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February 2019
February 2019
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SINGULARITY PERFORMANCE
Monthly Nasdaq Singularity Index NSI (NQ2045) vs. benchmarks: February showed a steady upswing in equity markets in which the Nasdaq Singularity Index (NSI, NQ2045) remained among leaders up 4.27%, well ahead of the MSCI AC World (+2.50%) and the Nasdaq Composite (+3.44%) while pure Tech had a strong month with the MSCI AC World Technology up 5.82%. Since the launch on 21 December 2017, the NSI is up 8.46%, ahead of all peers and benchmarks. (Nasdaq Composite: +8.14%; S&P500: +3.72%; MSCI AC World Technology: +5.81%; MSCI AC World: -1.51%)
UPCOMING EVENTS
*NEW* May 16, 2019, Breakfast @ Zunfthaus zur Saffran, Limmatquai 54, 8001 Zurich, 8:30am
Expert Access: Blockchain - A Reality Check
Featuring: Daniel Gasteiger, Founder and CEO Procivis AG, Co-Founder Nexussquared, Board Member of Global Blockchain Council; Laurenz Apiarius, Founder & Managing Partner of Blockwall, adviser to the OECD on policy making for crypto assets & blockchain technology; and more Blockchain industry experts
Sign up: [email protected] (Members: Free | Non-Members: 70 CHF)
*UPCOMING* March 28, 2019, Lunch @ Baur au Lac Zurich, 12:00pm
Expert Access: Virtual & Augmented Reality - Brave New Worlds
Featuring: Lukas Schleuniger, Founder of Red or Blue Labs
Sign up: [email protected] (Members: Free | Non-Members: 70 CHF)
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Performance Singularity Fund vs NSI - since Launch (October 1 2018)
Source: FactSet
Performance Since Launch NSI vs Peers
Performance February 2019 NSI vs Peers
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Is there room for the virtual world?
In light of negative performance in Virtual Reality related companies in February, a thought-process not to be neglected is that this has little to do with true value or investors’ perception of that Singularity Sector or technology (VR/AR), but more so with the main conventional sector where some of this technology’s impact is expected (Gaming). One threat currently posed to gaming stocks is understandable: increasing pressure from cheaper or even free gaming at similar quality. The question one needs to ask is if innovation and improvement of technology can also lead to value creation or, more simply, to money. Investors need to be aware that many technological improvements can also destroy cash generation.
Virtual and Augmented Reality, like most innovations on our radar, pose opportunities as well as threats - to value creation as well as to humanity. There are, however, as we speak companies creating value with VR/AR that have no connection to gaming. The fact that gaming related stocks were hit on an investor fear that might prove true does not mean that there is no room for VR and AR to create value elsewhere.
At our next event, Lukas Schleuniger, our expert on VR/AR, will give some insights into how this misunderstood and narrowly boxed technology is impacting healthcare, energy, mining, industrials, and many other sectors than just the world of video games.
SINGULARITY OUTLOOK
SINGULARITY SECTORS
The Space sector has established itself as repeat offender (+9.31%) with Spirit Aerosystems (SPR; +18.47%) leading the pack. The second strongest sector was Blockchain (+6.87%) where Taiwan Semiconductors (2330; +7.95%) rebounded strongly from a correction in semiconductor stocks. The worst performing Singularity sector was Virtual and Augmented Reality (+0.30%) attributable predominantly to negative performance in the gaming sector where Virtual Reality has some exposure.
SINGULARITY STOCKS
The best performance on the single stock basis for February came from two companies in Big Data and Artificial Intelligence: UK-based 7bn GBP market cap company Micro Focus International (MCRO; +33.57%) announced an acquisition of a machine learning platform to improve already strong security risk capabilities. The second strongest performance came from 11bn USD China-based Autohome (ATHM; +29.94%). Take Two Interactive (TTWO; -17.33%) was the worst performing stock in the NSI portfolio as video gaming companies face investor scepticism on viability of paid gaming in a world where pricing pressure and free-to-play options are the trend. One way to mitigate this pressure is to invest and create value with exponential technologies, where Take Two certainly seems to have an edge over peers for now.
