The disruptive nature of the industries included in the Evolve Innovation Index Fund (EDGE ETF) mean that, by nature, transformative change is part of the portfolio. However, June was an interesting study in contrasts. The automotive sector looks to be changing by coming to a consensus on a common EV charging standard for the industry, while the big change in the cloud computing and e-gaming industry was around the nature of competition—between Microsoft and Google in the cloud space and between Microsoft and the rest of the gaming industry should the acquisition of Activision-Blizzard be approved.
Updates on Specific Industries
Rivian Automotive Inc. became the latest EV manufacturer (after Ford and General Motors) to announce it was adopting Tesla Inc.’s electric vehicle charging ports for their vehicles, as Tesla’s ports rapidly become an unofficial industry standard.
Beginning next year, Rivian drivers will be able to access more than 12,000 Tesla superchargers across the United States and Canada. Additionally, Rivian will incorporate Tesla’s North American Charging Standard port into their current and future EV models beginning in 2025.
The availability and dependability of charging infrastructure are crucial factors for wider EV adoption, and the establishment of a unified standard could entice consumers to consider a plug-in EV. Tesla’s charging network is considered highly reliable, having received the highest ranking in a recent J.D. Power survey of EV drivers.1
Okta, Inc. announced the results of its international Secure Sign-In Trends Report, which analyzes billions of monthly logins from around the world to Okta Workforce Identity Cloud. The report shows that across more than sixteen industries the use of multi-factor authentication (MFA) has nearly doubled since 2020 and that MFA represents the best choice in terms of security and convenience for users.
Okta found that MFA adoption by Okta’s workforce customers jumped from 35% to 50% between February and March 2020, ramping up as the pandemic began. By January 2023, Okta found that 90% of administrators and 64% of users were signing in via MFA. While MFA has long been resisted because of the assumption that it trades security for a degraded user experience, the Okta report found that, on average, MFA saved users time and led to fewer failures compared to traditional passwords.2
In a June letter to the Federal Trade Commission (FTC), Google accused Microsoft of employing restrictive licensing terms in an effort to establish monopoly control of the cloud market.
An FTC request for input regarding potential anti-competitive practices within the cloud industry prompted the letter. Google specifically targeted Microsoft in its letter, asserting that because of the dominance of Microsoft’s Windows Server and Microsoft Office products in the market, it is challenging for Microsoft clients to explore alternatives to Microsoft’s Azure cloud offering. Google claimed that Microsoft’s licensing restrictions hinder businesses’ ability to diversify their enterprise software providers.
Additionally, Google emphasized the substantial national security and cybersecurity risks associated with monopolistic control of the cloud, citing previous cyberattacks involving Microsoft products, including the SolarWinds breach of 2020.3
After the U.K.’s competition authority blocked Microsoft’s acquisition of Activision-Blizzard in April, and the E.U. and China joined 37 other countries in giving the deal the green light in May, all eyes turned to await the decision of the U.S. Federal Trade Commission (FTC) as to whether the deal could proceed.4
In mid-June, the FTC received a court injunction to temporarily block the acquisition and a U.S. District Court in San Francisco agreed to hold a hearing just days later.
During the weeklong hearing, the court heard testimony From the FTC arguing that the acquisition would harm competition within the video game sector based on concerns that Microsoft could make Activision’s library of games exclusive to its own Xbox console at the expense of other platforms, such as PlayStation. The FTC further argued that controlling Activision’s library of games would also give Microsoft an unfair advantage in the emerging cloud gaming space.5
Microsoft CEO Satya Nadella and Activision CEO Bobby Kotick both appeared in court to argue their companies’ commitment to “open platforms and consumer choice,” pledging (as they have already done in other jurisdictions) not to withdraw Activision’s games from rival consoles and citing the potential for backlash and reputational damage amongst the gaming community should they do so.6
A decision from the judge hearing the case is expected imminently, as Microsoft and Activision Blizzard have set a drop-dead date of July 18 to terminate the deal if it is not completed. Should the court rule against Microsoft and Activision, the FTC wants to further adjudicate the acquisition in their own internal court before granting any decision—a delay which would likely sink the deal entirely.7
Recent figures from Stifel, Nicolas & Co. show that mergers and acquisitions in biotech have finally shaken a three-year-long slump. For the year so far, the sector has seen nearly $90 billion in deals done, compared to just $127 billion in all of 2022. Analysts project that the volume of deals will reach as high as $208 billion this year, meaning the sector is on pace for its third-highest M&A year of the last ten years.
Amongst these deals will be the deal struck for Novartis AG to buy Vancouver- and Seattle-based Chinook Therapeutics Inc. for as much as $3.5 billion US in June, largely on the strength of two drugs—atrasentan and zigakibart—the company has pioneered to treat a rare kidney disease that affects an estimated 500,000+ sufferers in the U.S. and Europe, with millions more throughout Japan and Asia.8
And count Novo Nordisk’s move to take a controlling stake in BIOCORP as another such deal. In an offer worth 154 million Euros, Novo Nordisk would delist and absorb the French biotech company while maintaining the “agility and entrepreneurial spirit of BIOCORP.”
