#241: After Battery Day, Does Wright’s Law Still Apply to Tesla?, & More

On Tuesday Tesla hosted Battery Day during which three announcements stood out:

• A plan to reduce battery costs by 56% on a $/kWh (dollar per kilowatt hour) basis.
• A plan to scale battery manufacturing to 3TWh by 2030 (a terawatt hour is one billion kilowatt hours).
• A plan to deliver a $25,000 car in three years.

Tesla grouped the innovations enabling the battery cost declines into five buckets:

• Cell design
• Factory design
• Anode materials
• Cathode materials
• Cell vehicle integration

Following Battery Day, ARK analyzed whether these innovations put Tesla on a new cost decline curve, or whether our Wright’s Law analysis for lithium-ion batteries had predicted this cost decline. We have concluded that, given its battery breakthroughs, Tesla is sustaining Wright’s Law, not only lowering costs by 56% on a $/kWh basis but also increasing range by 54%, thanks to vertical integration that we believe is unparalleled in the industry.

While the industry considers $/kWh the critical competitive variable, Tesla may be parting company with its EV competition by focusing on dollars per range and vehicle performance. From ARK’s perspective, $/kWh measures the point at which EVs will reach price parity with gas powered cars, without considering performance. Bottom line, Tesla seems to be leaving the competition even further behind.

This week, the Wyoming Banking Board approved U.S. cryptoasset exchange, Kraken, to form a Special Purpose Depository Institution (SPDI). Kraken will be the first digital asset company to operate as an independent bank recognized by federal and state law and to provide comprehensive banking services for cryptoassets. As a bank, Kraken will rely less on third-party financial institutions and will be able to conduct business across borders without state by state approval.

Known for its unique approach to encouraging crypto innovation, the State of Wyoming will regulate Kraken as an SPDI, requiring it to back deposits with 100% reserves and allowing traditional deposit accounts, wire transfers, and funding services. With its charter, Kraken is poised to serve as a bridge between traditional financial institutions and the crypto world, granting individuals access to seamless banking between and among cryptoassets and fiat currencies.

This week Amazon announced Luna, a cloud gaming service available for as little as $5.99 per month. With Luna, Amazon will give gamers access to an extensive library of video games, joining Microsoft, Google, Nvidia, and Sony aiming to capitalize on the trend toward ‘games-as-a-service’.

As video game sales have shifted from physical discs to digital downloads, gamers hoping that a Netflix-style bundled service would gain traction have been disappointed thus far, primarily because early attempts have failed to attract AAA games. Now, however, more AAA games are moving toward free-to-play models, monetizing by selling digital goods and services.

Another important gaming trend is cross-platform play that is pushing the industry toward the cloud. Cloud based gaming would obviate the need for downloads and enable instant access to games on any connected device. While still in its infancy, now that cloud gaming has attracted the attention of big tech players like Amazon, Microsoft, Google, Nvidia and Sony, perhaps it will hit an inflection point in the not too distant future.

Apple (AAPL) recently unveiled its Series 6 watch which uses infrared light to measure blood oxygen levels. The ability to measure blood oxygen accurately offers enormous potential.

Patients with chronic conditions need doctors to monitor their blood oxygen levels. Recently, COVID-19 has caused silent hypoxia, or oxygen deprivation without respiratory symptoms, which requires hospitalization. With accurate pulse oximeters at home, patients themselves could detect COVID-19, the flu, and other respiratory symptoms before they become dangerous.

The accuracy of blood oxygen levels measured from the wrist has been met with skepticism because blood flows much closer to the surface in fingertips and because slight position or daylight changes can impact the precision of the measurement.

Recently, third party payers have begun to cover the cost of med tech that incentivizes healthy behavior. For example, the John Hancock Vitality program rewards healthy behavior with points towards purchasing an Apple Watch.

This week, Apple unveiled three clinical trials to determine the accuracy of its blood oxygen monitor. A study sponsored by the University of California and Anthem will focus on asthma patients, while researchers at the University Health Network and the University of Toronto assess heart failure patients and those at the University of Washington School of Medicine other respiratory conditions and COVID-19.

After successful trials determining their accuracy and reliability, connected medical technology should create a healthier society.

ARM’s N1 server CPU has made huge strides in the data center. Amazon licensed it to create Graviton 2, and Ampere Computing to launch its Altra line of data center CPUs. While ARM’s original N1 excelled in parallel tasks, it lagged Intel CPUs in single-task performance.

ARM’s latest X1 CPU design aims to turbocharge single-threaded performance. With higher clock speeds and larger caches, single-threaded applications seem to run at least 80% faster—eclipsing Intel’s best x86 server CPUs today.

A typical data center dedicates some servers to multi-threaded workloads and others to single-threaded workloads. With the N1 and X1, ARM will be able to fight with both fists for every socket in the data center.

No wonder Nvidia is so keen on acquiring ARM. Together, we believe they could capture every unit of compute in the cloud.