ARK Investment Management LLC
February 06, 2020 | For Informational Purposes Only
This is not a recommendation in relation to any named securities and no warranty or guarantee is provided. Any references to particular securities are for illustrative purposes only. There is no assurance that the Adviser will make any investments with the same or similar characteristics as any investment presented. The reader should not assume that an investment identified was or will be profitable. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE, FUTURE RETURNS ARE NOT GUARANTEED. www.ark-invest.com Introduction to ARK’s Big Ideas
ARK Invest aims to identify large-scale investment opportunities by focusing on public companies that are the leaders, enablers, and beneficiaries of disruptive innovation.
BIG BIG IDEAS 2020 While we believe innovation is the key to growth, the opportunities it creates often are missed or misunderstood by traditional investment managers who are more focused on sectors, indexes, short-term earnings, or price movements.
ARK seeks to gain a deeper understanding of the convergence, market potential, and long-term impact of disruptive innovation by researching a global universe that spans sectors, industries, and markets. Today, we seem to be witnessing an acceleration in new technological breakthroughs.
To enlighten investors on the impact of these breakthroughs and the opportunities they will create, we began publishing Big Ideas in 2017. This annual research report highlights the latest developments in innovation and offers some of our most provocative research conclusions for the coming year.
We hope you enjoy our “Big Ideas” for 2020.
2 ARK’s Big Ideas 2020
1. Deep Learning — From Vision to Language
BIG BIG IDEAS 2020 2. Streaming Media — The Primary Technology Behind Content Distribution
3. Electric Vehicles — Faster Adoption Than Most Think
4. Automation — Increased Productivity and More Jobs
5. 3D Printing — An Underestimated Technology
6. Autonomous Ridehailing — The Future of Transportation
7. Aerial Drones — A Cost Saver and Potential Life Saver
8. Next Generation DNA Sequencing — The Transformation of Oncology
9. Biotech R&D Efficiency — The Convergence of Technologies in Healthcare
10. Digital Wallets — The Transformation of Banking
11. Bitcoin — An Evolution of Monetary Systems
3 Disclosure Risks of Investing in Innovation
Please note, companies that ARK believes are capitalizing on disruptive innovation and developing technologies to displace older technologies or create new markets may not in fact do so. ARK aims to educate investors and seeks to size the potential investment opportunity, noting that risks and uncertainties may impact our projections and research models. Investors should BIG BIG IDEAS 2020 use the content presented for informational purposes only, and be aware of market risk, disruptive innovation risk, regulatory risk, and risks related to certain innovation areas. Please read risk disclosure carefully.
RISK FACTORS OF INVESTING IN INNOVATION
Rapid Pace of Change Regulatory Hurdles
Exposure Across Sectors and Market Cap Disruptive Political or Legal Pressure Innovation
Uncertainty and Unknowns Competitive Landscape
à Aim for a cross-sector understanding of technology à Aim to understand the regulatory, market, sector, and combine top down and bottom up research. and company risks. (See Risk and Disclosure at the end)
Source: ARK Investment Management LLC, 2019 4 5 BIG IDEAS 2020 Author: James Wang, ARK Analyst decades. two next overthe markets 3x that impact, adding $30 trillion to global equity in 20 years. We believe that deep learning will have capitalization market globalequity in trillion $10 thantheInternet. TheInternet created roughly moreimpactful be will learning deep that believes ARK accuracy. level nearnatural andat language humanunderstand hear, can see, systems (AI) artificial intelligence computing platforms. Thanks to deep learning, Deep learning is powering the next generation of Learning Deep Deep Learning Software Teaches Itself
Traditional Software Deep Learning Software BIG BIG IDEAS 2020
Learning Program
Traditional software is coded by an army of human programmers. Deep learning is software that is not ‘written’ but is ‘trained’. Humans It’s expensive, fragile, and difficult to maintain. Traditional software create AI models and gather labeled data. The software then learns cannot perform cognitive tasks such as image and speech the right behaviors, improves with more data, and often exceeds recognition. human performance.
Source: ARK Investment Management LLC, 2019 6 Deep Learning Is Powering the Next Generation of Computing Platforms
Conversational Self-Driving Cars Consumer Apps BIG BIG IDEAS 2020 Computers
In 2019, smart speakers responded to 100 Waymo vehicles have traveled TikTok uses deep learning for video billion commands and questions, a number more than 20 million fully recommendations and is growing its that increased 50% in just one year.1 autonomous miles.2 user base 10x faster than is Snapchat.1
[1] Source: ARK Investment Management LLC, 2019; Based on company derived statistics. [2] Kyle Wiggers, “Waymo’s autonomous cars have driven 20 million miles on public roads”, VentureBeat https://arkinv.st/2N5fC4D. 7 This is not a recommendation in relation to any named securities and no warranty or guarantee is provided. Any references to particular securities are for illustrative purposes only. AI Software Should Create an $18 Billion Market for AI Hardware
The slowdown in Moore’s Law1 means no more ‘free’ performance upgrades every two years. As a result, the server industry will have to invest in more computing hardware. AI accelerator chips, which optimize deep learning BIG BIG IDEAS 2020 workloads, generated $4 billion in revenue last year and should grow 36% at a compound annual growth rate (CAGR) to $18 billion in 2024.
Global Server Revenue by Component
CPU Memory Storage Other AI Accelerator $100 36% CAGR $80
$60
Billions(USD) $40
$20
$0 2019 2024
[1] Moore’s Law: Gordon Moore’s prediction that the number of transistors on a chip would double every two years. Forecasts are inherently limited and cannot be relied upon. | Source: ARK Investment Management LLC, 2019; “Worldwide Server Market Revenue Declined 6.7% Year Over Year in the Third Quarter of 2019, 8 According to IDC.” IDC, 5 Dec. 2019, https://arkinv.st/2ZSWcFh. Assumes 15% OEM margin. Deep Learning Workloads Are Growing at 5x the Rate of Moore’s Law
Hardware and software improvements reduced the cost to train neural networks by 100x in roughly two years. As a result, AI capabilities are multiplying as models are trained with 10x more computing power each year. BIG BIG IDEAS 2020 Cost to Train a Neural Network For Image Recognition Two Eras of Compute Usage in Training AI Systems (Using ResNet-50 Database) 2x every two years 10x per year Legacy GPUs Nvidia Volta GPUs Google TPUs 1. 00E+03 AlphaGoZero Tesla Autopilot $10,000 Neural Machine Translation 1. 00E+01 Days*) - BERT
$1,000 1. 00E-01 VGG ResNets AlexNet 1. 00E-03 $100 Deep Belief Nets and DQN 1. 00E-05 layer-wise pretraining
$10 TD-Gammon v2.1 1. 00E-07 BiLSTM for Speech LeNet-5 Training Compute Time (Petaflop Time Compute Training
Cost to TrainNeural(USD) to Network Cost NETtalk RNN for Speech $1 1. 00E-09 Mar 17 Sep 17 Apr 18 Oct 18 May 19 Dec 19 1980 1990 2000 2010 2020
GPU: Graphics Processing Unit; TPU: Tensor Processing Unit | *A “Petaflop-Day” refers to performing a quadrillion operations per second for a day. Source: ARK Investment Management LLC, 2019; Amodei, Dario. “AI and Compute.” OpenAI, OpenAI, 12 Dec. 2019, https://arkinv.st/2ZOH2Rr; “DAWNBench.” Stanford DAWN Deep Learning Benchmark (DAWNBench), 9 https://arkinv.st/2MUITyO. | This is not a recommendation in relation to any named securities and no warranty or guarantee is provided. Any references to particular securities are for illustrative purposes only. AI Is Expanding From Vision to Language
ARK believes that 2019 was the year of conversational AI. For the first time, AI systems could understand and generate language with human-like accuracy. Conversational AI requires 10x the computing resources of computer vision and should spur large investments in the coming years. BIG BIG IDEAS 2020 Training Time For Different AI Systems 1,000.0
~10x Days*) - 100.0
~10x 10.0
1.0
ComputeTime (Petaflop 0.1 Pre-AI Computer Vision Language Understanding Reinforcement Learning
Deployment Year: 2015 2018 - 2020 2020 +
Industry Penetration: Most global 2000 Select tech companies Tech giants: Elite research companies today and startups Google, Facebook, organizations: Baidu, Amazon etc. DeepMind, OpenAI
*A “Petaflop-Day” is performing a quadrillion operations per second for a day. Forecasts are inherently limited and cannot be relied upon. | Source: ARK Investment Management2012 LLC, 2019 10 This is not a recommendation in relation to any named securities and no warranty or guarantee is provided. Any references to particular securities are for illustrative purposes only. Sizing the Opportunity
Deep learning could create more economic value than the Internet. Within two decades the Internet added roughly $10 trillion to the global equity market cap. Since 2012, deep learning has created $1 trillion in market capitalization. BIG BIG IDEAS 2020 ARK believes it will add $30 trillion by 2037.
