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ARK Disrupt Issue 92: AI, Blockchain, CRISPR, Drones, and EVs

Please enjoy ARK Disrupt Issue 92. 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. 

1. AI Will Be Everywhere: Apple Puts AI in the New iPhone

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In perhaps the clearest sign that AI will be everywhere, AppleAAPL is putting AI into the new chips that power the upcoming iPhone. Apple’s new A11 Bionic chip enables AI with two components: the first Apple-designed GPU, and a Neural Engine to accelerate deep learning.

The Neural Engine enables fast and accurate facial recognition, a feature that has never worked reliably on a phone. Deep learning, which provides pinpoint accuracy, requires substantial computing resources to run in real time. With specialized circuits on the chip, the A11 accelerates these operations, making accurate, real time facial recognition possible on a handheld device.

Today’s SoCs (system-on-chips) contain logic blocks that accelerate audio, video, and wireless functions. In a close race with Huawei’s Kirin, Apple’s A11 will include artificial intelligence as another ‘standard block’.  Because SoCs power everything from smartphones and tablets to drones and cars, in the future AI should be able to permeate every connected device.

2. Blockchain Technology Could Transform The Insurance Industry

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You’re at the airport…your flight is delayed…then canceled…and you have to scramble to find another flight. You might get some form of compensation from an airline, but then again you might not.

To take some of the frustration out of such travel experiences, France’s AXA has created an insurance product. With an Ethereum blockchain based backbone,“Fizzy” insures against flight delays, creating a smart contract that compensates individuals or companies automatically if a flight is delayed by more than two hours. Fizzy interfaces with global air traffic databases to verify flight times and delays. Flyers can buy insurance against flight delays up to 15 days before a flight.

Currently in test mode for flights to and from the US and Charles de Gaulle Airport in Paris, according to AXA’s website Fizzy is the “first major insurance group to offer insurance using blockchain technology.”  Parametric insurance, which triggers a contract and potentially pays out a claim based on a parameter, is a prime example of the disruptive innovation that ARK Invest seeks out and researches.

3. CRISPR for Crops

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According to the Food and Agriculture Organization of the United Nations, the global population will increase from 7 billion today to more than 9.6 billion in 2050, necessitating a 70% increase in food production. While existing technologies would not be able to accommodate the magnitude of this increase, CRISPR genome-editing should change the current trajectory.

ARK estimates that by 2025, editing just 17% of agricultural products, CRISPR would add more than $110 billion to the value of production.  Aquaculture should enjoy the biggest lift, 15% compared to current production volumes based on farmed fishing techniques that have not changed much over the years.  In terms of total global dollar value, CRISPR should impact the $1.2 trillion crop market more than any other in agriculture.

So where are we with CRISPR-edited agricultural products? Genetically-modified organisms (GMOs) and traditional trait breeding techniques have existed for centuries. Current GMO techniques require the addition of transgenes, or foreign DNA, to native crops, enabling bacterial-resistance and pesticide-tolerance. Because CRISPR edits a crop’s own DNA, it has become more acceptable, both scientifically and politically, than genetic-engineering using other species’ genomes. Just this month, the USDA decided that Yield10 Bioscience’s CRISPR-edited Camelina seed trait does not require its approval. Consequently, Camelina already is in commercial use, increasing oil yields in the US, at a much lower cost than would have been the case had it been subject to regulatory approval.

In other recent news, Cold Spring Harbor Laboratory released a study in Cell describing CRISPR’s multiplexing ability to modulate regulatory regions and zero in on “yield” genes in tomatoes. These traits extend editing from “bacteria-resistance” and “pesticide-tolerance” genes to those optimizing for fruit size, vegetable shape, crop yield maximization, and more.

Stay tuned for our upcoming research to learn more about CRISPR’s impact on agriculture and investable opportunities.

4. Drones Should Become Integral To Logistics Around The World

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While the FAA has been slow to allow and regulate commercial drones in the US, projects are proliferating in the rest of the world. For example, a San Francisco based startup, Zipline, plans to launch the world’s largest drone operation, making thousands of trips per day delivering medical supplies, in Tanzania.

In Africa and other emerging markets, drones are likely to leapfrog other technologies as companies attempt to overcome poor infrastructure and serious traffic congestion. In China, for example, already uses drones to deliver packages in rural areas.

Perhaps drone use in other countries will inform and encourage the FAA to formalize guidelines in the US before autonomous cars and trucks start clogging the roadways. ARK’s recent research suggests that autonomous trucks will be cheaper than rail on a cost per ton mile basis and could push more deliveries onto trucks, and that, likewise, autonomous passenger cars could drive total vehicle miles traveled up dramatically.

As autonomous trucks and cars place more demands on infrastructure and increase traffic congestion, drones should alleviate both problems.

5. Could Tesla Emulate SpaceX’s Strategy As It Launches Its EV Semi?

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While ARK has hypothesized that TeslaTSLA will roll out a battery swapping network when it launches its long haul EV semi next year, new information is reshaping our thinking. Paralleling its “SpaceX strategy”, Tesla could build out a super charging network for its semi.

In the “SpaceX strategy”, the Falcon 9 rocket is comprised of nine Falcon 1 rockets, suggesting that the Tesla could bundle four or five Model 3 drivetrains to produce a fast-charging semi.  As shown below, Musk says that the next generation of superchargers could provide much more than 350 kW of power. While a 350 kWh battery would take roughly an hour to charge, four or five Model 3 batteries could be charged simultaneously in ~15-20 minutes.

With this strategy, Tesla could leverage the Model 3’s infrastructure and build a number of different vehicles in the same factory, putting it at a competitive advantage.  In contrast, Daimler will be manufacturing its EV trucks and cars in different facilities.

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.