Recode.net : Ford is putting $1 billion into an AI startup, Detroit's biggest in

Ford is putting $1 billion into an AI startup, Detroit's biggest investment yet in self-driving car tech
The automaker will take a majority stake in Argo AI, founded by two top engineers from Google and Uber.


Ford has made Detroit’s biggest investment yet in self-driving technology, acquiring a majority stake in artificial intelligence startup Argo AI for $1 billion, the company announced on Friday.

Argo AI was founded by two top engineers from Google and Uber who were both previously at Carnegie Mellon’s robotics institute. The startup plans to use its expertise in AI to develop software for self-driving vehicles.

Bryan Salesky, the CEO of Argo AI, was the head of hardware at Alphabet’s car division, Waymo, for the past three years. Peter Rander, Argo’s COO, left Uber in September, where he was one of the top engineers for its self-driving division.

This is the largest investment a traditional auto manufacturer has made in self-driving technology. General Motors acquired self-driving startup Cruise for $1 billion last year, and Uber bought autonomous trucking company Otto for $680 million, also last year.

Ford will dole out the $1 billion over a five year schedule but will immediately become the majority shareholder. The company declined to disclose its specific stake, but the investment would value Argo at over $1 billion.

Ford says Argo will remain headquartered in Pittsburgh and operate with substantial independence. Both Ford and Argo elect two board seats, with a fifth independent position. Ford plans to install Raj Nair, head of research and development, and Vice President John Casea to the board.

This is the most Ford has spent on autonomous technology. In 2016, the automaker acquired on-demand shuttle service Chariot for far below $1 billion and invested in Velodyne, a maker of Lidar technology. Ford says it plans to market fully self-driving cars by 2021.

While Ford will effectively own Argo, the AI developer plans to eventually license its software and sensor suite to other companies.

“Our view [is that], in the future, there will be a number of players that will have systems,” Ford CEO Mark Fields told Recode in an interview. “There won’t be just one winner. But at the same time we can offer that to other companies where it doesn’t compromise our competitive advantages. We think that’s a great opportunity to get even more scale and create some value for the companies.”

“There’s a lot of advantages to having this company be independent and operate with the agility of a startup,” Salesky told Recode. “We know that in order for this technology to be fully realized and deployed at scale, we have to work with folks that know how to do that.”

According to Fields and Rander, the most important reason Ford didn’t acquire Argo was so the startup could attract top talent with offers of equity.

This is also not the first instance of a cross-pollination between staffers from Uber, Google and Carnegie Mellon.

Both Rander and Salesky — who plan to have a team of 200 by the end of the year — were big losses for Alphabet’s self-driving car company Waymo and for Uber.

As Recode first reported, Rander left Uber along with two other top self-driving engineers — mapping head Brett Browning and autonomy head Drew Bagnell — just a year or so after Uber famously raided Carnegie Mellon’s Robotics Institute for top talent.

Rander’s departure came in the wake of Uber’s acquistion of Otto, a startup co-founded by former Google engineer Anthony Levandowski. The Otto founder was put in charge of Uber’s entire self-driving division, which sources said contributed to staff defections.

For Waymo, Argo is the latest car startup to be hatched by one of its former engineers. In addition to Argo and Otto, Chris Urmson, Waymo’s former lead technologist, is starting, Aurora, as Recode first reported.

Then there’s Nuro.ai, which was started by two former top executives of Google’s self-driving car project: Jiajun Zhu and Dave Ferguson.

Though Google has been working on its self-driving technology far longer than any other tech company and has arguably the most advanced technology, many sources say there has been internal tension over the company’s path to market.

It’s no coincidence that many of those who’ve left what is now called Waymo to start their own companies are laser-focused on commercializing self-driving technology.

“We want to take a straight line path to market as much as we possibly can,” Salesky said.

>>> Weekly Upate

Weekly Market Update: Markets Stirred by Geopolitics Again, but Gravitate Back to Risk-on

US stock markets had a bumpy ride this week succumbing to lingering geopolitical concerns in the first part of the week. Indices pushed away from early highs and money flowed into the arms of global bond markets. The US 10-year yield drifted back towards the early 2017 low, briefly dropping below 2.35%, while oil prices dipped and gold jumped. Polling data ahead of key European elections and more awkward rumblings from the Trump administration were ultimately pushed aside and reflation trades resurfaced. The DJIA, S&P and the NASDAQ made runs to fresh all-time highs before the week’s end and the flows into Treasuries were unwound. For the week, the DJIA gained 1%, the S&P500 added 0.8%, and the Nasdaq rose 1.2%.