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EXPERT INSIGHTS
Virtual and Augmented Reality: Investments and Opportunities Beyond the Hype
Every month, Seeking Singularity highlights one of the Singularity Sectors. This month we look at the key takeaways of our recorded interview with Lukas Schleuniger, our Expert
Advisor in VR/AR, part of our upcoming podcast series.
The full interview will be available to Singularity Fund Clients and Members of ‘Seeking Singularity - Insider’.
For inquiries on Membership, please email: [email protected]
Lukas Schleuniger, Co-Founder Red or Blue Labs.
Born in Switzerland and raised in Palo Alto, CA, Lukas co-founded Red or Blue Labs and is a recognized expert in Augmented and Virtual Reality. At Red or Blue Labs, the company and team push boundaries for uses of Virtual and Augmented Reality and its combined use with Rapid Prototyping, Internet of Things, 3D Printing and other new integrated technologies. Red or Blue Labs seeks practical applications for all their platforms and technologies, and has for example developed advanced virtual reality applications intended to dramatically improve the quality of life for the elderly.
Previously, Lukas was involved with Dacuda, a Swiss-based computer vision startup that the team sold to MagicLeap.
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A Conversation with Lukas Schleuniger on AR and VR: Four Main Takeaways
Lukas notes that VR started in the 1960s but has gained significant growth only in recent years. He then takes us deep into the world of Virtual Reality (VR) and Augmented Reality (AR), separating hype from reality, for a clearer picture of the present landscape and the potential futures. We have condensed the hour long Q&A into five key takeaways. The full interview will be available to Singularity Fund Clients and Members of ‘Seeking Singularity - Insider’. For inquiries on Membership, please email: [email protected]
Takeaway 1: Virtual Reality is much more than just gaming.
For those not immersed in the subject, the knowledge of what is happening in the world of virtual reality starts and stops with gaming. The best known platforms are Oculus Rift, HTC Vive, Samsung VR or Sony Playstation VR. But VR devices and platforms have been adopted by many other industries. Some of the many areaas Lukas mentioned were
maintenance, healthcare, engineering, education and defense. In particular when looking at the defense sector, the United States Department of Defense (the DOD), announced a deal with Microsoft’s Hololens division worth $400 million, a substantial investment within the scope of the industry. The DOD plans to use these headsets for more interactive training purposes. This is one of the main uses for AR and VR technologies outside of gaming: interactive training at varying levels of immersion. Many pioneers of VR gaming are now using their skills taken from the gaming world and applying them to interactive experiences of another kind using elements of gaming to create better and cheaper methods of training people for various tasks.
To the question of how this creates value for companies, Lukas mentions significant cost saving potential in training employees - in the form of equipment costs, travel costs, as well as other administrative items. Another area where value creation is less visible is the whole area of marketing and sales with VR tools. This is yet to be determined by longer term studies.
Lukas Schleuniger
Oculus Rift: This VR headset and system was the spark that set off the latest boom of VR and AR technologies and companies. The company, Oculus, would eventually be acquired by Facebook and become the leader in consumer orriented VR products and services.
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Takeaway 2: The Distinction Between AR and VR Will be Determined by Levels of Immersion, Not Devices.
In a nutshell, AR and VR are both subsets of “Mixed Reality,” blending elements of a virtual world into the real world. AR tends to focus on layering information or individual virtual objects onto the real world in a way that still allows you to interact with the world around you. VR tends to be a fully immersive experience that takes you out of the real world completely. In the future, the devices capable of these two different types of experiences will merge into one, and it will simply be about what type of experience the user is looking for rather than the hardware dictating the type of experience the user can have using that device. AR, while being the likely more useful tool, is also more costly and more difficult to implement.
