The innovation-focused mindset was on display in February across eight sectors. Whether in the potential for EVs and cloud computing to help achieve environmental goals or how breakthroughs in genomics and AI will transform our health and work life, even in the face of an uncertain economy, innovation continues to be a key driver of growth for the future to stay ahead and meet the evolving needs of consumers and markets.

Automobile Innovation

Numbers released in February show that, so far, 2023 is a good year for the electric vehicle industry. Year-over-year, global EV registrations are up over 662,000 units to date (or roughly 10% above 2022 figures), with the Chinese market the main driver of growth. Continued YoY growth in other EV markets was also strong in Belgium (+75%), Japan (+104%), the United States (+118%), India (+256%), and Australia (+352%).¹ Overall, new projections estimate the global market for EVs at 80.7 million units by 2030, growing at a CAGR of 30.7% between 2022-2030.²

Cybersecurity

While the tech sector is going through rounds of layoffs, strong demand for cybersecurity workers continues, given the threat of cyberattack is a persistent and growing concern. According to newly released data, there were more than 755,000 unfilled online job postings in cybersecurity as of December 2022, with only 68 workers available for every 100 job openings. These figures continue the trend of a shortage of skilled cyber talent—one which doesn’t appear likely to end soon. This steady demand makes cybersecurity a haven for investment even in the face of an uncertain economy.³

Cloud Computing

Cloud computing featured prominently in the recently published Net Zero Review by former UK Energy Minister and current MP, Chris Skidmore. Expressing concerns that the UK is lagging behind its emissions reduction targets, Skidmore emphasized the need for the public sector to modernize legacy systems and accelerate its transition to the cloud to help achieve the government’s goal of net zero emissions by 2050. The UK government is expected to release an updated version of its Net Zero Strategy by the end of March, which will likely include policies based on Skidmore’s 129 recommendations for decarbonization. This will put renewed pressure on the public sector to review their operations and move to more cloud-based applications to meet sustainability targets.⁴

E-Gaming

A new report on generational differences in gaming and digital engagement released by Newzoo shows how Gen Z, Millennials, and Gen X engage differently with different forms of entertainment, including gaming.

While the report finds all three generations spend the bulk of their time in digital activities, Gen Z consumers spend the most time in virtual worlds and playing games, preferring “active” entertainment that require active engagement (reading material, content creation, game playing) almost as much as passive forms of entertainment (viewing and listening).

As the most gaming-focused generation, Gen Z’s interest in interactive media has significant implications for the future success of ‘the metaverse,’ as games become a conduit for a variety of interactions beyond just play, such as socializing, creating, and collaborating. It suggests that consumer buy-in can no longer be achieved through passive experiences alone and that success can only be had by adding active engagement into the media value chain.⁵

Genomics

In February, The Wall Street Journal reported that drug manufacturer Pfizer is in early discussions to acquire Seagen, the largest biotech firm in the Seattle area. Seagen is currently valued at over $30 billion and has approximately 3,200 employees globally, with 1,800 located in the Seattle region. In 2022, the company generated $2 billion in revenue, and announced plans to construct a 270,000 square foot manufacturing facility north of Seattle.

Seagen saw a YoY sales increase of 23% in 2022 for its four approved antibody-drug conjugates, which attack tumors through an antibody that recognizes cancer cells. The company is also conducting trials to test these drugs in combination with immunotherapies. In April, the FDA is expected to decide on Seagen’s application to combine its drug Padcev with Merck’s Keytruda as a first-line treatment for specific patients with urothelial cancer.⁶

Fintech

Departing PayPal Holdings Inc. CEO Dan Schulman made an unusual move as he eyes the door at the end of 2023: he purchased nearly $2 million in PayPal stock. This purchase of more than 26,000 shares comes after Schulman bought another $1 million worth of PayPal’s stock in February 2022. He also has not sold any PayPal stock since December 2021.

Insider buying and company buybacks are closely monitored by investors, and it is noteworthy that executives nearing departure from a company typically reduce their exposure to the company’s stock. However, market observers suggest that Schulman’s significant purchase may indicate management’s confidence in their ability to “expand earnings meaningfully this year, despite modest top-line growth.”

PayPal has faced challenges in the past year as it returns to normal growth following a pandemic-driven boom in e-commerce spending.⁷

Robotics & Automation

With the debut of ChatGPT and other AI chat bots, speculation is rampant about what jobs are most likely to be replaced by AI tools.