Investor sentiment largely turned on another Trump tweet. At Thursday's meeting with airline executives the President teased the upcoming announcement of a “phenomenal” new tax plan in the next few weeks. Though yet again no specifics were offered, the headline gave investors the kind of fuel they were looking for to add more risk. The week finished with the state visit of Japanese PM Abe at the White House. A joint press conference failed to produce any headlines that could potentially damage the market's psyche and both leaders indicated their willingness to cooperate moving forward on security and trade.

Greek debt worries resurfaced as the IMF issued a statement saying that the EU would need to pay-in more cash to prop-up the country’s finances. The news irritated various officials in Greece and Europe, although various politicians from Germany have recently hinted it might be best for Greece to leave the EU altogether. In the UK, PM May’s government won a series of Parliamentary votes, swatting away proposed legislative amendments that would have impeded the planned invocation of Article 50 next month. The recent political upsurge of the far-right in various countries in Europe, such as Sweden, France and Holland, also adds to the pot for EU break-up risk. Spanish and Italian 10-year yields gained 9 basis points on Friday as peripheral European Government Bonds continue to take loses.

China took action in an attempt to stabilize the exchange rate and stop the continued slide of the yuan. The PBOC decided to stop reverse repo operations for four consecutive days, pushing short term money markets rates higher and making it more expensive to short sell yuan. However, the yuan reversed its bullish trend this week to close down 0.9% to the US dollar. The growing trade imbalance and potential weaker economic growth in the wake of policy tightening may have contributed to pushing the currency lower. Emerging markets, China in particular, will be watching Fed Chair Yellen's comments closely when she testifies on Capitol Hill next week. Any signal the Fed could be gearing up for a rate hike in March could unleash a significant bout of volatility into FX markets.

In corporate earnings news, GM reported better than expected results on Tuesday, but still saw some profit taking in the stock. Disney reported mixed Q1 results, as cable network revenues slipped. CEO Bob Iger confirmed press reports that he may further extend his executive tenure and promised a bright future as Disney moves more content to over the top services. Shares of Twitter collapsed after another lackluster quarter. Multiple analysts downgraded the social network after it missed revenue estimates and showed no almost growth again in monthly active users.

MON 2/6
TM Reports 9-month Net ¥1.43T v ¥1.89T y/y, Op Profit ¥1.56T v ¥2.31T y/y, Rev ¥20.2T v ¥21.4T y/y
*(EU) EURO ZONE FEB SENTIX INVESTOR CONFIDENCE: 17.4 V 16.8E
(US) Fed Q4 senior loan officer survey: about a quarter of banks tightened credits standards for commercial real estate loans in Q4
*(NZ) NEW ZEALAND Q1 INFLATION EXPECTATION SURVEY: 2-YEAR INFLATION EXPECTATION 1.92% V 1.68% PRIOR
*(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; AS EXPECTED

TUES 2/7
BNP.FR Reports Q4 Net €1.44B v €1.50Be, Rev €10.7B v €10.5Be
BP.UK Reports Q4 adj Net $400M v $568Me, Underlying replacement cost profit $72M v loss $2.23B y/y, Total Rev $51.0B v $49.2B y/y
*(CN) CHINA JAN FOREIGN RESERVES: $2.998T V $3.004TE (7th consecutive decline and falls below $3T for first time since Feb 2011)
GM Reports Q4 $1.28 v $1.14e, R$43.9B v $42.2Be
(US) Atlanta Fed cuts Q1 GDP forecast to 2.7% from 3.4% on 2/1
(US) Homeland Security Sec Kelly: expects border wall with Mexico to be well underway within 2 years - comments on Capitol Hill
(US) White House Press Sec: President Trump is in favor of negotiating pharma prices
DIS Reports Q1 $1.55 v $1.48e, R$14.8B v $15.3Be
2202.HK Reports Jan contracted sales CNY48.1B v CNY23.4B m/m