Market Cap Creation Internet vs. Deep Learning 30.0% Information Technology Internet Deep Learning
22.5% $1 T 21% CAGR $30 T 15.0% $10 T
7.5% 3% CAGR
ShareGlobalofMarketCap $20 T
0.0% 1997 2019 2037
Forecasts are inherently limited and cannot be relied upon. Source: ARK Investment Management LLC, 2019 11 12 BIG IDEAS 2020 Author: Nick 2024. in billion $390 to today billion $86 from years, five next the during quadruple more than should revenue streaming research, ourto According habits. viewing technology behind content distribution, reshaping believes streaming could become the primary andmassive video, audio game to libraries. ARK access content over the Internet. Now consumers have instant Streaming technology is delivering more and more Media Streaming Grous , ARK Analyst ARK , 13 BIG IDEAS 2020 This is not a recommendation in relation to any named securities noand warranty or guarantee is provided. Any references to Source: ARK Investment Management LLC, 2019 — HistoricallyCompanies SoldEither or DistributionContent Now They Are Vertically Integrating Through Both Through Vertically Are They Now Integrating 1980 Distribution Content – 2010 par ticularsecurities are for illustrative purposes only. Content & Distribution 2010+ 14 BIG IDEAS 2020 SVOD is a relatively inexpensive source of inexpensive premium content. is relatively a SVOD Per hour costs Netflix watched, consumers nearly 75% less than cable. Thanks to3.4 costs, on 75%Thanks services cable. average. streaming compelling watch less than Americans https:// https:// 2019, Mar. 29 Magazine, Toni Forbes Fitzgerald, 2019; LLC, Management Investment ARK Source: | upon. relied be cannot and limited inherently are Forecasts *Minus Ads: In our cost per hour estimate for cable we excluded the amount of time spent watching advertisements. TakingIs TV Linear Over SubscriptionVideo On Demand (SVOD) Revenue (Billions USD) $100 $140 $120 $60 $40 $80 $20 $- arkinv.st 2014 /35lJbFo;Sutton, Kelsey. “Nearly 25% of U.S. Households Will Be Cord Linear TV Estimated Revenue Estimated TV Linear 2015 2016 arkinv.st 2017 Linear Linear TV vs. SVOD: US Market Share Market US /2ZMohxS;“The Cross Platform Report.” Nielsen, Oct. 2011, https:// 2018 2019 2020 SVOD Estimated Revenue Estimated SVOD 2021 2022 - Cutters by 2022, According to EMarketer.” Adweek, Adweek, Adweek, Adweek, EMarketer.” to According 2022, by Cutters 2023 2024
arkinv.st Cost Per Hour Viewd $0.60 $0.40 $0.80 $0.20 $1.00 $1.20 $- /39sMoGB;“Cable Operators' Shift to Profit Mode Accelerates Cord . “ . How Many Streaming Video Services Does The Average Person Subscribe To?” Forbes, Forbes, To?” Subscribe Person Average The Does Services Video Streaming Many How $0.57 Ca ble TV Cost (Minus Ads*) (Minus Cost TV ble Ca 2014 Cable Cable TV vs.Subscription: Netflix $ 0.17 6 Aug. 2019, https:// 2019, Aug. 6 US CostUS Hour Viewed Per $0.81 $0.81 arkinv.st 2019 $ 0.22 /2ZM6hnw. - Cutting.” EMarketer, EMarketer, Cutting.” Netflix Cost Netflix $1.08 $1.08 2024 $ 0.34 15 BIG IDEAS 2020 years. years. According to ARK’s research, ad OTT morecouldrevenues increase 7x than during years, the fromnext five Ad nearly $6 billion in 2019 to roughly $44 billion in 2024. Source: ARK Investment Management LLC, 2019; “Booming Internet Ads Power Fasterupon. Globalrelied be cannot and limited inherently are Forecasts ApproachingIs Cliff a TVAdvertising Linear Global Revenues (Billions USD) - $200 $250 $100 $150 supported over $50 $0 2000 2002 - the - 2004 top (OTT) streaming channels should gain significant market share during the next significant few should gain top channels streaming (OTT) 2006 OTT Services OTT 2008 Global TV Share Advertising Market Adspend 2010 Growth.”Zenith, 2019,21Mar. https:// 2012 Television Advertising Television 2014 arkinv.st 2016 /36juELP. 2018 2020 51% CAGR 2022 2024 28% 72% 16 BIG IDEAS 2020 Thanks to Thanks streaming, the industry music is recovering from more revenues. decade a of than declining from $8 billion in from2019 toin 2024. in $8 billion $18 billion According to ARK’s rate research,the in revenue US of streaming music 18%, could annual grow average at an Source: ARK Investment Management LLC, 2019; “2018 RIAA Music Industry Revenue Statistics:upon. relied RIAA.”be RIAA,cannot https:// and limited inherently are Forecasts Reshaping and It Reviving Are Industry,the Services Streaming Music Revenue Adj. for Inflation (Billions USD) $20 $25 $10 $15 $5 $- 1978 1980 1982 1984 1986 1988 US Music Industry Revenue Forecast the Years During Five Next Industry Music US Revenue 1990 1992 Physical (8 - 1994 Track, Vinyl, Cassette, CD) Track,Vinyl, Cassette, 1996 Physical 1998 2000 Digital arkinv.st 2002 /39BdB9S. 2004 2006 Streaming 2008 2010 2012 (Downloads) Digital 2014 2016 2018 18% CAGR 2020 ( OTT Streaming 2022 and Paid) 2024 17 BIG IDEAS 2020 $13.5 billion, $13.5 orbillion, from 0.2% to 6.3% share during years. the Amongnext five the reasons for are this share shift Cloud gaming instant access toback end access support, games, dynamic instant device. any with and compatibility Source: ARK Investment Management LLC, 2019; “ upon. relied be cannot and limited inherently are Forecasts [1]Weconsider cloudsubscriptionto be gaming CloudGamingPoisedFor Is Explosive Growth 2019 Estimated Global Share Game Market 30.4% Mobile 23.7% 1 is likely to is take likely share from console Total $149 B $149 Total PC 2019 0.2% - Newzoo's based services that offer instant access to gaming content libraries. Console GlobalGames Market Report.” Cloud 45.8% Newzoo - , https:// , and PC arkinv.st - gaming, growing from nearly $263 million in 2019 toin from$263 growing million gaming, nearly /37su2nc. 2024 Forecast of Global Share Game Market 23.4% Mobile 15.4% Total $216 B $216 Total PC 6.3% 2024 Console Cloud 55.0% 120% CAGR 18 BIG IDEAS 2020 Esports. is Amazon’sthe 58th mostTwitch popular site the in world, morestreaming hours 11 billion than in the in form of streaming video, live Typically 2019 alone, according to2019 according alone, ARK’s estimates. This is not a recommendation in relation to any named securities noand warranty or guarantee is provided. Any references to Source: ARK Investment Management LLC, 2019 based on data sourced from [1]Weconsider livestreaming web to be Number of Hours Watched (Billions) TakingIs Streaming Live VerticalsNewin Off 10 12 0 6 4 8 2 2013 36.5% CAGR - based platforms that allow users to stream their game 2014 twitchtracker.com 2015 (Number ofHoursWatched) 1 is gaining popularity globally, with a particularly strong particularly a on impact with popularity globally, is gaining Twitch Viewership ; “Livestreaming; - play to a broader audience. 2016 - A $5 Billion Global Phenomenon.” Phenomenon.” $5 BillionA Global par ticularsecurities are for illustrative purposes only. 2017 Roundhill Investments,https:// 2018 arkinv.st /2FcVUiX. 2019 19 BIG IDEAS 2020
https:// sou data on Newzoo based 2019 LLC, Management Investment ARK Source: | upon. relied be cannot and limited inherently are Forecasts Revenue (Billions USD) $390 billion in 2024. couldrevenue streaming Total rate,grow 35% from2019 toin annual estimated at an an $86 billion roughly Sizingthe Opportunity $200 $300 $250 $100 $350 $150 $50 $- arkinv.st , https:// , /2FcVUiX. arkinv.st SVOD Video Streaming 2019 /37su2nc;“2018 MusicRIAA Industry Revenue Statistics: RIAA.” https://arkinv.st/39BdB9S;RIAA, “Livestreaming Ad 36% CAGR Total - Supported User Generated 2024
Revenue (Billions USD) $60 $40 $20 $50 $30 $10 $- Audio Streaming 2019 32% CAGR 2024 rce d from - A $5BillionA Gl zenithmedia.com
obal Phenomenon.” Phenomenon.” obal Revenue (Billions USD) $20 $30 $25 $10 $- $15 $5 ; “ ; Newzoo's GlobalGames Market Report.” Roundhill Game Streaming 2019 Live 37% CAGR Total Investments, Cloud 2024 20 BIG IDEAS 2020 Author: Sam Korus, ARK Analyst forestimateconsensus 2024. the forecasting agencies’ saleswill be million 37 units, six dramatically. ARK’s thesis for the evolution of the market differs forecast roughly 6.5 million in 2024. now 2 million agencies same anthe estimated in 2019, hit 1.45 million sales EV After andin 2020s. units 2018 would total a few hundred thousand units in the early sales EV that estimated agencies and forecasting other (EIA) Administration Industry Energy the ago, years Four Vehicles Electric (EVs) Based on Wright’s Law, we forecast EV - times higher times than 21 BIG IDEAS 2020 during the next five years. EV sales during growth sales years. couldthe EV next be five build lumpy factories as tobut scale should be robust over Despite estimated dropan 3.1 million total in auto worldwide, sales time as EV adoption traction.time EV as gains Forecasts are inherently limited and cannot be relied upon. | Source: ARK Investment Management LLC, 2019; Based on data so data on Based 2019; LLC, Management Investment ARK Source: | upon. relied be cannot and limited inherently are Forecasts [1] Gas As Increasing Are Sales EV Year
Raimonde Units (Millions) 2.5 - .5 1. 2. .5 over 1. . - , Olivia., “Global Car Sales Expected to 3.1Slide by Million This Year inSteepest Drop since Great Recession.” CNBC, CNBC, 2 Year 2013 Growth: 60% Growth: 2014 Global 2015 66% Electric Vehicle Electric 2016 46 % 2017 71 % Sales 2018 79 % 2019 (est) 2019 - 38 Powered Auto Sales Shrink Sales Auto Powered % urc 1 ed from: EV from: ed Units (Millions) are expectedsales EV to grow significantly 100 5 N 5 60 40 80 20 ov. 2019, https:// 2019, ov. - volumes.com ~2.5% ~2.5% Penetration EV Sales EV 2 M Units 2 arkinv.st . Auto Sales in 2019 /35bYEYHl. Global Auto Sales Auto Global 80 M Units 22 BIG IDEAS 2020 These cost declines are critical to reaching priceto gas parity costare These with reaching critical declines According to doubling of Wright’s units produced,forLaw, cumulative by every 18%. fall costsbattery will cell of an EV is its battery.EV of an Source: ARK Investment Management LLC, 2019; Based on data sourced from: upon. relied be cannot and limited inherently are Forecasts *kWh: Kilowatt hour Costs Battery in Decline the Forecasts Law Wright’s
$/kWh* $10,000 $1,000 $100 $10 $1 10,000 Modeled Cost Decline 100,000 ARK’s ARK’s Lithium 1,000,000 Avicenne Energy, International Energy Agency (IEA), and Bloomberg New Energy Finance. Energy New Bloomberg and (IEA), Agency Energy International Energy, - Cumulative kWh Produced kWh Cumulative Ion CostBattery Decline Model Forecast Cost Decline 10,000,000 - powered vehicles, as powered the as largest cost vehicles, component 100,000,000 Reported Prices 1,000,000,000 Cost 10,000,000,000 23 BIG IDEAS 2020
