Q3 AI Update: Palantir’s Rise and AI’s Transformative Power

As we near the end of Q3 2024, AI continues to shape industries from energy to healthcare and beyond. This quarter, major advancements in AI-driven platforms, autonomous mobility and drug discovery are changing the landscape. Here’s a breakdown of the most critical trends this quarter, with an emphasis on their investment potential.

Palantir’s Role in Energy and S&P 500 Inclusion

Palantir continues to solidify its position as a key player in the AI/ML space, recently being ranked as the #1 AI/ML platform by Forrester. The company’s growth has been driven by making its AI platform more accessible to a broader set of users, contributing to its consistent expansion over the past five years. As it joins the S&P 500, Palantir’s strategic role in the energy sector—optimising operations, forecasting and supply chain management—adds to its value proposition.

Despite geopolitical challenges, including CEO Alex Karp being blacklisted by Russia, Palantir’s focus on delivering AI solutions at scale has not wavered. Architect Chad Wahlquist highlighted that traditional enterprise software faces a “Tower of Babel” situation, where complexity slows progress. In contrast, Palantir emphasises production-ready systems that add tangible value immediately. As AI becomes increasingly embedded in the operations of large-scale industries, Palantir’s consistent performance in highly regulated sectors like defense and energy positions it as a crucial player in the future of AI deployment.

Scaling Robotaxis and Tesla’s Data Advantage

Autonomous mobility continues to grow, with Tesla’s Full Self-Driving (FSD) technology benefiting from a vast data lead. Tesla’s data advantage—estimated to be 70 times greater than competitors—is positioning it for dominance in the robotaxi space.¹ Companies like Waymo and Baidu are also scaling operations, but Tesla’s unique approach to data collection and machine learning algorithms gives it a competitive edge. As Tesla’s advancements continue, the future of urban transport could hinge on its ability to maintain this lead.

Source: ARK Investment Management LLC, 2024, based on data from a range of external sources, as of August 23, 2024, which can be provided upon request. For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security.

AlphaProteo and the Future of Drug Discovery

DeepMind’s AlphaProteo, released in Q3, marks a milestone in AI-driven healthcare. The system has shown remarkable efficiency in designing protein binders, with success rates 3-300x higher than traditional methods.² While it has limitations, such as difficulty with certain proteins, its ability to significantly cut down the time and cost of drug discovery makes it a game-changer in the biopharma sector.

Source: Zimbaldi, V. et al. 2024. Lefthand Chart: Experimental Success Rate Comparison, showing the success rates of AlphaProteo versus traditional methods for different proteins. (Higher is better.) Righthand Chart: Best Affinity Comparison (log scale), illustrating the superior binding affinity achieved by AlphaProteo compared to existing methods. (Lower is better.) For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security. Past performance is not indicative of future results.

The Cloud Wars: Competing for AI Compute Capacity

The race for dominance in AI compute infrastructure is intensifying among hyperscalers like AWS, Google, Microsoft and Oracle. Custom silicon development has become a focal point, as these companies vie for control of AI workloads. While Nvidia GPUs remain the gold standard, hyperscalers are rapidly developing their own AI chips to meet growing demand. Google leads with its sixth-generation TPUs and Amazon is pushing forward with its Trainium and Inferentia chips, aiming to reduce reliance on Nvidia. The shift toward in-house solutions could reshape the cloud industry in the years ahead.

Investing in AI and Robotics

As AI reshapes industries from healthcare to mobility and cloud computing, investors have an opportunity to capitalise on these advancements. Our ARK Artificial Intelligence & Robotics UCITS ETF offers a curated portfolio of companies leading the AI revolution. Whether it’s Tesla’s dominance in autonomous vehicles or Palantir’s growing role in data-driven solutions, our ETF provides a diversified approach to capturing growth in AI and robotics.