WED 2/8
CARLB.DK Reports FY16 adj EBIT DKK8.25B v DKK8.29Be, Rev DKK62.6B v DKK63.2Be RIO.AU Reports FY16 Net $4.62B v -$866M y/y; Underlying earnings $5.1B v $4.75Be; Rev $33.8B v $32.8B y/y
SAN.FR Reports Q4 Business EPS €1.25 v €1.25e, Business Op €2.12B v €2.20Be Rev €8.87B v €9.30Be
RMS.FR Reports Q4 Rev €1.5B v €1.5Be
MAERSKB.DK Reports FY16 underlying Profit $711M v $3.07B y/y, EBITDA $6.77B v $9.07B y/y, Rev $35.5B v $35.9Be;
*(TH) THAILAND CENTRAL BANK (BOT) LEAVES BENCHMARK INTEREST RATE UNCHANGED AT 1.50%; AS EXPECTED
*(IN) INDIA CENTRAL BANK (RBI) LEAVES REPURCHASE RATE UNCHANGED AT 6.25%; NOT EXPECTED (2nd straight pause)
*(PL) POLAND CENTRAL BANK (NBP) LEAVES BASE RATE UNCHANGED AT 1.50%; AS EXPECTED
HUM Reports Q4 $2.09 v $2.06e, R$12.9B v $13.5Be
(US) DOE Crude: +13.8M v +2.5Me; Gasoline: -0.9M v +1Me; Distillate: +0.03M v +0.5Me
JWN President Trump tweets: "My daughter Ivanka has been treated so unfairly by @Nordstrom. She is a great person -- always pushing me to do the right thing! Terrible!"
(US) Association of American Railroads weekly rail traffic report for week ending Feb 4th: 541.5K carloads and intermodal units, +7.3% y/y
(UK) House of Commons passes Article 50 trigger bill by 494-122 vote, as expected

THRS 2/9
(CN) China Passenger Car Association (PCA): China Jan retail auto sales 2.12M units v 2.76M m/m, -9.8% y/y
GLE.FR Reports Q4 Net €390M v €315Me, Op €1.79B v €1.70B y/y, Rev €6.13B v €5.99Be
TKA.DE Reports Q1 Net €15M v €92Me, adj EBIT €329M v €318.1Me, Rev €10.1B v €9.67Be
TWTR Reports Q4 $0.16 v $0.12e, R$717M v $738Me; MAU's ~flat q/q
*(US) INITIAL JOBLESS CLAIMS: 234K V 249KE; CONTINUING CLAIMS: 2.08M V 2.06ME (initial claims match lowest level since 1973)
(US) Pres Trump: to make a "phenomenal" tax announcement in the next 2 or 3 weeks - breakfast meeting with airline CEOs
*(CN) CHINA JAN TRADE BALANCE (USD TERMS): $51.4B (5-month high) V $48.5BE

FRI 2/10
MT.NL Reports Q4 Net +$403M v -$6.69B y/y, EBITDA $1.66B v $1.61Be, R$14.1B v $14.7Be
*(UK) DEC INDUSTRIAL PRODUCTION M/M: 1.1% V 0.2%E; Y/Y: 4.3% V 3.2%E
BHP Reportedly declaring force majeure on shipments from Escondida mine in Chile – press
*(US) JAN IMPORT PRICE INDEX M/M: 0.4% V 0.3%E; Y/Y: 3.7% V 3.4%E
*(CA) CANADA JAN NET CHANGE IN EMPLOYMENT: +48.3K V -10.0KE; UNEMPLOYMENT RATE: 6.8% V 6.9%E
(US) US Fed Gov Tarullo planning to resign on or around April 5th; Tarullo is the leading expert at the Fed on financial regulation issues; creates a 3rd open seat at the Fed

>>> US Close Dow +0.48% S&P+0.36% Nasdaq +0.33% Russell +0.75-%


Closing Market Summary: Another Record Close for Equities

Equity indices closed the week on an upbeat note, climbing to fresh record highs for the second consecutive day. The Dow (+0.5%) led the advance while the Nasdaq (+0.3%) finished just behind the S&P 500 (+0.4%).