This is not a recommendation in relation to any named securities noand warranty or guarantee is provided. Any references to Source: ARK Investment Management LLC, 2019 Auto Unit Cost $/hp (USD) Accurately Costs Auto Years 100 Than More For Forecast Has Law Wright’s $10,000 $1,000 $100 $10 1,000 ModelA 1903 10,000 Wright's Law Applied to Auto Costs the HistoryOver of the Industry 1909 Ford Cost ($/hp) Cost Ford 100,000 1912 (Adjustedfor Inflation Cumulative Production Cumulative ModelT 1,000,000 1916 Wright's Law Model ($/hp) Power(Modeled Ford Cost ($/hp)) ) par ticularsecurities are for illustrative purposes only. 10,000,000 1927 100,000,000 1977 1996 2003 2012 1,000,000,000 2018 FordFusion 24 BIG IDEAS 2020 This is not a recommendation 2019 LLC, in relation to any named securitiesManagement noand warrantyInvestment orARK guaranteeSource: is| provided. Anyupon. references relied be to cannot and limited inherently are Forecasts *MSRP: Manufacturer Suggested Retail Price EVsWith Parity Price Gas Nearing Are
(USD) $40,000 $20,000 $50,000 $30,000 $45,000 $25,000 $10,000 $35,000 $15,000 $5,000 $- $44,000 2018 $24,000 250 MileRange EVPrice $33,000 Electric Vehicle Price Parity Price Vehicle Electric 2020 $24,000 EVsless! cost Cross Toyota Camry Toyota MSRP*Camry $24,000 par - ticularsecurities are for illustrative purposes only. Over: 2022 - Powered Cars Powered $25,000 $17,000 $17,000 2024 $25,000 25 BIG IDEAS 2020 tapers growth beyond 2025,adoption traditional ignoring curves. The Source: ARK Investment Management LLC, 2019; “U.S. Energy Information Administrationupon. relied be cannot and limited inherently are Forecasts HasRevised TheEIA Consistently Up EVForecasts Its Unit Sales (Thousands) 1,000 1,400 1,200 600 00 40 00 80 200 Energy Industry Administration ( Administration Industry Energy 0 2011 EIA Forecast of US Electric Vehicle Sales Vehicle EIA Forecast of Electric US 2013 2015 Actual 2017 (2015 2019 - 2019) 2021 2023 EIA) has increased its US forecasts for EV sales significantly but consistently but consistently its increased US EIA) has significantly forecasts forsales EV 2025 2027 - Forecastedin: EIA EIA 2029 - IndependentStatistics Analysis and 2019
Unit Sales (Thousands) 6,000 4,000 8,000 2,000 5,000 7,000 3,000 1,000 - EIA Forecast of US Electric Vehicle Sales Vehicle EIA Forecast of Electric US
.” 2011 EIA, https:// EIA,
2012
2013 arkinv.st
2014 vs. ARK Forecast /2F5SY7R. 2015
2016
2017
2018
2019
2020 ARKForecast 2021
2022 EIA Forecast EIA
2023
2024 26 BIG IDEAS 2020 Source: ARK Investment Management LLC, 2019; Based on data sourced from: EV upon. relied be cannot and limited inherently are Forecasts If do,they could sales hit EV then global biggest The risk to ARK’s forecast is orwhether beproduction. not toautomakersEV able traditional will scale Sizingthe Opportunity Units (Millions) 40 20 30 25 35 10 15 0 Year 5 - over - Year Growth: 60% Growth:Year 2013 2014 2015 66% Global Electric Vehicle Sales Forecast GlobalVehicle Electric 37 37 million units in 2024. - volumes.com 2016 . 46 % 2017 71 % 2018 79 % 2019(est) 2 M Units 79% CAGR 38% ($1.1 T Revenue) T ($1.1 2024 Forecast 37 MUnits 37 27 BIG IDEAS 2020 Author: Sam Korus, ARK Analyst 2035. by trillion $12 potentially and 2024, by (GDP) Product Domestic Gross US to billion $800 add will automation research, ARK’s to According andgrowth. wage will empower humans, increasing both productivity fear that automation will destroy jobs, believesARK it observers many While systems. automation and robots, Automation encompasses industrial robots, service Automation 28 BIG IDEAS 2020 Powered by Neural Networks Neural by Powered SystemsRobots, Automation and Service Robots, Industrial Encompasses Automation Industrial Robots Industrial Manufacturing Logistics, Vacuums,Logistics, Delivery Robots, Nurse Assistants Service RobotsService Restaurants, LinesProduction Automation Systems Automation 29 BIG IDEAS 2020 years comparedyears to forecast a by the Boston GroupConsulting (BCG). Based on Wright's ARKLaw, morea estimates rapid robotindustrial costin decline prices during the next five (BCG) “How Robots Will Redefine Competitiveness.” 23 Sept. 2015, https:// 2015, Sept. 23 Competitiveness.” Redefine Will Robots “How Robotics (BCG) “World 2019, LLC, Management Investment ARK Source: | upon. relied be cannot and limited inherently are Forecasts Unit Price (2018 USD) IndustrialRobot Prices Are Declining $200,000 $20,000 $2,000 500,000 1995 BCG Price Decline Price BCG 1996 $139,000 ARK’s arkinv.st /2SDew3B. Industrial Industrial Robot Decline Model Price Cumulative Production (Units) Production Cumulative 2005 $72,000 2010 R rc Dcine Decli Price ARK .” IFRInternational Federation of Robotics, https:// 2014 $33,000 2018 5,000,000 arkinv.st Historic Prices /36dFXVJ;Boston Consulting Group 2024 $25,000 $13,000 30 BIG IDEAS 2020 auto industry, ARK expects robot sales to quadruple during the next five years, from roughly 420,000 in 2018 While they flattened in 2019 in response to the US to 1.6 million in 2024. in to 1.6 million Source: ARK Investment Management LLC, 2019; “World Robotics.” IFR Internationalupon. Federationrelied be of Robotics,cannot and https:// limited inherently are Forecasts Prices Lower to Responded Has Demand Robot Unit Sales of Industrial Robots 400,000 200,000 500,000 300,000 100,000 1996-2002 - 1996 $120,000 Industrial Industrial Robot Elasticity of Price Demand 1998 2002-2010 $100,000 Unit Price of an Industrial Robot of Industrial Unit an Price 2000 $80,000 2002 2009 2004 $60,000 2006 2008 2010-2015 2010 $40,000 2012 - 2014 China trade conflict and a slowdown in the global global the in slowdown a and conflict trade China 2016 $20,000 2018 2016-2018 arkinv.st /36dFXVJ. $0
Units (Millions) 1.6 1.4 1.8 1.2 .6 .4 .8 .2 1. . ARK ARK Industrial Robot Forecast 420,000 2018 25% CAGR 1,600,000 2024 31 BIG IDEAS 2020 while increasing total employment 7x. Based on their superior economics, robots are likely to dominate the food centers fulfillment its in units 200,000 to roughly them ramped has Amazon robot2012, first in its deploying Since delivery space as well. well. as space delivery This is not a recommendation in relation to any named securities noand warranty or guarantee is provided. Any references to Source (Right Chart): ARK Investment Management LLC, 2019; Bridges, Dash. “I Made $10,378 in 1 Year Working for Source (Left Chart): ARK Investment Management LLC, 2019; Amazon SEC Filings, Amazon, https:// Logisticsthe Space Robots Penetrating Are Service # of Robots and Employees 600,000 400,000 200,000 500,000 700,000 300,000 100,000 - Number Number of Robots in Amazon's Centers Fulfillment 2013 Compared to Total Employment at Amazon 2014 Robots 2015 2016 Employees 2017 arkinv.st 2018 /2ZCRyuT. DoorDash 200 K 2019 650 K Part Time.” The Rideshare Guy Blog and Podcast, Aug.22 2019, https:// par ticularsecurities are for illustrative purposes only. USD/Mile $0.60 $0.40 $0.80 $0.20 $1.00 $1.60 $1.40 $1.80 $1.20 $- Human Human Delivery $1.60 $1.60 Cost of Delivery cost savings cost 95%+ Autonomous Delivery Autonomous arkinv.st Robot /37osrPo. $0.06 32 BIG IDEAS 2020 and clean Automationoperate systems can of much fast a as their as suppliers. Source: ARK Investment Management LLC, 2019; “Food Expenditure Series.” USDAupon. ERS relied be cannot and limited inherently are Forecasts USD Labor “Paid” to “Unpaid” From Shift a Cause Will Robots $10 $14 $12 $0 $6 $4 $8 $2 - Grocery Time Cost Time Grocery up will shift from shift up “unpaid” tasks will at home to paid jobs at fast Home Cooked Cost of a byMeal Location Food Prep Food and Prep Cleanup Cost Cleanup Food Food Cost ≈ $ 12 as sal asua C st Fa ≈ $12 - Food Expenditure Series, https:// Series, Expenditure Food - casual restaurant. Grocery casual shopping, food preparation,
Trillions (USD) $0 $2 $3 $1 arkinv.st Food Outside the Home the Outside Food /2sptBve. Costs of Food to Consumers US Non $930 B $930 (67% of addressablemarket) of (67% - 2018 - casual and other casual restaurants well as market activity labor cost labor activity market Food Inside the Home the Inside Food d esbl arket Ma le ressab Add $226 BGrocery Time Total = $2.4 T $2.4 = Total Food Food at Home and Cleanup Food Prep $781 $781 B $1.4 T 33 BIG IDEAS 2020
Source: ARK Investment Management LLC, 2019; “The Future of Employment: Howupon. Susceptiblerelied be Are Jobscannot toand limited inherently are Forecasts Trillions (USD) automation, compounding at 2.4%a growth rate of instead 1.8%. during the next 15 years. By could 2035, 40%would hit $40 bethan GDP trillion, higher nearly without the case Automation could add Sizingthe Opportunity $40 $20 $50 $30 $10 $0 2017 2019 GDP with Automation US GDP US With and Without Automation 2021 $800 billion to US GDP 2023 2025 2027 GDP Without Automation 2029 2031 Computerisation 2033 ?”Oxford Martin School, https:// during and years $12 the trillion next five 2035
Compound Annual Growth Rate 0.0% 2.0% 0.5% 3.0% 2.5% 1.0% 1.5% GDP Growth Without GDP Growth Without US Real GDP Growth Real (CAGR) US arkinv.st Automation /2rFJJYW. 1.8% 2019 2019 - 2024 GDP GDP Growth With Automation 2.4% 34 BIG IDEAS 2020 Author: Tasha Keeney, ARK Analyst 65%. rateaverageof annual an 2024 at in billion $97 to 2018 in billion $10from growing manufacturing, revolutionize will printing 3D believes ARK traditional of manufacturing. cost the a of at fraction waste, and less with radically new architectures products and creates designers, power to shifts production, and design between time the printing 3D collapses blocks. larger from material removes that manufacturing layer objects builds that manufacturing additive a form printing of 3D is Printing 3D - by - layer, as opposed to traditional subtractive subtractive traditional to opposed as layer, 35 BIG IDEAS 2020 entered the so called “valley of entereddespair,” the so“valley 3D printing suffered stocks called from of have interest, lack a a creating not recovered 3D have printing companies from the consumer mismatch between the valuation of the public in and space. private companies the between valuation mismatch Source: ARK Investment Management LLC, 2019; Data sourced from https:// used[1] ARK Google toSearch illustrateTrends decline investorthe in interest for stocks. printing 3D Whileanalysisthis Seem Investors Google Search Trends Interest Over Time 100 50 25 75 0