Takeaway 3: VR is Cutting the Umbilical Cord
One of the big developments in the world of VR this year was the announcement of the Facebook’s Oculus Quest system. A single, self-contained, dedicated VR device without wires, without the need to be connected to a computer or a smartphone and without any outside devices to help it track the environment around it. Priced at $400, it seems positioned to compete with gaming consoles in the same range, yet the applications can go beyond gaming and will allow companies interested in the potential benefits of VR training to make an investment into these switch-on-and-play style devices. This is a strong indication of where the rest of the market is likely to head in terms of the form factor of consumer oriented products.
Takeaway 4: A Long Walk to the Holodeck
Helping to manage the expectations of what is possible now and what we will likely see in a 5 to 10 year timeline, full sensory immersion and the simulation of worlds indistinguishable from reality as envisioned in popular science fiction like Star Trek or Ready Player One is still very far away. While there are companies that are working on improving fidelity of image within headsets, creating new peripherals for added immersion and interactivity, and ways for multiple users to experience the same virtual space simultaneously, much of the focus now is around finding ways to apply the technologies we have today in ways that will improve productivity and efficiency across industries and sectors. Struggles include precision tracking, resolution, field of view, as well as connectivity and cost developments. The dream of walking into a perfect simulation of your chosen fantasy will remain just that for the foreseeable future, a dream.
Magic Leap One: While not the first augmented/mixed reality headset to reach the market, Magic Leap has proven to be a leader in showing the world the possibilities of layering interactable virtual objects over the real world.
Apple AR Glasses Concept: Apple historically has never jumped into a new product category first. While nothing official has been stated, it’s been speculated that the consumer tech giant is hard at work on their vision of an AR wearable device and ecosystem. If so, the deivce could have an impact akin to the original iPhone.
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*NEXT UP* March 28, 2019, Lunch @ Baur au Lac Zurich, 12:00pm
Expert Access: Virtual & Augmented Reality - Brave New Worlds
Featuring: Lukas Schleuniger, Founder of Red or Blue Labs
Sign up: [email protected] (Members: Free | Non-Members: 70 CHF)
UPCOMING EVENTS
Takeaway 5: Lukas’ favorites and the Wild Card
Make no mistake, we are still in the very early days of commercial VR and AR and there are only a handful of companies that have the capacity to make waves in and across the industry. The first to watch is Facebook, after acquiring Oculus and steadily refining the hardware, creating better experiences and systems of interaction and partnering with content makers to give adopters enough to keep them in the platform. Offering more ways to get in than any other company and set to harness the power of the socially connective roots, even despite all the scandals of 2018, Facebook is well on it’s way to becoming the leader of the VR industry.
The second is Magic Leap. With AR barely in its infancy, Magic Leap , according to Lukas, is ‘leaps’ ahead of everyone else in terms of technology, funding and partnerships. AR could likely be the defining platform for computing and communication in the next 5-10 years, with an impact on the global market greater than the smartphone revolution. However consumer level AR is an extremely complex challenge and one that will take some time to solve. But Magic Leap already has a few steps out of the gate, and similarly to Facebook with VR, may continue its dominance in the world of AR.
The wild card, according to Lukas, is Apple. While they have no direct skin in the game as of yet, their moves in recent years, parts of the products they have released, the company acquisitions, patents and rumors surrounding their future strategy all suggest that they will likely make noise in the next few years. As they have often done, Apple will likely take a back seat and allow other competitors to come out with impressive yet ultimately underwhelming consumer oriented devices, only then to release upon the world their stylish and refined vision of what a device in this realm should look and act like. As for areas to watch: Augmented Reality will likely be more widely adopted than Virtual Reality in the future, simply due to the fact that fully immersive experiences have less value on a day to day basis for an average user. Therefore, this will be the technology Apple would likely focus on, and will put enormous effort into making a device with the same impact as the iPhone, several times greater.
*Full Recordings and Extended Content Will be Available to Singularity Fund Clients and Members of ‘Seeking Singularity - Insider’.
For Inquiries on Membership, please email: [email protected]*