The optimism surrounding today's session had its roots in President Trump's upcoming tax-related announcement. On Thursday, the president promised the unveiling of a "phenomenal" tax plan in the coming weeks, but didn't provide any specific details on what the plan will include. Still, it was enough to push the stock market to record highs on Thursday and then again on Friday.

It is worth noting that Federal Reserve Governor Daniel Tarullo announced on Friday that he will be resigning from his position, effective April 5. As a result, President Trump will have the opportunity to fill three of the seven seats on the Federal Reserve Board of Governors.

On the earnings front, NVIDIA's (NVDA 113.62, -2.76) earnings report lived up to lofty expectations that accompanied the company's massive 55.8% gain in the fourth quarter. However, the stock fell 2.4% on Friday as better than expected top and bottom lines and above-consensus first quarter guidance was met with a sell-the-news response from investors. In addition to Apple's (AAPL 132.12, -0.30) lackluster performance, the response to NVIDIA's earnings report put a lid on the top-weighted technology sector's (+0.2%) gain. 

Elsewhere on the earnings front, Skechers (SKX 27.78, +4.50) and Columbia Sportswear (COLM 59.83, +6.54) spiked 19.3% and 12.3%, respectively, following the release of their quarterly reports. SKX's jump can be attributed to its above-consensus revenues and upbeat Q1 revenue guidance, whereas COLM's surge was fueled by better than expected earnings.

However, Yelp (YELP 35.83, -5.66) didn't share the good fortune of its consumer discretionary peers. The company plunged 13.6% following worse than expected first quarter revenue guidance. The consumer discretionary space took in the positive and brushed off the negative to close 0.5% higher.

Energy (+0.8%) also finished Friday's session solidly higher thanks to the uptick in crude oil; the commodity finished its trading day up 0.9% at $53.85/bbl. WTI crude's third consecutive advance followed a bullish International Energy Agency report, which showed 90.0% OPEC compliance with agreed-upon production cuts and an increased oil demand growth forecast for 2017.

On the countercyclical side, consumer staples (-0.1%) finished at the bottom of the day's leaderboard, while the influential health care space (+0.1%) finished just a step ahead. Health care overcame weakness in biotech names with a 1.0% jump in the sector's largest component by market cap, Johnson & Johnson (JNJ 115.24, +1.16).

JNJ's uptick was the result of a positive development involving the European Medicines Agency. As a reminder, Johnson & Johnson agreed to acquire Actelion in late January for roughly $30 billion. The EMA stated that Actelion's Uptravi may continue to be used, after the agency reviewed the safety of the drug following the deaths of five patients in France who were taking it.

In the Treasury market, government-issued debt extended Thursday's downtick with minor losses on Friday. The benchmark 10-yr yield closed two basis points higher at 2.41%.

Today's economic data included January Export/Import Prices, the preliminary Michigan Sentiment Index for February, and the January Treasury Budget:

  • Import prices excluding oil declined 0.2% in January after ticking down 0.1% in December (revised from -0.2%). Export prices excluding agriculture increased 0.1% in January after rising 0.4% in December.
    • The key takeaway from the report is that nonfuel import prices remain in check, but nonetheless, inflation concerns could get dialed up just a bit on the notion of a potential pass-through effect should higher fuel prices persist.
  • The preliminary reading of the University of Michigan Consumer Sentiment Index for February declined to 95.7 (consensus 97.9) from 98.5 in the prior month.
    • While consumer sentiment faded, the key takeaway is that it is still high, as there have only been five higher readings in the past decade.
  • The Treasury Budget for January showed a deficit of $51.3 billion versus a deficit of $55.2 billion for January 2016. The Treasury Budget data is not seasonally adjusted, so the January deficit cannot be compared to the $27.5 billion deficit registered in December.

Investors will not receive any economic data on Monday.