Jun-13 Aug -13 Oct-13 Dec-13 Feb-14 Apr- 14 Jun-14 Aug -14
Oct-14 to Be Dec-14 Feb-15 Apr- 15 trends.google.com
Jun-15 Printing 3D Underestimating Google Trends "3D Printing Stocks” Printing "3D Trends Google
Aug -15 (Category:Finance, Worldwide) Oct-15
/. Dec-15 Feb-16 Apr- 16 Jun-16 Aug -16 Oct-16 - is is 3D 3D printing hype of 2013 limited,itmirrors generalinvestor the sentiment for stocks printing 3Dtheir price and decline. Dec-16 Feb-17 Apr- 17 1 Jun-17 Aug -17 Oct-17 Dec-17 Feb-18 Apr- 18
Jun-18 - 2014. As they have 2014. As have they Aug -18 Oct-18 Dec-18 Feb-19 Apr- 19 Jun-19 Aug -19 Oct-19 Dec-19 36 BIG IDEAS 2020 the GE9X engine contained 304 3D printedcontained engine the parts.GE9X produced (GE) In Electric 2015,the first General 3D printed nozzle, 20 fuel parts combining into one. complexity, a large percentage of the GE9X engine could complexity, percentage belarge a of engine the 3D printedGE9X by the 2020s. late Forecasts are inherently limited and cannot be relied upon. | | upon. relied be cannot and limited inherently are Forecasts Brent.Donaldson, “Mission [2] Critical: ManufacturingAdditive An Breakthrough Commercialin Aviation.” ManufacturiAdditive [1]Kellner, Tomas.“How Manufacturing.” WillChange Printing GE3D Reports, 16 Feb.2018,https:// Point Tipping a at Is Printing 3D of Adoption The *Note: There are 19 fuel nozzles per engine nozzles There fuel are 19 *Note: 2015 3D Printed Parts in Engine One Aircraft 19 19 2019 304 Source: ARK Investment Management LLC, 2019. Data sourced from Bloomberg. 4,000 2024 * 2 At that rate of adoption, for and adjusting the reduction in arkinv.st /2MQQNcJ. 200,000 250,000 100,000 150,000 50,000 -
ng, 2014 20 May 2019, https:// 3D TheReduces Printing Number of Parts 2016 Required For An Engine Required Aircraft 2018
2020 arkinv.st oalPr ount C Part l Tota
/2ZIqYAP. 2022
2024
2026
2028
2030 1 In 2019, 2019, In
2032
2034 37 BIG IDEAS 2020 reduce manufacturing time, reducelower costs, manufacturing and create designs notpreviously possible. Space use 3D printing, robotics,Companies Relativity like and AI to optimize production, improve quality, Advancements in Aerospace Through Disruptive Technologies Technologies Disruptive Through Aerospace in Advancements Source: ARK Investment Management LLC, 2019; “Relativity Space.” Relativity Space, https:// Printing3D Manufacturing In Enables Leaps Static Manufacturing Process Manufacturing Static Complex Supply Chain Human Designed Parts 48 Months Iteration Time 24 Months Build Time 100,000+ Parts Manufacturing Traditional ManufacturingProcess Improves Continuously AI Chain Supply Simplified ComputerGenerated Design Time Iteration Months 6 Time Build Months 2 < 1,000 Parts 3D PrintedManufacturing Rocket arkinv.st /2FyXfAO. — Case Study: Terran Study: Case Rocket1 controls to build rockets in less than one year. year. one than buildless to controlsin rockets AI and printers 3D metal largest world’s the incorporating by aerospace of years Disrupts60 YEARS OF INSTEAD DAYS IN TERRAN ROCKET 1 BUILT AND FLOWN - driven driven 38 BIG IDEAS 2020 ARK’s research shows that 3D printing for end printing 3D that shows research ARK’s Source: ARK Investment Management LLC, 2019; McKinsey; Stratasys; “3D Printing History.”upon. relied be cannot and limited inherently are Forecasts PrintingInfancyBelievesIts inStill 3D ARK Is
Market Size (Billions USD) CurrentPenetration First Applications Market Potential:Market PROTOTYPES $12.5 Billion $12.5 40 1980’s - 50% - use use parts is the next frontier. AV Plastics, 14 June 2018, https:// 2018, June14 AV Plastics, MOLDS & TOOLS & MOLDS $30 Billion $30 arkinv.st 1990’s 6% /2TC57H1. END $490 Billion $490 Early 2000’s - USE PARTS 1% 39 BIG IDEAS 2020 The global 3D printing market could scale to Source: ARK Investment Management LLC, 2019 upon. relied be cannot and limited inherently are Forecasts Sizingthe Opportunity Forecast Last Updated: Billions (USD) $500 $100 $60 $40 $80 $20 $0 . . . $10B 2018 by 2025 by Credit Suisse $12B 2013 Estimates: $13 by 2020 by Morgan Stanley 2014 - 21B AT AT Kearney Global by 2020 by $17B 2015 $97 3D Printing Market 2020 3D to Market Printing 2025 Lux Research Lux billion by 2025 by $20B 2017 by 2020 by Deloite Deloite by $21B 2016 2024, by 2023 by & Young $27B Ernst 2019 compounding at a 65% annual rate. 65% CAGR by 2024 by Wohlers $36B 2019 by 2024 by $97B ARK 2019 $180 McKinsey by 2025 by 2013 - 490B 40 BIG IDEAS 2020 Author: Tasha Keeney, ARK Analysts 2029. bytrillion $9 and than$1trillion today trillionandshould$5 byhit 2024 10 the that suggests research ARK’s promised, than later year a debut should ridehailing autonomous While car ownership the exception, enabling new business models. ridehailing norm the will autonomous andbecome personal 1/10th the of cost a taxi today. In urban areas, believesARK pointof cost the reduce should place can move that and people fromparcels Robots to place Autonomous - year net present value (NPV) of its cashflows is more more is cashflows its of (NPV) value present net year Ridehailing - to - point point travel to 41 BIG IDEAS 2020 the first assembly line. ARK line. the first that, estimates cost assembly autonomousat scale, consumers taxis will $0.25 per mile, Adjusted the costfor toinflation, and own operate the Model personal a notsince car has changed T rolled off spurring widespread adoption. Forecasts are inherently limited and cannot be relied upon. | Source: ARK Investment Management LLC, 2019; Morton Salt Comp Salt Morton 2019; LLC, Management Investment ARK Source: | upon. relied be cannot and limited inherently are Forecasts b and estimates our refined have We mile. per $0.35 at price could taxi autonomous an that previously estimated had ARK Note: Autonomous $1.70 $1.70 1871 Ridehailing Cost Per Mile of CostOwned Mile a Vehicle Personally Per $0.70 1934 IsLikely Be to Affordable (2019 Dollars) (2019 $0.70 1950 eli any eve that autonomous taxis could be even cheaper, at only $0.25 per mile. per $0.25 only at cheaper, even be could taxis autonomous that eve Records, American Automobile Association (AAA). $0.70 2016 $0.25 2021 2024 42 BIG IDEAS 2020 Although ridehailing companies take 20 companies Although ridehailing pressures that ridehailing companies pressures are today. companies experiencing that ridehailing Moreover, someautonomous of platforms monopolies,the geographic in competitive should evolve eliminating providethey as fees higher moreto value consumers through cheaper, safer, services. and more convenient This is not a recommendation in relation to any named securities noand warranty or guarantee is| provided. Anyupon. references relied be to cannot and limited inherently are Forecasts *Amazon From Third Party Sellers 30% Exceeding Fees Platform Command Could Platforms Autonomous 60% 0% 40 0% 80 20% 0%
Ki nd le 30 - 65%
Roku 30 - 50%
Groupon 50%
Huya 50%
Youtube 45% Source: ARK Investment Management LLC, 2019
Grab 35% -
iTunes 30% of today,revenues autonomousproviders technology could collect App le App S tore 30% 30% Platform Platform Fees
Lyft 26%
Booking 20 - 25%
Expedia par 20 ticularsecurities are for illustrative purposes only. - 25%
Rover 25%
Stubhub 23% Uber (Rides) 23%
Ai rbnb 14 - 20%
Amazon* 15%
Uber EATs 11%
Ebay 10% 43 BIG IDEAS 2020 Based on and CruiseWaymo’s Automation’s missed for deadlines service, ARKdriverless commercial pushed had anticipated, future cashflows fromshould beautonomous futurehad anticipated, worth ridehailing cashflows $1 between out its autonomous adoption were curve by one to year. If one take we commercialization later place year than Source: ARK Investment Management LLC, 2019 upon. relied be cannot and limited inherently are Forecasts ShouldBe Worth Roughly $1.4 Trillion Today Winning The Trillions (USD) $10 $12 $0 $6 $4 $8 $2 2019(Should Be) $1.4 T $1.4 Autonomous Autonomous Autonomous 2020 Start Date 2020 (Estimated 10 (Estimated Ridehailing - Year Net Present Value, Cumulative) Value, Present Net Year Ridehailing Cashflows During Cashflows the During 10 Next Years 2024 $5 T 2019 Start Date; Original Forecast 2019 Start Date 2019 Platforms Platforms 2029 $9 T $9 - $2 trillion today. 44 BIG IDEAS 2020 Ridehailing company platform fees probably will drop platform probably fees company will from 20 Ridehailing The majority of fees gowill to This is not a recommendation2019 LLC, in relation to any named securitiesManagement noand warrantyInvestment orARK guaranteeSource: is| provided. Anyupon. references relied be to cannot and limited inherently are Forecasts Sustain to Unlikely Are Valuations Companies Future Current Autonomous The In Ridehailing Today’s Pony.AI Go Yidao UCAR Yandex Caocao Hyundai Cabify AutomationCruise Ola Didi Get Grab Lyft Uber include: Valuations Ridehailing - Jek Zhuanche Aptiv JV
Trillions (USD) $10 $12 $0 $6 $4 $8 $2 Ridehailing ridehailing $ 2018 2018 0.24 T Ridehailing Autonomous platform providers that own and develop autonomous technology. autonomous develop and own that providers platform Valuations Based on Estimated Of Value Net Present Ridehailing $ Ridehailing 2019 2019 0.18 Ridehailing T $0.1 T $0.1 - 30% today to 1 uooosRdhiigPatforms Pla Ridehailing Autonomous Cashflows During Next 10 Cashflows Next Years During Should Be Should $1.4 T $1.4 par 2019 2019 ticularsecurities are for illustrative purposes only. - 5% as into they evolve lead generators. $0.3 T 2024 $5 T $0.5 T 2030 $9 T $9 45 BIG IDEAS 2020 ARK believes that the autonomous ridehailing opportunity that ARKthe autonomous believes ridehailing should be worth more dollars $1 trillion than today, $5 trillion by 2024, $9 and trillion by 2029. Forecasts are inherently limited and cannot be relied upon. | Source: ARK Investment Management LLC, 2019 LLC, Management Investment ARK Source: | upon. relied be cannot and limited inherently are Forecasts li software assuming estimates, revenue and curve adoption global our using is capitalization market for estimate ARK’s Note: Sizingthe Opportunity Trillions (USD) $10 $0 $6 $4 $8 $2 (Should Be) (Should Estimated 10 Cumulative $1.4 T $1.4 2019 Of Of Autonomous Ridehailing 2024 $5 T - Year Net Present Value Value Net Year Present Cashflows 2029 $9 T ke margins and cash flowcash for and margins platformdiscounting operators, flowscash and from 10 years forward.