Economists and business school professors interviewed by CBS News believe that basic computer programming and drafting simple administrative or scheduling emails will be amongst the first tasks handed off to AI. Mid-level white-collar writing, such as human resources letters, advertising copy, and press releases will follow. Media planning and buying may also have to give way to AI, as companies leverage automation to buy ad space most effectively. And finally, AI may take some common forms of legal writing off the plate of over-burdened lawyers. Standard forms and documents such as those for home lease agreements, wills, and NDAs will soon all be drafted by AI.

However, as with other significant technological innovations, while some workers will lose out to AI, the technology will help generate new job roles and forms of employment for humans as it displaces.⁸

5G

T-Mobile US Inc. has exceeded profit expectations and anticipates 75% growth in free cash flow for 2023, indicating the success of its merger with Sprint Corp. and its 5G network expansion. Despite a record number of mobile-phone customer gains in 2022, T-Mobile plans to add 5 to 5.5 million new subscribers this year, slightly below analyst predictions of 5.8 million. This may signal a cooling in the mobile sector. T-Mobile added 2 million wireless home broadband customers in 2022 and is on track to have 7-8 million by 2025, according to CFO Peter Osvaldik. However, the work needed to expand fiber and upgrade cable networks may hinder wireless broadband growth.⁹

Investing in Innovation with EDGE ETF

The Evolve Innovation Index Fund (EDGE ETF) is an 8-in-1 innovation fund that invests in disruptive innovation themes across a broad range of industries, including: cloud computing, cybersecurity, egaming & esports, automobile innovation, 5G, fintech, genomics, and robotics & automation.

EDGE ETF Portfolio Strategy and Activity

For the month, Evolve Cyber Security Index Fund made the largest contribution to the Fund, followed by Seagen Inc., and Nvidia Corp. On last rebalance, this security was added to the portfolio: BeiGene Ltd (Genomics).

For more information on EDGE ETF, visit our website at https://evolveetfs.com/edge/.

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Sources:

¹Pontes, J., “Best Selling Electric Cars in The World — January 2023,” CleanTechnica, March 3, 2023; https://cleantechnica.com/2023/03/03/best-selling-electric-cars-in-the-world-january-2023/

²“Global Electric Vehicles Market Report 2023: Localizing the EV Supply Chain Remains Crucial for Sustainable Growth of EVs,” GlobeNewswire, February 28, 2023; https://www.globenewswire.com/news-release/2023/02/28/2617465/0/en/Global-Electric-Vehicles-Market-Report-2023-Localizing-the-EV-Supply-Chain-Remains-Crucial-for-Sustainable-Growth-of-EVs.html

³Balasaygun, K., “Tech Layoffs Aren’t Hitting This Digital Job Market Where Over 700,000 Workers Are Needed,” CNBC, January 26, 2023; https://www.cnbc.com/2023/01/26/how-to-find-a-job-in-the-one-tech-market-that-is-not-seeing-layoffs.html

⁴MacRae, D., “Public sector ‘must accelerate move to cloud to cut emissions,’” CloudTech, February 17, 2023; https://www.cloudcomputing-news.net/news/2023/feb/17/public-sector-must-accelerate-move-to-cloud-to-cut-emissions/

⁵Kaser, R., “Newzoo: Gen Z’s gaming habits foreshadow the metaverse,” VentureBeat, February 6, 2023; https://venturebeat.com/games/newzoo-gen-zs-gaming-habits-foreshadow-the-metaverse/

⁶Schubert, C., “Seagen stock rises as Pfizer reportedly in talks to acquire Seattle-area biotech giant,” GeekWire, February 27, 2023; https://www.geekwire.com/2023/seagen-stock-rises-as-pfizer-reportedly-in-talks-to-acquire-seattle-area-biotech-giant/

⁷Bary, E., “PayPal CEO’s ‘unusual’ $2 million stock purchase is ‘certainly a positive’ signal,” MarketWatch, February 22, 2023; https://www.marketwatch.com/story/paypal-ceos-unusual-2-million-stock-purchase-is-certainly-a-positive-signal-a5dcfb0a

⁸Cerullo, M., “These jobs are most likely to be replaced by chatbots like ChatGPT,” CBS News, February 1, 2023; https://www.cbsnews.com/news/chatgpt-artificial-intelligence-chatbot-jobs-most-likely-to-be-replaced/

⁹Moritz, S., “T-Mobile Tops Profit Estimates, Sees 75% Free Cash Flow Gain,” Bloomberg, February 1, 2023; https://www.bloomberg.com/news/articles/2023-02-01/t-mobile-tops-profit-estimates-sees-75-free-cash-flow-gain

 

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