ARK Disrupt Issue 74

ARK Disrupt Issue 74: Deep Learning, Genomics, Solar, and Fintech

Please enjoy ARK Disrupt Issue 74. 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. NVIDIA GTC 2017

This week we attended NVIDIA’sNVDA annual GTC developer conference in San Jose, California. CEO Jensen Huang made four major announcements:

  • Volta — NVIDIA announced its next generation Graphics Processing Unit (GPU) designed for deep learning and high performance computing. Volta is the first GPU with specialized circuits (“Tensor Cores”) designed to accelerate deep learning applications. It can perform 120 trillion operations per second, a six-fold improvement over today’s Pascal GPU.
  • NVIDIA GPU Cloud — NVIDIA announced a new cloud service that lets developers deploy their work seamlessly across local machines, on-premise systems, and public cloud services. NVIDIA’s key value-add will be supporting and optimizing performance for popular deep learning frameworks like TensorFlow, Caffe, and MXNet. NVIDIA GPU Cloud sits on top of public cloud providers like AWS and Azure, but also can tap into its own GPU cluster, paving the way for NVIDIA to enter the lucrative cloud software business.
  • Open Sourced Deep Learning Accelerator (DLA) — The DLA is a hardware unit on NVIDIA’s Xavier automotive chip that accelerates deep learning inference operations. By open sourcing its design, royalty free, NVIDIA hopes companies will integrate deep learning capabilities into chips powering anything from refrigerators to smart watches, expanding the market for deep learning.
  • Toyota: An Important Win for Its Autonomous Driving Chip — NVIDIA’s Xavier chip will enable Toyota’sTM cars with autonomous driving capabilities. With more than 10 million sales annually and a reputation for safety and reliability, Toyota is a significant customer win for NVIDIA, validating the capabilities of its Drive PX autonomous driving platform.

After more than four days of technical sessions and talks at GTC 2017, we concluded that deep learning is far from overheating: real world use cases and customer deployments are proliferating, turbocharging the artificial intelligence (AI) movement. With Volta, NVIDIA is cementing its outsized lead as the provider of “picks and shovels” for the artificial intelligence age.

2. Why Just “Read” the Human Genome When You Can “Write” It?

This week, 250 top scientists from 10 countries met in New York City to discuss and plan the next steps of the genomic revolution: synthesizing the full human genome.

While scientists can sequence or “read” the human genome for $1,000 now – and likely $100 in 2020 – the new focus is on “writing,” or synthesizing, a whole human genome. Writing will give scientists better insights into complexities of the human genome and how its structure affects function.

Today, the cost of synthesizing DNA is a high hurdle for research institutions to jump, roughly $300 million per whole human genome. Genome Project-write (GP-write) hopes to drop this cost 1,000-fold during the next 10 years, but has only $250,000 in secured funding toward the estimated $100 million in projected costs required to reach its goal.

ARK Disrupt Issue 74 Genome
Source: ARK Investment Management LLC

Meanwhile, private companies like Twist Biosciences and Molecular Assemblies have been blazing a trail and knocking down technological barriers. In the last six months alone, Twist Biosciences has lowered the cost of gene-synthesis by 30%.

To the extent GP-write and companies are successful in finding a way to synthesize DNA in a rapid, cost-effective manner, they will enable much deeper research with potentially profound consequences. Among the beneficiaries and breakthroughs could be:

  • Full-gene replacement with genome-editing tools such as CRISPR
  • DNA-based data storage
  • Enhanced biosensors
  • Universal human stem cell lines for screening purposes, limiting animal model research
  • Enhanced defense technology, such as bomb-sniffing plants
  • Epigenomics research

The genomic revolution is in its infancy. ARK Invest won’t skip a beat in researching this fascinating and important space.

3. Tesla Solar Roof Debuts

Earlier this week TeslaTSLA started taking orders for its solar roof. It posted a price calculator on its website so that a prospective customer can estimate the cost to add a solar roof to his/her home. Compared to ~$12 per square foot on average for regular tiles, the cost per solar tile is more than triple at $42.

Tesla’s price tops the estimate that ARK made several months ago and is one reason it has elicited a mixed response. On the positive side, the roof is an attractive plug and play solution for solar. In addition, in certain geographic regions where energy costs are high, it will be economic, as measured by the value of the energy it will generate during its 30-year warranty period. On the negative side, Tesla is incorporating in its pricing calculator the 30% Solar Investment Tax Credit, which will disappear in 2022.

While the solar roof did not debut at the affordable price point we anticipated, limiting demand, other strategic decisions should protect Tesla’s business model. Recently, Tesla disbanded SolarCity’s door-to-door sales force, slashing the 20% of costs allocated per installed watt. Now Tesla will push what once was SolarCity into the digital age, responding only to self-selected qualified leads. Tesla also will encourage customers to finance their roofs as part of their mortgages, providing a lower cost of capital to the customer than can Tesla.

Also this week, Tesla announced a partnership with Green Mountain Power, a utility in the northeast, which will bundle utility scale energy storage with residential energy storage for a distributed and shared energy resource. ARK is following this potentially important opportunity for Tesla and utilities.

4. Xero And Capital One Sign Data Exchange Deal

Among US banks, Capital One is leading the way in open data infrastructures. This week, Capital One Financial and Xero, a New Zealand-based online accounting software company similar to IntuitINTU, announced a partnership that will “give small businesses greater ability to control their financial data.” The partnership will enable small businesses to connect Capital One financial data with Xero’s cloud accounting solution. Xero is the third such partnership that Capital One has struck this year.

Importantly, the relationship will be fully digital and streamlined through a tokenized authorization process. The goal of this partnership is to “simplify direct bank feeds, credit card data, and the bank reconciliation process, empowering millions of small businesses to make more informed financial decisions.”

Enabling the partnership is Capital One’s new developer portal, Capital One DevExchange, through which the bank is engaging with developers to evolve this open banking platform.   Thus far, Capital One has released three open APIs: Swift ID API (authentication service), Rewards API, and Credit Offers API.

As noted in the Xero press release, “The growth of the financial web, where a network of organizations connect and share financial data in order to drive their business, is transforming the way the economy operates.” From two sides of the world, Capital One and Xero are at the forefront of this transformation.

5. A Digital & Decentralized Delaware

Two high-profile cryptoassets soon will conduct Initial Cryptoasset Offerings (ICOs), one called Tezos and the other Aragon. Because Tezos has attracted more mainstream attention, such as Tim Draper declaring it the first ICO in which he will participate, we will focus on Aragon for this Sunday Newsletter.

Aragon aims to become a digital Delaware, providing a platform for decentralized organizations to orchestrate permissioning, decision-making, capital tables, accounting systems, and more. Like many recent ICOs, it operates on top of the Ethereum blockchain. Uniquely, it has the potential to create the digital standard upon which open source organizations will automate the nitty-gritty of operations and governance. As the leading state for business incorporations, and with a progressive approach to blockchain technology, Delaware should pay close attention to Aragon’s ICO!

REMINDER:

Along with William Mougayar, CoinDesk, Coin Center, and others, ARK is helping to organize the Token Summit. This is a first-ever event exploring the economics, regulation and best practices around the issuance and operations of new cryptoassets. You can sign up for this two-day event occurring on May 24 and 25 in NYC here.


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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