Trillions (USD) $0 $6 $4 $8 $2 Ridehailing $0.2 T $0.2 Market CapitalizationMarket in 2019 Automakers $1 T Energy Sector Energy $7 T 46 BIG IDEAS 2020 Author: Tasha Keeney and Sam Korus, ARK Analysts 2030. byrevenue mapping in billion $12 and sales, hardware in billion $49 delivery revenues, generatein billion roughly $275 could platforms dronedelivery that believes ARK savingpotentially lives. change shopping behavior and reduce travel times while should Drones before. ever than conveniently more andand food, even quicker deliverpeople our packages, drones willpower aerialbelieves ARK drones. Soon, Lower battery andcosts autonomous technology should Drones Aerial 47 BIG IDEAS 2020 Battery technology Batteryis improving, enough soreserves technology air taxis and air that meet flight regulations, enabling autonomous flight, autonomous reducing costsflight, dramatically. to enabled improvements take to ambulances have learning In the addition,skies safely. machine Forecasts are inherently limited and cannot be relied upon. | Source: ARK Investment Management LLC, 2019 LLC, Management Investment ARK Source: | upon. relied be cannot and limited inherently are Forecasts next 5 *JFK Affordable and Possible AutonomousTravelAir BothHasBecome Safe Flight Range (Miles) – 20 25 - 10 15 John F. Kennedy International Airport | **Note: Prices**Note:|Airport future for technoloshown the each technologyin droneareInternational when F.Kennedy John 10 years, exact dates will be dependent on regulatory approval. approval. regulatory on dependent be will dates exact years, 10 0 5 2000 Distance from Manhattan to JFK* (Inclusive of Flight Reserve For Safety) For of Reserve Safety) (Inclusive Flight 2005 Safe Passenger Drone Range Passenger Safe 2010 accommodate12 In2020 batteries should + reserves+ for safety 2015 - mile flights flights mile 2020 $10.00 $6.00 $4.00 $8.00 $2.00 $- gy reaches scale. While ARK estimates drone delivery services will commercialize in the Remotely Piloted Cost of a 10 $7.80 - Mile Drone Delivery Mile Autonomous $0.25 ** 48 BIG IDEAS 2020 $6.00 $100 $4.00 $2.00 $150 $50 Source: ARK Investment Management LLC, 2019; Bridges, Dash. “I Made $10,378 in 1 Year Working for technologyreaches scale. Whileestimates ARK drone delivery services will commercialize next5 the in *Ambulance transports patient to hospital and assumes NewDramatically Markets Decline as Drones Create TodayTo Things Cost The and Should TransportPeople $0 $- Price of a Price 30 Bike Courier Price of a Price 3 Human $140 $140 $4.80 - Minute Parcel Delivery Parcel Minute - Mile FoodMile Delivery (10 Miles) (10 eVTOL (electric vertical takeoff and landing) transports only first responder to patient. | Note: Prices shown for drone technolo drone for shown Prices Note: | patient. to responder first only transports landing) and takeoff vertical (electric Drone (atscale) Drone (atscale) $0.25 $0.20 DoorDash - 10 years, exact dates wil dates exact years, 10 $1,000 $1,500 $200 $100 $150 Part Time.” The Rideshare Guy Blog and Podcast, Aug.22 2019, https:// $500 $50 $- $- Ground Ambulance Ground l be dependent onregulatory dependent be l approval. $1,000 Helicopter Price of TransportPrice to Airport $195 $195 Price of Ambulance Price Trip* eVTOL Ambulance eVTOL $360 arkinv.st irTxi( c le) sca t (a i Tax r Ai gy Ambulance (at scale) Ambulance Autonomous eVTOL eVTOL Autonomous are in the future when each /37osrPo. $74 $150 49 BIG IDEAS 2020 Drones should make package delivery inexpensive: more Drones inexpensive: should delivery made purchase make package decisions in autonomous parcel drone operators could marketbe targeting $115 a opportunitybillion by 2030. ecommerce fromglobal pushing online, 14%2019 to in of sales retail 60% 2030. in At $0.25 per delivery, Adjusted.” FRED, Federal Reserve Bank of St. Louis, ofAdjusted.” Federalhttps:// ReserveFRED,St. Bank 2017, National Bureau of Statistics of China, 25 Jan. 2018, https:// P Bowes Pitney Bowes,“Pitney 2019; 28 Aug. 2018,LLC, https:// Management Investment ARK Source: | upon. relied be cannot and limited inherently are Forecasts Volumes Ecommerce of TakeShould Delivery Drone Share Substantial a Ecommerce (Non-Drone) 2019 14% 86% arkinv.st Global Share Global of Sales Share Retail /2QjSeSQ; “Data and Research “Data/2QjSeSQ; and on Digital for Business Professionals.” EMarketer, EMarketer, https:// (2019 and Forecasted) and (2019 Ecommerce (Drone Delivered) 2024 arkinv.st arkinv.st /2ZJWSN4. /36mBKz6;“Monthly Sales for Food Retail and Services Kindof by Business: Retail SalesKindof by Business, Millions of Doll 29% 65% 6% 2030 Other Retail 40% 27% 33% 60% arc el Shipping Index Reports Global Parcel Shipping Reaches $279 Billion in Revenue.” Revenue.” in Billion $279 Reaches Shipping Parcel Global Reports Index Shipping el
Billions (USD) $100 $140 $120 $60 $40 $80 $20 $0 arkinv.st Global Parcel Drone Delivery Revenue Revenue Drone GlobalDelivery Parcel /2trGQeE;Total Retail Sales of Consumer Goods inDecember $15B 2024 - store could move $115 B 2030 ars , Seasonally, 50 BIG IDEAS 2020 Consumption Expenditure Pattern in Egypt" (2008). CARD Working Papers. 503. https:// 503. Papers. Working CARD (2008). Egypt" in Pattern Expenditure Consumption Forty the Endorsedby and Statistics Rural Agriculturaland https:// 2017, Nov. Surveys, Bank World Surveys.” Household StrategicIn Market“Euromonitor Research,2019; LLC, Data & Analysis, https://Management Investment ARK Source: | upon. relied be cannot and limited inherently are Forecasts that estimate fromrevenue We drone by 2030. food could globally delivery total roughly $116 billion that ARKfood believes is gooda for candidate drone and time sensitive. it delivery, as is lightweight DronesCould Global Food as Of TotalDelivery a Percent Food 2019 1% Spending With and Without Drones Tota l F ood Deli very S pend Wi thout Drones thout Wi pend S very Deli ood F l Drones Tota With Spend Delivery Food itional Add (2019 and Forecasted) and (2019 arkinv.st Cause an Inflection in in Inflection an Cause 2024 - /2udM3HB;“Food Expenditure Series.” USDA ERS Ninth Session of the United Nations Statistical Commission, 29 Mar. Mar. 29 Commission, Statistical Nations United the of Session Ninth arkinv.st /2FaRyZV;Food Collection Data inHousehold Consumption Expenditure and Surveys. InterThe 10% 2% arkinv.st 2030 /2ZLnBJt. 19% 22% - Food Expenditure Series, https:// Series, Expenditure Food 2018, https:// ter
national: Strategic Market Research, Data & Analysis.” Euromonitor International | Billions (USD) $100 $140 $120 $60 Food Delivery Food $40 $80 $20 $0 arkinv.st Global Food Revenue Drone Delivery arkinv.st /36mElJm; /39AmNLF;“Measurement of Food Away From Home (FAFH) In $7 B 2024 Fabiosa - Agency and ExpertGroup Food on Securand Agency , Jacinto, F., Food"The $116 B - Away 2030 - from - Home Home ity, ity, 51 BIG IDEAS 2020 $200 $250 $100 $150 Forecasts are inherently limited and cannot be relied upon. | Source: ARK Investment Management LLC, 2019 LLC, Management Investment ARK Source: | upon. relied be cannot and limited inherently are Forecasts *JFK Transport,Traffic EspeciallyAbove Bottlenecks TaxisAir Electric ProvideShould Faster Cheaper and $50 $- – John F. Kennedy International Airport International F.Kennedy John $195 Helicopter 5 min Cost and of OptionsConvenience Travel From Manhattan to JFK $74 atsale) sca t (a irTxi Tax r Ai 18 min Cost $65 Ti me (min) me Ti axi Ta 70 min uooosT xi Ta Autonomous $10 $10 atsale) sca t (a 80 min * NYC Subway $8 60 min 52 BIG IDEAS 2020 Each year in the US roughly 350,000 cardiac arrests occur outside of hospitals, with only 12% of the victims incremental $2.8 billion in the US. The benefit associated with lives saved would be more than six times the cost. an be would cost annual the per patient, $150 additional an to cost were service ambulance air the if saved, lives of responseby decreasing Dronestimes. upcould Basedsurviving. save to on annually the present20,000 lives value Source: ARK Investment Management LLC, 2019 upon. relied be cannot and limited inherently are Forecasts 30-Day Survival Rate Lives Save to Taxis Air CostElectric a Be Could 20% 25% 10% 15% 0% 5% 0 Survival Rate by Ambulance Survival Response Time 1 2 Ambulance Response Time From 911 From Call (min) Time Response Ambulance Bystander CPR Bystander 3 4 5 Ambulance Ambulance Air Electric 6 No Bystander CPR Bystander No 7 8 9 10 Ambulance Ambulance Ground 11 12 13
Billions (USD) - $20 $25 $10 $15 $0 Effective Way Effective $5 Adding Air Taxi EMTs to Existing Ambulance Fleet: Ambulance Existing to EMTs Taxi Air Adding ot fAbl c ervice S nce Ambula of Costs Estimated Lives Estimated EMTs, $2.8 B EMTs, AirTaxi Add to Cost AdditionalAnnualized $20 B $20 Expenditure, Ambulance AnnualTotal - Saved and Cost Benefit Cost and Saved Ai r Tax i EMT Benefit EMT i Tax r Ai $18.3 LivesSaved, Valueof Present B 53 BIG IDEAS 2020 in hardware sales, and billion $12 in mapping revenue by 2030. Drone delivery platforms could generate Source: ARK Investment Management LLC, 2019 upon. relied be cannot and limited inherently are Forecasts Billions (USD) Sizingthe Opportunity $200 $300 $250 $100 $150 $50 $0 Parcel Drone $15B $400M $7B Delivery Revenue Delivery $22B 2024 Food Drone Food $116B $115B $44B $275B 2030 irTxi Tax r Ai
Billions (USD) $40 $20 $50 $30 $10 $275 billion in delivery revenue, $49 billion $0 Parcel Drones $66M $5B $1B Drone Hardware Drone Sales Hardware $6B 2024 Food Drones Food $25B $16B $8B $49B 2030 irTxis Tax r Ai
Billions (USD) $16 $12 $0 $4 $8 $300M $700M Parcel Drones Mapping Revenue 2024 $1B $6B $6B Food Drones Food $12B 2030 54 BIG IDEAS 2020 Author: Simon Barnett, ARK Analyst 2024. in billion $21 year last to billion $3.5 from rate, annual an at 43% grow will revenues NGS that estimates ARK drug discovery. medicine, personalized and accelerate decision healthcare into science more become a standard of care in oncology. It will introduce ARK believes that as costs continue to drop, NGS will $1,000. than less to billion $3 nearly cost to sequence a human genome has dropped from force behind the genomic revolution. Since 2003 the Next Sequencing DNA Generation Next - generation DNA sequencing (“NGS”) is the driving the is (“NGS”) sequencing DNA generation - making, enable enable making, 55 BIG IDEAS 2020 in units produced,in costs40%. decline If NGS Moore’shad followed 2009, since the costLaw to sequence whole a that at ARKNGS rapid a costs doubling believes are Wright’s rate,fordeclining Law: cumulative every following Wright’s Law predicted. Wright’s Law genome today human would be $100,000 Forecasts are inherently limited and cannot be relied upon. | Source: ARK Investment Management LLC, 2019; “The Cost of Seq of ThisCost is not“The a recommendation 2019; LLC, in relation to any named securitiesManagement noand warrantyInvestment orARK guaranteeSource: is| provided. Anyupon. references relied be to cannot and limited inherently are Forecasts *Human genome data equivalents equate to 96 Precipitously Declining Is Sequencing DNA of Cost The Cost to Sequence a Human Genome*
