ARK Disrupt Issue 96: Online Auto Sales, Autonomous Cars, Self-Driving Computers, Fintech, and CRISPR

Please enjoy ARK Disrupt Issue 96. 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. Auto Sales Are Moving Online

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ARK believes that traditional automakers will face significant technology transitions and distribution challenges during the next five to ten years. As delineated in our research, the internal combustion engine seems likely to give way to electric drivetrains during the next five to ten years, at the same time that autonomous taxi networks are evolving and proliferating.

Last week offered a few reminders that traditional automakers must master not only new technologies but also new business models if they want to remain relevant.  Both VWVLKAY and HyundaiHYMTF announced new online sales initiatives, competing to some extent with their existing go-to-market strategies. Meanwhile, Tesla’sTSLA direct sales model and over-the-air software updates continue to challenge the less efficient and less convenient sales and service models associated with traditional auto dealers.

Interestingly, Tesla’s Model 3 has been listed online for $150,000 and $90,000, significant premiums to its $35,000 retail price (though we cannot tell if any sales at those price points have taken place).  Along with the nearly 500,000 reservations for the Model 3, those price quotes suggest that demand remains robust. Meanwhile, GMGM just announced it will be shutting down a Detroit based factory for six weeks due to weak demand for its sedans.

2. Waymo Provides Regulators With A Safety Roadmap For Autonomous Cars

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This week Google’sGOOG Waymo became the first autonomous transportation technology company to comply with the US Department of Transportation’s request for a “safety checklist.” According to the Washington Post, Waymo may have moved first to gain a strategic advantage, aiming to convince regulators to standardize on its sensor suite, design choices, and rollout plans.

Waymo has developed 3 types of LiDAR solutions which could become important in the race toward dominance on the autonomous vehicle front. Thus far, Tesla has decided against LiDAR in favor of radar and other sensors.  If regulators were to recommend or require a LiDAR solution, Tesla and other competitors could be forced into serious redesigns and delays, giving Waymo a time-to market advantage and an opportunity to provide turn-key solutions to its competitors.

If it could convince regulators that the optimal rollout strategy for autonomous technology is all or nothing, Waymo probably would pull away from the pack. Several years ago, it abandoned plans to phase in autonomous capabilities after observing that its engineers were too comfortable with the technology and could not keep their hands on the wheels and eyes on the roads. In contrast, Tesla and GM have opted to continue phasing in autonomous capabilities.

ARK envisions that the autonomous mobility-as-a-service markets will evolve into natural geographic monopolies, suggesting that the first mover will enjoy significant competitive advantages in a market measured in trillions of dollars. If Waymo delivers on its promise to launch a commercial autonomous taxi service this quarter, it will be first to market.  Further, if its safety checklist sways regulators, competitors will have to retrace their steps and fall behind.

3. NVIDIA’s Pegasus Self-Driving Computer Aims at Level 5 Autonomy

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NVIDIANVDA is moving very quickly to cement its lead in AI and autonomous driving. This week at its GTC developer conference in Munich, it announced Pegasus, a self-driving computer capable of Level 5 autonomy, the highest level in self-driving capability. Pegasus is designed for autonomous taxi operators who are looking to provide an Uber-like service without the need for human drivers. Various autonomous taxi startups have expressed support for the Pegasus system.

Pegasus is the successor to NVIDIA’s popular Drive PX 2 system. Like its predecessor, the computer is made up of four chips: two SoCs and two GPUs. Both have been upgraded to the new Volta architecture, which boosts deep learning performance by more than 10x thanks to the incorporation of dedicated Tensor Cores. With peak performance of 320 trillion operations per second, Pegasus is 6+ times more powerful than Google’s “ideal” self-driving chip, as shown below.

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If trillions of operations per second is any indication, and we believe it is, then NVIDIA is running circles around IntelINTC–MobileyeMBLY, which has not made a hardware announcement for over a year. NVIDIA ships new chips every six months, while Its competitors seem to be operating at the glacial speed of the traditional automotive industry.

4. The Fintech Insurance Industry in China Is Heating Up

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Earlier this week the China Insurance Regulatory Commission (CIRC) granted a license to Weimin Insurance Agency, an online property and casualty insurance company partly owned by TencentTCEHY.  As a result, Tencent will be able to offer insurance products embedded in its WeChat and QQ platforms.

Online insurance is soaring in China, leapfrogging the penetration of such technology in more developed markets. Weimin’s announcement comes on the heels of the oversubscribed ZhongAn IPO in September, China’s first internet-only insurance provider. According to China Economic Review, “about 65% of new insurance policies [in China] were sold through the internet last year.”

Weimin’s ownership structure highlights the tangled web in China’s insurance industry. Tencent and Fubon Property Casualty Insurance founded Weimen in 2016. Tencent not only owns a 57.8% stake in Wemin Insurance but also is an investor in ZhongAn, which in turn was founded by Jack Ma, CEO of AlibabaBABA, and Pony Ma, CEO of Tencent. China’s internet giants will continue to ride the wave of insurance and Fintech in the region, as a launching pad for ventures in the developed world.

5. CRISPR-Gold Is A Promising Alternative To Viral Delivery In Gene-Editing

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CRISPR-Gold is the most recent advance in CRISPR genome-editing technology, increasing CRISPR’s correction efficiency rate dramatically. An investigational new oncology drug will not do much good if it corrects just a fraction of cells and leaves most of them malignant. In early studies, gold nanoparticles seem to be more efficient than viruses in delivering such therapies.

To increase its correction efficiency, researchers at the University of California, Berkeley used 15nm gold nanoparticles to deliver CRISPR constructs to a variety of cell types. As shown in the schematic below, they used CRISPR-Gold, in which Cas9, a guide RNA, and donor DNA covered a central gold nanoparticle, to correct the dystrophin gene and cure Duchenne muscular dystrophy (DMD) in mice. Compared to the viral delivery of CRISPR, CRISPR-Gold increased correction efficiency 18-fold and improved muscle function 2-fold. At 5.4%, the correction efficiency rate reached an acceptable threshold for therapeutic benefit. Notably, off-target effects were minimal in the 0.005-0.2% range.

After this fascinating feat, a number of the researchers founded GenEdit to focus on developing new CRISPR delivery mechanisms like CRISPR-Gold and to find cures for human disease.

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Figure A: CRISPR-Gold construct. CRISPR–Gold is composed of 15 nm gold nanoparticles (GNP) conjugated to thiol-modified oligonucleotides (DNA-Thiol), which are hybridized with single-stranded donor oligonucleotides and subsequently complexed with Cas9 and the endosomal disruptive polymer PAsp(DET). PAsp(DET) mediates endosomal escape once CRISPR constructs successfully enter the cellular matrix, inducing rapid and efficient CRISPR, Cas9, and donor DNA delivery.

The information provided is for informational purposes only. It does not constitute any form of advice or recommendation to buy or sell any securities mentioned. It is intended only to provide observations and views of the author(s) at the time of writing, both of which are subject to change at any time without prior notice. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on ARK's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Past performance is no guarantee of future results. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. 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.