  • Nasdaq Composite +6.5% YTD
  • S&P 500 +3.5% YTD
  • Dow Jones Industrial Average +2.6% YTD
  • Russell 2000 +2.3% YTD

>>> US Early premarket gappers


Early premarket gappers

Gapping up: IMMU +25.6%, INFN +17%, AVEO +16%, CTRL +15%, SKX +11.4%, HDP +10.1%, QUOT +10.1%, CBR +9.4%, ATVI +9%, TRVG +8.6%, ASYS +8.1%, SWIR +7.5%, RPD +7.5%, ATEN +7%, ELLI +5.5%, MJN +4.9%, CPN +4.7%, ICHR +4.5%, COLM +4.4%, VALE +4%, TLND +3.9%, NE +3.9%, HXL +3.4%, FLR +3.3%, ARCW +3.2%, RGC +3.2%, INVA +2.7%, FCX +2.5%, MT +2.4%, AMD +2.1%, PBR +2.1%, JCOM +2%, LPLA +1.9%, VRSN +1.8%, ESNT +1.7%, CPST +1.6%, NWSA +1.6%, RIO +1.5%, NVDA +1.5%, CCJ +1.4%, AVGO +1.3%, GFI +1.2%, HAL +1.2%, NR +1.2%, HMY +1.1%, REGN +1%, RIG +0.8%, AON +0.7%, CHK +0.6%, MIME +0.6%

Gapping down: RSYS -15.3%, ONVO -15.1%, TCON -12.4%, YELP -9.1%, BTX -9%, NDLS -9%, UBNT -8.1%, CATM -7.3%, MX -6.6%, IPAS -6.3%, CLF -6.2%, SGEN -5.6%, MCFT -5%, CYBR -4.4%, CERN -4.1%, ZNGA -4%, ZAYO -3.9%, APTI -3.2%, SANW -3.2%, MPWR -2.6%, ALDW -2.6%, EGAN -2.4%, CS -1.8%, P -1.8%, TBBK -1.7%, TWTR -1.6%, DB -1.5%, CARB -1.4%, MHK -1.3%, LYG -1.2%, NVO -1.1%, NBIX -0.8%, TEVA -0.8%

>>> US Gapping up


Gapping up
In reaction to strong earnings/guidance:

  • CTRL +15%, INFN +11.7%, SKX +10.4%, HDP +10.1%, ATVI +10.1%, QUOT +10.1%, SWIR +9.7%, ASYS +8.1%, TRVG +7.8%, RPD +7.5%, IMMU +7%
  • ATEN +7%, ELLI +5.5%, CPN +4.7%, ICHR +4.5%, NE +4.4%, COLM +4.4%, TLND +3.9%, MT +3.6%, FLR +3.3%, ARCW +3.2%, RGC +3.2%, INVA +2.7%
  • ESNT +2.7%, NVDA +2.4%, JCOM +2%, LPLA +1.9%, VRSN +1.8%, CPST +1.6%, NWSA +1.6%, NR +1.2%, EXPE +0.9%, AON +0.7%, MIME +0.6%, NTT +0.6%

M&A news:

  • MJN +5.2% (to be acquired by Reckitt Benckiser (RBGLY) for $90 per share)

Select metals/mining stocks trading higher:

  • FCX +4.2%, VALE +3.9%, GFI +2.4%, RIO +1.9%, HMY +1.5%

Select oil/gas related names showing strength:

  • WLL +2.5%, PBR +2.2%, RIG +1.9%, CHK +1.3%, HAL +0.8%

Other news:

  • SHLD +35.2% (announces 2nd phase of strategic restructuring program, targeting cost reductions of at least $1.0 billion on an annualized basis and enters into amended credit facility, sees upside Q4 sales)
  • CBR +9.4% (Lone Star Value discloses 5.4% active stake, says has engaged, and may continue to engage, in general discussions with the Board and management team, including with respect to the composition of the Board)
  • IMMU +9.1% (enters into exclusive global licensing agreement with Seattle Genetics (SGEN))
  • HXL +3.4% (authorizes $300 million of additional share repurchases)
  • AMD +2.7% (NVDA sympathy)
  • AVEO +1.1% (announces updates for its lead drug candidate, tivozanib; 'Pivotal TIVO-3 Trial Enrollment Proceeding Substantially Ahead of Schedule', not revising anticipated topline data time)
  • JBLU +0.7% (reports January traffic)

Analyst comments:

  • GTE +5.5% (upgraded to Outperform from Neutral at Credit Suisse)
  • QEP +0.6% (upgraded to Outperform at Wells Fargo)
  • BYD +0.5% (initiated with a Buy at SunTrust)