(USD) $100,000,000 $10,000,000 $1,000,000 $100,000 $10,000 $1,000 $100 $10 1 2001 Sequenci ng Cost ng Sequenci 10 gigabases Cost Decline Comparison: Moore's Law vs. Wright's Law of sequence data. sequence of 2009 100 Cumulative Human Genomes Sequenced Genomes Human Cumulative — more two than orders the $1,000than of higher magnitude that Veritas Genetics ($599) Genetics Veritas 1,000 10,000 par uen ticularsecurities are for illustrative purposes only. cing a Human Genome.” Genome.” Human a cing 100,000 Moore's Law Genome.gov 1,000,000 , https://arkinv.st/2SImMzm., 2019 10,000,000 Wright's Law Early 2020’s 100,000,000 56 BIG IDEAS 2020 Forecasts are inherently limited and cannot be relied upon. | Source: ARK Investment Management LLC, 2019; “The Cost of Se of Cost This is not“The a recommendation2019; LLC, in relation to any namedManagement securities noand Investment warranty ARK or guaranteeSource: is| provided. Anyupon. references relied be to cannot and limited inherently are Forecasts [1]combinedIllumina its technology with immune Amongdiagnostics. these sequencing rate, adoption from 2019 2024,to in in of roughly 2.6tomolecular thanks 105 million million the clinical that ARKthe numbergenomes sequenced believes human perof whole 110% should year annual at an scale AsCosts IsSurging Demand Decline, for Sequencing Genomes Sequenced Per Year 1,000,000,000 100,000,000 10,000,000 1,000,000 100,000 10,000 1,000 - 100 oncology, and non and oncology, 10 1 p-01 Apr- Jan-04 Solexa's Annual Sequencing Volume Sequencing Is Annual as Practice Accelerating Clinical NGS Enters tocommercialize firstthe waveof instruments.NGS Acquires Solexa (Jan. 07) Solexa(Jan. Acquires - invasive prenatal screening. prenatal invasive Illumina(ILMN) Oct-06 Annual Sequencing Volume Sequencing Annual - intensive tests are: intensive liquid biopsies, solid tumor testing,profiling, germline Jul-09 1 p-12 Apr- Dec-14 par que ticularsecurities are for illustrative purposes only. ARK Estimate (2024) Estimate ARK ncing a Human Genome.” Sep-17 Genomes in 2019 2.6 Million Genome.gov Jun-20 , https:// , arkinv.st Mar-23 /2SImMzm. Genomes in 2024 105 Million Dec-25 57 BIG IDEAS 2020 Source: ARK Investment Management LLC, 2019 recurrence more precisely. risk to of individual’s treat cancer, an gauge diagnosed patients, and monitorclinicians NGS enables disease Oncology Clinical Transform Should Sequencing Generation Next could identify cancer in Stage 1. information genetic data, healthcare electronic other with Combined Less Biopsy Liquid Patient GermlineRisk Assessment - InvasiveTissue Profiling - CentricMonitoring via Patients Undiagnosed Therapy Matching Therapy Disease Advanced Liquidfor Biopsy Testing Tissue Somatic throughout the course of treatment. profiling and precision therapies NGS enables sophisticated tumor Patients Diagnosed Liquid Biopsy Liquid via Monitoring Recurrence recurrences. identify to frequently and noninvasively remission NGS can monitor patients in Remission in Patients 58 BIG IDEAS 2020 many times for an accurate result. accurate an for times many analyzed be to need samples that meaning sequencing are biopsies Liquid Mayo Clinic, Mayo Foundation for Medical Education and Research, 22 Dec. 2017, https:// Mar. 2019, https:// Source: ARK Investment Management LLC, 2019; “Potential Utility of Liquid Biopsy as a Diagnostic and Prognostic Tool for the *Human genome equivalents equate to 96 in remission forin recurrences. As is increasing. result,a intensity sequencing are underof to liquid the biopsies,utility way increase not toonly screen forbut cancer toalso monitor patients patients totrials use tissue therapies matching this information, biopsies. without the need Clinical for invasive Liquid biopsies sequence tumor BiopsiesLiquid Oncologists’Add Toolkits to arkinv.st /359hcZD; Chamie - intensive, intensive, gigabases , Karim,, et “Recurrenceal. of High of sequence data. | **Full penetration of 104 million human genomes is equal to a 40x increase in annual sequencing intensi sequencing annual in increase 40x a to equal is genomes human million 104 of penetration **Full | data. sequence of - derived DNA ( fragments
Human Genome Equivalents* (Millions) 100 120 - 60 40 80 20 Risk Bladder Cancer: a Population - arkinv.st Bladder 3 M /2rJ3v5P;“Survivorship Care Plans.” American Cancer Society, https:// Annual Sequencing Volume Sequencing by Annual 40X Roughly Recurrence Monitoring Alone Could Magnify Recurrence - Based Analysis.” Cancer, U.S. National Library of Medicine of Library National U.S. Cancer, Analysis.” Based ctDNA Prostate 4.5 M Ass ) circulating in the in bloodstream. ) circulating Oncologists essment of Solid Tumors: Implications in the Precision Oncology.” Journal of Clinical Medicine, 18 18 Medicine, Clinical of Journal Oncology.” Precision the in Implications Tumors: Solid of essment Breast 12 M Lung 18 18 M arkinv.st , 1, 2013,Sept. https:// ty /36bTzAY. as measured in 2019 (2.6 million human genomes). ooet l Colorecta 67 M ** arkinv.st /39w7aVy;“Bladder Cancer.” OAL TOTA 104 M 59 BIG IDEAS 2020 Forecasts are inherently limited and cannot be relied upon. | Source: ARK Investment Management LLC, 2019 LLC, Management Investment ARK Source: | upon. relied be cannot and limited inherently are Forecasts delineated. recently (NIH) Healthcare of Institutes National the as costs, associated other and consumables amortization, hardware labor, of inclusive is price selling average the addition, In could. they as quickly as costs adjusted[1]its ARK previous cost of Webelieve $100market 2023. leadersspace this in areloweringby not revenues could grow at an annual rate couldrevenues of grow43%, annual at an reaching Based on Wright’s ARKLaw, that estimates NGS to roughly $200 by fall 2024. genome will human whole price that ARKthe toaverage believes sequence a Sizingthe Opportunity $21 billion in 2024. 1
Total Addressable Market (USD) $20 $25 $10 $15 $0 $5 DNA Sequencing DNA Market Sequencing $3.5 B 2019 43% CAGR $21 B $21 2024 60 BIG IDEAS 2020 industries, while creating a more efficient healthcare system. Pharmaceutical and Biotech the of capitalization market gene CRISPR and NGS, AI, of convergence the that shows research ARK’s cures. disease for search inthe R&D on returns increase and failure rates, development timelines, reduce of drug development radically. It should shorten gene Next Generation DNA Sequencing (NGS) and CRISPR The convergence of Artificial Intelligence (AI), Author: Simon Barnett, ARK Analyst Efficiency R&D Biotech - editing has the potential to boost the efficiency - editing could add trillions to the the to trillions add could editing 61 BIG IDEAS 2020 Source: ARK Investment Management LLC, 2019 Radically Development Drug of Efficiency Technological Three Advances the CouldBoost • • • Sequencing Generation Next Improvesselection clinicaltrial treatments targeted toward Guidespatients fidelity higher with cheaper, and faster Sequences • • • CRISPRGene Turns chronic conditions into potential cures potential into conditionschronic Turns experimentation earlier Enables capability more with cheaper, and faster Edits - Editing NGS CRISPR AI Shorterdevelopment timelines Fewerfailures indrug development forCures chronic conditions • • • Intelligence Artificial Lowers the cost of sequencing and analysis and sequencing of cost the Lowers participationclinicaltrial Increases drug candidates of discovery the Accelerates 62 BIG IDEAS 2020 Elsevier, 20 Nov. 2015, https:// 2015, Nov. 20 Elsevier, Source: ARK Investment Management LLC, 2019; * [1]Assumes 10% cost of capital. clinical trials using genetic diagnostics will result in fewer failed drugs and will increase capital efficiency. efficiency. capital drugsresult increase failed fewer in and will will diagnostics genetic using trials clinical to respond.likely NGS by tousing more trials and enroll find patients efficient Drug clinical development are companies making to Clinical Trial Success Rates Critical Is (NGS) Sequencing DNA Generation Next A lower failure rate constitutes an improvement in clinical trial success. Targeted drugs have a mechanism of action that usu of mechanism actionlower that A a failureclinicalsuccess. trial constitutesin have improvementrate drugs an Targeted Failure Rate 60% 30% 45% 75% 15% 0% Genetic Genetic Diagnostics Can Overall 72% by 45% in Phase III Lung Trials Cancer arkinv.st Half of clinical trials and 80% of oncology trials now collect genetic information. ARK believes ARK information. and trials 80%genetic believes collect now of trials oncology of clinical Half /35AnSA2. Falconi Ta rgeted Drugs* rgeted Ta , Adam, etAdam, “Biomarkers, al. Receptor and Targeted Therapies Reduce Clinical Trial Risk inNon 69% Lower Failure Rates Lower Failure Genetic Diagnostic Drugs* 38% materially at every stage of the drugdevelopmentthe of processstageevery at materially rates failure trial shouldreduce clinical intelligence, artificial with combination in generation sequencing Next tests, diagnostic all 45 25 10 0 (%) Reduction Rate Failure TheCost to Produce One FDA y isy genetic tailored naturein topatient. and a Given Reduced Failure Rates Failure Reduced Given – Small - Cell Lung Cancer.” Journal of Journal Cancer.” Lung Cell 3 9 18 28 (#) Drugs Failed - $220 $350 $520 $720 USD) (Million TotalCost of R&D Approved Drug Approved Thoracic Oncology, 1 63 BIG IDEAS 2020 Source: ARK Investment Management LLC, 2019; “Home Assumes [2] 10% cost of capital. [1]Academic mentioning“machinepapers learning”one or of mortalti 5top “deep the learning” diseasesthe in and US the in times trial cutting by more potentially half. than throughputtrial ecosystem. by AIimproving patient recruitment clinical and should retention,increase toAI addressdeployedis being increasingly major throughoutand diseases to boostthe healthcare efficiency Time the IntelligenceShould (AI) Reduce Artificial 1995 Publication Publication Volume of Learning Machine and Deep 1997 Learning Learning Papers Focused on DiseasesMajor
1999
2001 -
2003 to
2005 - Market for New Therapies
2007 - PubMed
2009 - NCBI.” National Center for Biotechnology Information, U.S. Nationa U.S. Information, Biotechnology for Center National NCBI.”
