol screening. The model also surfaced risk-factors for other diseases such as atrial fibrillation, diabetes, and breast cancer.

Because 98% of all genetic diseases are polygenic, that is involving more than one gene, the clinical utility of whole genome sequencing (WGS) is taking on new importance. To date, roughly two million whole human genomes have been sequenced. If DNA sequencing costs continue to drop by 40% per year, the number of whole human genomes sequenced should increase at 150% rate per year. As a result, genome-wide association studies should power poly-epigenetic models of disease and result in molecular diagnostic tests which introduce more science into health care decision-making.

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.