2011
2013
2015
2017 1
2019 0 500 1,000 1,500 2,000 2,500 3,000 3,500 tle or abstract or clinical trial speed and lower costspeed and lower trial clinical sequencing, andshouldgeneDNA improve editing TheAI, combination of 45 25 10 0 (%) Time l Libraryl of Medicine, https:// Cost To Develop A Single Successful Drug DevelopToCost SingleSuccessful A - to - Market Reduction Reduction Market arkinv.st /2ZZk9L4. - of - capital adjusted R&D costs. adjustedR&D capital $535 $610 $675 $720 USD) (Million TotalCost of R&D 2 64 BIG IDEAS 2020
Alireza, et al. “Development and Clinical Translation of Approved Gene Therapy Products for Therapy Genetic Disorders.”Gene of Approved Translation ClinicalFrontiers, Frand “Development al. et Alireza, Source: ARK Investment Management LLC, 2019; Biologics Evaluation and Research. “Approved Cellular and Gene Therapy Products. [1]Life Cost per Treatment complete remission in liquid tumors at a low cost per "life of rates high demonstrated therapies gene three first the years, two last the in FDA the by Approved registered. approved FDA been have therapies Gene editing promises to transform our ability to create and deliver gene and cell therapies. To date, only 10 Bang ForMuch Better the Buck a StickerBut Price Higher a Comesat Disease Curing (Thousands USD) - year:Year of survival Chronicwhile| [2] on therapy. cancer treatments include treatments 2014toapproved 2019. $300 $450 $150 $- Average CostofChronicCancer Treatment likely will be a one ane ratment Trea ncer Ca Average Cost of Cost Average Chronic Cancer Cancer Chronic Treatments 2014-2019 administered cure administered $158 $158 GeneTherapies 2 vs. GeneTherapies - time time Average Cost of Cost Average C hrpies Therap ACT . Cancer Gene Gene Cancer Therapies $424 — three of them targeting cancer targeting them of three
Incremental Life-Years Gained 0.0 4.0 2.0 5.0 .0 3. .0 1. Average Life Chronic Cancer Cancer Chronic Treatments Treatment Paradigm hoi re mn s eaTr tment Chronic 1.6 - +3x Years Gainedby - year”. Immunotherapies/ GeneTherapies Cancer Gene Gene Cancer Therapies 1 4.9 ont — iers, 20 Aug. 2019, https:// 2019, Aug. 20 iers, but more than 2,000 trials have been been have trials 2,000 but more than ” U ” .S. Food and DrugFood Administration, .S. FDA,and https://
Cost per Treatment (Thousands USD) arkinv.st $300 $450 $150 $- /39MZOxg. Average CostofCancerCare Average Cost Per Life Year Gained Chronic Cancer Cancer Chronic Per Life Treatment 2014-2019 $134 higher, Gene higher, Therapies can While the list price is 2 is price list the While arkinv.st - Year Gained be more cost effective effective cost morebe per per Life Year Gained Year Life per Average Cost of ACT /37LrKQh; - life Therapies - year gained. year Gene $100 $100 Shahryari - 3x , 65 BIG IDEAS 2020 Source: ARK Investment Management LLC, 2019; Garnier, Jean upon. relied be cannot and limited inherently are Forecasts Garnier, J [2] rateof =[1]The Returns return, Drugon R&D less risk the revolution. biotech the since seen not R&D to returns catalyze could therapies curative to afforded pricing premium the and throughput trial in increase an with coupled rates success trial clinical in increase A marginal onR&DTherapeutic Returns ReverseDecaying Could AI and Editing Sequencing, of Combination The 0% 40 20% 30% 25% 10% 35% 15% 0% 5% - P. 2008. Rebuilding the R&D Engine in Big Pharma. Harvard Business Review May 2008. 1980 IPO, spurred 2 decades of productive R&D spend decadesspurredproductive2R&D of 1980IPO, technology recombinantandGenentech’sbyDNA signaled discovery of theby triggered The revolution, biotech 1984 1988 Pharma Pharma and onBiotech: Returns Drug 1992 - free rate, on the R&D dollars spent (inclusive of drug failures) in in failures) drug of (inclusive spent dollars R&D the on rate, free - Pierre. “Rebuilding the R&D Engine in Big Pharma.” Harvard Business R 1996 ( 5 YearMovingAverage) 2000 obligation to deliver, and bureaucratic inertia.” bureaucratic and deliver, to obligation no with promises aversion, “risk innovationto lead disruptive of andlack consolidation,a Generics, 2004 R&D the yearsthe upto drugleading releases associated and present value ofyear. given earningsany in 2008 1 and Potential Trajectories eview, 1 Aug. 2014, https://arkinv.st/37JClLp. 2014, Aug. 1 eview, 2012 2016 2 2021 decay without disruptive technology disruptive decay without return R&D continued Potential 2024 failure reduction failure 10% trial phase reduction 25% time to market chronicconditions 2xpricing curing for + + 66 BIG IDEAS 2020 Source: ARK Investment Management LLC, 2019; Garnier, Jean patent and exclusivity expirations. Based on extensive analysis and reconstruction of historical R&D spend and associated rev *Assumes no change in price to sales multiple for the biotech sector, market cap expectations based on expected incremental s of duringtherapeutics companies the next 5 years. could Improvements R&Din efficiency Sizingthe Opportunity Revenue (Billions) Trillions (USD) $10 $14 $12 $0 $6 $4 $8 $2 $460 2019 $2 T Projected Therapeutic Market Capitalization Projected Therapeutic Market by 2024 - Pierre. “Rebuilding the R&D Engine in Big Pharma.” Harvard Business R Without Disruptive Technology add $9 trillion Return on R&D R&D on Return $690 $3 T 7% Failure rate reduction of 10% of reduction rate Failure enu to the market capitalization to the market capitalization (DNASequencing) Return on R&D R&D on Return ale e yields. | Forecasts are inherently limited and cannot be relied upon. upon. relied be cannot and limited inherently are Forecasts | yields. e s generated from associated R&D spend accounting for likely revenue declines from declines revenue forlikely accounting spend R&D fromassociated generated s eview, 1 Aug. 2014, https:// 2014, Aug. 1 eview, $1,700 $5 $5 T 15% * arkinv.st Time /37JClLp. - (AIand Other Technology) to - Market Reduction by 25% by MarketReduction Return on R&D R&D on Return $2,500 $4 T 22% $9 T $9 67 BIG IDEAS 2020 Author: Maximilian Friedrich, George couldbe worth more than $800 billion. customers,the digital wallet opportunity bank traditional of value lifetime the to according in the US by 2024, if every user were to be valued wallets digital million 220 of estimate ARK’s Given cannot. banks traditional that way ina earners income of customer acquisition, will offer banking services to low their low cost to and,a at premium thanks retail banks to According to ARK’s research, digital wallets will be valued Wallets Digital Whitridge , ARK Analysts ARK , 68 BIG IDEAS 2020 compounding at a 107% annual growthcompounding rate.at 107%a beannual In of multiple a ARK’s will mobile payments global view, Third today’s $87 trillion in global today’s GDP. global in $87 trillion World Source: ARK Investment Management LLC, 2019; ARK Estimates; "World Economic upon. Outlook relied be Database, Octobercannot and 2019". limited inherently are Forecasts InChina, Mobile Payments Are 2.5x the Size of GDP China’s Mobile Payment Transactions Bank.org $10.4T $0.9T - 2014 party mobile payment transactions in China grew from China in party 10% 2014 toin transactions 250% mobile payment of 2019,GDP in nearly . World13. Bank. December 2019; “China’s Third $1.9T 2015 $11T - Party Mobile Payment Market Soared 58.4% in 2018”. $11.1T 2016 $9T vs. China’s GDP $12.1T $15T 2017 IResearchChina.com IMF.org . InternationalMonetary Fund. 15 October 2019; “GDP iResarch . 6 May 2019. May 6 . $13.6T $26T 2018 – China”. China”. $14.1T $34T 2019 69 BIG IDEAS 2020 With networkthat appear With effects strongerare penetrating different thosewallets media, than digital of social parents into their ecosystems. payment groupsage the time that the it in US tookhalf in 10 media ago.years social Children seem to welcome Source: ARK Investment Management LLC, 2019. “2018 TSYS U.S. Consumer Payment Study”. *Note: 2xFaster Took Media Than Social Off Wallet Digital US, the In Adoption isOccurring 100% 60% 0% 40 0% 80 20% 0% Pewresearch.org 41% 2 Years 2006 18-29 did not release data on the social media adoption in the US for the year of 2007 2007* 2007 Social MediaAdoptionintheUS: 67% 30-49 2008 30% 2 Years 2006 - 2009 2012 50-64 2010 55% 12% 2 Years 2011 65+ TSYS.com 2012 TSYS. 18 April 2019; “Social Media Fact Sheet”. 22% 42% 18-24 Peer 1 Year - to - 37% Peer PaymentServicesAdoptionintheUS: 1 Year 2017 25-34 Pewresearch.org 35-44 12% 2017 1 Year . Pew Research.Pew . June122019. - 2018 65% 5 54 45- 57% 2018 55-64 65+ 22% 70 BIG IDEAS 2020 JP Morgan Chase Morgan JP Bank of America of Bank Source: ARK Investment Management LLC, 2019. Company information and ARK estimates. Estimate of Annual Active Users for Venmo This is not a recommendation in relation to any named securities noand warranty or guarantee is provided. Any references to *Data Source: Estimate of Annual Active Users for Venmo, Bank of America, Cash App, Citibank, Capital One, US Bank, PNC Bank, America. of Bank largest consumer finance application in the US. Square’s Cash App ranks as number four, behind JP Morgan and Finance the become has Venmo users, PayPal’s active annual million 52 more than with and to research ARK's According Consumer Largest US thein Application the Hosts Venmo Capital One Capital Wells Fargo Wells PNC Bank PNC Cash App Cash Citibank TD Bank TD US Bank US Venmo 0 Top 10 Financial Institutions by Number of Active Digital (2019)Users 10,000,000 20,000,000 30,000,000 par TD ticularsecurities are for illustrative purposes only. Bank. Estimate of Quarterly Active Users for JPMorgan Chase, Wells Fargo. Wells Chase, JPMorgan for Users Active Quarterly of Estimate Bank. , B , ank of America, Cash App, Citibank, Capital One, US Bank, PNC Bank, TD Bank. 0,00000 0,0 ,00 40 50,000,000 * 60,000,000 71 BIG IDEAS 2020 $2,000 $4,000 $3,000 private fintech valuations. ARK believes that, at maturity, a digital wallet userthat,ARK at should believes maturity,wallet valuations. beat digital a roughly valued private fintech Square’sas such wallets, digital discount App,Cash marketsper are Public valuing user at significant a to $3,650, similar $3,650,to similar bank customer.retail a Bank, Bank of America 2018 Annual Reports. This is not a recommendation in relation to any named securities and no warranty o warranty no and securities named any to relation in recommendation a not is This Reports. Annual 2018 America of Bank Bank, divided by ARK’s MAU (Monthly Active Users) estimate. For private Source: ARK Investment Management LLC, 2019. Company Information, ARK Estimates. For Cash App and Venmo using Square’s and Pa Wallets Digital AreValued aDiscount Banks at to $2,000 $1,000 $0 $0 Monzo $2,850 per per Customer Total Value Total Value $3,650 $2,780 Valuation PerActiveUser(USD): N26 Valuation Per Customer Across Revenue Segments (USD) Segments Revenue Across Customer Per Valuation Checking & Saving Checking Revolut $2,700 $1,930 Fintechs Chime $2,560 using last valuation divided by ARK’s MAU estimate. | Representative Retail Banks: ARK Estimates based on JP Morgan Chase, Chase, Morgan JP on based Estimates ARK Banks: Retail Representative | estimate. MAU ARK’s by divided valuation last using Robinhood Credit Credit Card Private FintechStartupsvs.PublicDigitalWalletProviders $2,170 $ 820 $1,830 SoFi r g r Mortgage uarantee is provided. Any references to particular securities are for illustrative purposes only. only. purposes illustrative for are securities particular to references Any provided. is uarantee : $510 Dave $710 Representative RetailBanksintheUS yPa l’sprice - to Moneylion - sales multiple applied to estimated Cash App and Venmo revenue and and revenue Venmo and App Cash estimated to applied multiple sales $570 Auto & Other Lending & Auto Other $230 Acorns $540 Cash Cash App Square $150 Public Digital Wallet Wallet Digital Public Asset Management Asset Providers We $160 llsFargo, PNCBank, US Venmo $55 72 BIG IDEAS 2020
This is not a recommendation in relation to any named securities noand warranty or guarantee is provided. Any references to Issuance https://arkinv.st/2sJ7gJf;ABS “US 2019; LLC, “Board of GovernorsManagement of theInvestment FederalARK ReserveSource: | System.” upon. The Fedrelied be cannot and limited inherently are Forecasts Billions (USD) in half during the next five to ten years. from $740 billion in 2018 to $483 billion by 2028. As a result, interest income on banks’ credit cards is likely to be cut sheets balance bank on debt sitting card credit revolving of amount the reduce will wallets digital to research, ARK’s companies Fintech like Market Credit Consumer Wallets Digital AreTaking Share in the $1,000 $1,500 $1,250 $500 $250 $750 $0 1995 Banks' Balance Sheet Balance Banks' 1998 LendingClub 2001 rdtCr euiiaion Securitizati Card Credit 2004 and Sofi have captured 39% of the unsecured consumer loan market. According Total Consumer Debt Unsecured in US 2007 - Consumer Credit ConsumerCredit 2010 - G.19,https://arkinv. Digital Wallets 2013 st/2FrbOqe. par an ticularsecurities are for illustrative purposes only. d Outstanding.” Securities Industry and Financial Markets Association, 6 Dec. 2019, Unsecured FintechLoans 2016 2019 2022 Unsecured Loans 2025 2028 73 BIG IDEAS 2020 Source: ARK Investment Management LLC, 2019 upon. relied be cannot and limited inherently are Forecasts In could the be at US, wallets valued digital Sizingthe Opportunity Digital Wallet Users (Millions) 200 300 250 100 150 50 0 2014 2015 2016 2017 2018 2019 Digital Wallet Users Digital in Users Wallet the US $800 billion by 2024, 2020 2021 27% CAGR 2022 2023 2024 equals a $800 billion opportunity.billion $800 equalsa value) customer lifetime bank’s traditional a as (same $3,650 at valued 2024, by US the usersin wallet digital million 220 Estimated 2025 27x the $29.5 today.billion 2026 2027 2028 2029 2030 74 BIG IDEAS 2020 Author: Yassine *As of publication 01/14/2020 its $150 billion network value trillions,more thanorderan magnitudeofhigher than in measured be will result the believes ARK does, it If bitcoin is in a good position to win this battle. no with reliance State, on the system global monetary sovereign. As an open, neutral, and sovereign andboth non amongsystems, monetary Because of bitcoin, we are witnessing a global battle Bitcoin Elmandjra , ARK Analyst ARK , * today. permissionless - 75 BIG IDEAS 2020 This is not a recommendation in relation to any named securities noand warranty or guarantee is provided. Any references to Source: ARK Investment Management LLC, 2019 non a bitcoin, of creation the Before Explosion” “Cambrian a Systems Monetary of Witnessing Are We like gold. like non of limitations physical ofthe exploitation State money. in market free of a The absence State. issuance and the between money link An inextricable Pre - - sovereign money Bitcoin Post cryptography. by public enabled ownership sovereign wealth self of forms Viable systems. monetary non native The of rise digitally initiative. private a as money The introduction of - custody and - Bitcoin - key - sovereign - government backed monetary system seemed neither norfeasible imaginable. Explosion ACambrian par ticularsecurities are for illustrative purposes only. 76 BIG IDEAS 2020 Source: ensure: will systems monetary winning the that expects ARK run, long the In Systems, Monetary Among BothSovereignNonand Battle Global a Today, Mahmudov , Murad., Assurance Theory of Money cryptocurrencies appear to be best equipped to win this battle. and As open, neutral, 5. 4. 3. 2. 1. Record of transactions will be secure and immutable. Recordwill of transactions censored. be not will transactions and auditable, be will supply Money seized. or frozen be not will Money arbitrarily. diluted be not will Money seamlessly. stored and transferred be will Money - TFTC, 26 June 2018, https:// permissionless arkinv.st - sovereign,Underway Is /2FsGwz9. global global monetary systems nowith on reliance the State, 77 BIG IDEAS 2020 Source: ARK Investment Management LLC, 2019 https:// Metrics, Coin Charts.” Data “Network from: sourced data on Based 2: Assurance 1: Assurance Well Is Bitcoin Assurances These Satisfy to Positioned AmongCryptocurrencies, issuance growth rate set to halve in May 2020. 18 been units million createdhave the with current scarce, cappedunits. Approximatelyat 21 million and predefined schedule. The supply of bitcoin is predictable, metered, mathematically to a according created been have bitcoin of units All requirement being possession of a private key. key. private a of possession being requirement only the low, are Bitcoin on transacting morebarriers The $2 of trillion value. than to The Bitcoin network has transferred securely Money will be transferred and stored seamlessly. stored and transferred be will Money Money will not be diluted arbitrarily. diluted be not will Money arkinv.st /37tGseJ.
Bitcoin (Millions) Trillions (USD) $0 20 $2 $3 10 $1 15 0 5 2009 2010 Bitcoin TransactionsVolume 2013 Bitcoin’s MonetaryPolicy Adjusted Cumulative 2013 Projected bitcoin issuance Cap Supply e nc issua bitcoin Cumulaltive 2017 2016 2021 2025 2019 78 BIG IDEAS 2020 Source: ARK Investment Management LLC, 2019; Based on data sourced from: “Network Data Charts.” Coin Metrics, https://arkinv. *The term “ledger costliness” refers to the amount of compensation miners receive per unit of time. 5: Assurance 3: Assurance Bitcoin AmongCryptocurrencies, jurisdiction the enable strongest form of cryptography and secure custody to curve elliptic combines Bitcoin blocks, a transaction is unlikely to be reversed. unlikely is transaction a blocks, high confidence that, once embedded in a few on the shown right. as 2019, in revenue miner total of 80% roughly up 2019 and making in surpassing $5 billion costliness*, is the highest of any ledger or revenue, miner annual Bitcoin’s Money will not be frozen or seized. seized. or frozen be not will Money Record of transactions will be secure and immutable. Recordwill of transactions IsWell - agnostic property rights. Positioned to Satisfy These Assurances Assurances These Satisfy to Positioned Bitcoin recipients can have have can recipients Bitcoin cryptonetwork , Assurance 4: 4: Assurance
Billions (USD) 0.0001 st/ 0.01 100
37tGseJ; Carter, Nic. Medium, 22 July 2019, https://arkinv.st/36OUw2x. 2019, July 22 Nic. 37tGseJ;Carter, Medium, Jul-10 1 Annualized MinerAnnualized Revenue Cryptocurrencies Across
May-11 Bitcoin Money supply will be auditable. auditable. be will supply Money permissionlessly anyone can make a bitcoin transaction subject to authority: centralized a Decision validate transactions and audit supply. to free are users node, full a running By Mar-12
Jan-13 Ethereum No v-13 - making in Bitcoin is notin making
Sep-14
Jul-15 .
May-16 Bitcoin Cash Bitcoin
Mar-17
Jan-18 | CONT.
No v-18
Sep-19 Litecoin 79 BIG IDEAS 2020 This is not a recommendation in relation to any named securities noand warranty or guarantee is provided. Any references to De, Medium, 31 Jan. 2019, https:// Source: ARK Investment Management LLC, 2019; “Latest Research & Perspectives.” Cambridge Associates, Feb. 2019, https:// Financial the Community In Credibility Gaining Is Bitcoin Nikhilesh Entity . “Square. HiringIs New Crypto Engineers arkinv.st /36bzk6p; initiative, potentially a precursor of open source development from other institutions. Bitcoin source open first the launched Square SupportDevelopment: Source for Open services, with institutions like Fidelity seeking toseeking Fidelity meet like institutions that demand. services, with custodial regulated for demand the fueled has appetite Institutional Custody: upon which institutional investors can rely. can investors institutional upon which contract now serves as a benchmark determined by a trusted price discovery process Price Discovery and Market Infrastructure: begin exploring cryptoassets, citing a likely rise in institutional investor exposure. investor institutional in rise likely a citing cryptoassets, exploring begin Portfolio Allocation: Cambridge Associates recommends that institutional investors Bakkt Market Validation . “We. Have Liftoff: Milestone a for Industry.” the Medium, - And It Wants to Pay Them in Bitcoin.”2019, https:// in Mar. Them CoinDesk, 20 toPay Wants It And Bakkt Blog, 25 Sept. 2019, https:// 2019, Sept. 25 Blog, arkinv.st arkinv.st par Bakkt’s ticularsecurities are for illustrative purposes only. /359leRH;Fidelity Digital. “Custody intheAge of Digital Assets.” Medium, /36bie8t. physically delivered futures futures delivered physically arkinv.st /2tdbmZY; 80 BIG IDEAS 2020 quickly in emerging markets. demonetization evolve could exchange and currency for catalyst Bitcoin as a potential medium of Demonetization: Currency Forecasts are inherently limited and cannot be relied upon. | Source: ARK Investment Management LLC, 2019; “This Time Is Di Is Time “This 2019; LLC, Management Investment ARK Source: | upon. relied be cannot and limited inherently are Forecasts ***HNWI (High Net Worth Individual) is defined as a person with investable assets in excess of $1 million USD. **M2 is a measure of the money supply that includes cash, checking deposits, and easily convertible near money. M2 is a broad *Assumes a five Sizingthe Opportunity $40 trillion x 5% Top 4 Countries ofOutside M2 of Sum Value* Present Estimated - $1.1 Trillion $1.1 yeartakeover time, 10% required return,9% and dilution. Dilution is defined Bitcoin’sas inflation rate over t ** Market ShareMarket $9 trillion x 15% Market Cap. Market Gold auditable. publicly highly portable, strictly scarce, and limitations as value:a store of it is Bitcoin improves upon gold’s Digital Gold: $800 Billion $800 replacing Gold) Gold) replacing P (Bitcoin he next 5 years consistent with its predetermined supply schedule. ffe er rent measure of the money supply that M1, which just include cash and checking justwhichdeposits. M1, include measureand cash that of moneysupply the - Data.” HarvardUniversity,Data.” 2009,https:// individual’s lifetime. an assetof seizure during an should approximate the probability protection against asset seizure A sensible bitcointo as allocation Utility: Protection $46 trillion x 5% ofHNWI Global Wealth *** $1.3 Trillion $1.3 arkinv.st /36de9Rd. over 50 years) 50 over SeizureP (Asset Disclosure
For more research on disruptive innovation visit www.ark-invest.com
BIG BIG IDEAS 2020 ©2020, ARK Investment Management LLC. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of ARK Investment Management LLC (“ARK”).
Please note, companies that ARK believes are capitalizing on disruptive innovation and developing technologies to displace older technologies or create new markets may not in fact do so and/or may face political or legal attacks from competitors, industry groups, or local and national governments.
ARK aims to educate investors and to size the potential opportunity of Disruptive Innovation, noting that risks and uncertainties may impact our projections and research models. Investors should use the content presented for informational purposes only, and be aware of market risk, disruptive innovation risk, regulatory risk, and risks related to Deep Learning, Digital Wallets, Battery Technology, Autonomous Technologies, Drones, DNA Sequencing, CRISPR, Robotics, 3D Printing, Bitcoin, Blockchain Technology, etc.
The content of this presentation is for informational purposes only and is subject to change without notice. This presentation does not constitute, either explicitly or implicitly, any provision of services or products by ARK and investors are encouraged to consult counsel and/or other investment professionals as to whether a particular investment management service is suitable for their investment needs. All statements made regarding companies or securities are strictly beliefs and points of view held by ARK and are not endorsements by ARK of any company or security or recommendations by ARK to buy, sell or hold any security. Historical results are not indications of future results. Certain of the statements contained in this presentation may be 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. The matters discussed in this presentation may also involve risks and uncertainties described from time to time in ARK's filings with the U.S. Securities and Exchange Commission. ARK assumes no obligation to update any forward-looking information contained in this presentation. Certain information was obtained from sources that ARK believes to be reliable; however, ARK does not guarantee the accuracy or completeness of any information obtained from any third party. ARK and its clients as well as its related persons may (but do not necessarily) have financial interests in securities or issuers that are discussed.
ARK Investment Management LLC 3 E 28th Street, 7th Floor, New York, NY 10016 [email protected]
81