BIOCORP specialises in medical delivery systems and devices, including Mallya, an innovative Bluetooth-enabled smart add-on device for pen injectors, including the Novo Nordisk FlexTouch pen used by people with diabetes. Novo Nordisk and Mallya have been collaborating since 2021 on commercialising Mallya for the diabetes market as well as other therapy areas.9
Mastercard announced a hiring push for tech talent across its seven global technology hubs.
Widely recognized as a card company, Mastercard is also in the vanguard of the open banking movement. Consequently, the firm is actively recruiting software architects, product developers specializing in IT and cybersecurity, projects and program managers, as well as professionals with expertise in crypto and artificial intelligence strategy.
The growing need for tech-oriented staff is thanks to the boom in Mastercard’s open banking business, which often sees multiple releases of production code each day, as well as larger projects that will scale globally, each of which may require months of planning and development before they launch.
Tech hires will have the opportunity to work from any of Mastercard’s seven tech hubs, including New York, Dublin, Sydney, and Vancouver. These hubs serve as centres of innovation and collaboration for Mastercard, fostering an environment conducive to cutting-edge ideas and breakthrough solutions.10
Robotics & Automation
Amazon Web Services (AWS), Amazon’s cloud unit, has announced a $100 million investment to develop a new center to assist companies in utilizing generative artificial intelligence (AI) more effectively. Assistance will come through no-cost workshops, engagements, and training to help customers envision innovative new use cases for AI based on best practices and industry expertise. This move comes both as a recognition of the significance of generative AI, as well as a response to strides made in AI by rivals Microsoft and Google.11
In a similar move, Google announced that its cloud-computing unit would also begin offering consulting services to help clients maximize the utility of generative AI across industries. This new service from Google Cloud will help “identify trends, summarize information, boost automation and generate content,” so that customers get the most from generative AI tools.12
June saw a dramatic expansion of 5G access across the United States.
UScellular announced the launch of its 5G mid-band network, giving customers in parts of 10 states up to 10x faster speeds than its 4G LTE network and low-band 5G. The new 5G mid-band network is available mainly in parts of Illinois, Iowa and Wisconsin, with communities in Maine, Missouri, Nebraska, Oklahoma, Oregon, Virginia and Washington also receiving access. By the end of 2023, UScellular expects this network to cover more than 1 million households.13
Also in June, Verizon initiated its 5G Ultra Wideband network across parts of Indiana after doing the same a month earlier in Illinois.
The new 5G network will provide customers up to 10x speeds, greater capacity, and enhanced network reliability. This network uses Verizon’s recently acquired C-band spectrum, and when additional bandwidth becomes available at the end of this year, Verizon will be able to provide additional speed and capacity for the full network.14
Investment 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. For more information on EDGE ETF, visit our website at https://evolveetfs.com/edge/ or click here to give your portfolio an EDGE.
Portfolio Strategy and Activity
For the month, Evolve Automobile Innovation Index Fund (CARS) made the largest contribution to the Fund, followed by Evolve Cloud Computing Index Fund (DATA ETF), and Evolve E-Gaming Index ETF (HERO ETF). The largest detractors to performance for the month were BeiGene Ltd, followed by Fiserv Inc and Genmab A/S.
- Ludlow, E., “Rivian Adopts Tesla’s EV Charging Standard, Joining Ford and GM,” Bloomberg, June 20, 2023; https://www.bloomberg.com/news/articles/2023-06-20/rivian-adopts-tesla-s-charging-standard-joining-ford-and-gm
- “Use of Multi-Factor Authentication (MFA) Nearly Doubles Since 2020, New Okta Secure Sign-In Trends Reports Finds,” Okta, June 12, 2023; https://investor.okta.com/news-releases/news-release-details/use-multi-factor-authentication-mfa-nearly-doubles-2020-new-okta
- Goswami, R. & Elias, J., “Google accuses Microsoft of unfair practices in Azure cloud unit,” CNBC, June 21, 2023; https://www.cnbc.com/2023/06/21/google-accuses-microsoft-of-anticompetitive-practices-in-azure-cloud.html
- Fineman, J., “Microsoft’s planned $69B Activision purchase gets China antitrust approval – report,” Seeking Alpha, May 19, 2023; https://seekingalpha.com/news/3973465-microsofts-planned-69b-activision-purchase-gets-china-antitrust-approval-report
- Browning, K. & McCabe, D., “Microsoft Says It Could Abandon Activision Deal if Judge Delays It,” The New York Times, June 22, 2023; https://www.nytimes.com/2023/06/22/technology/microsoft-activision-federal-hearing.html
- Browning, K., “Microsoft and Activision Chiefs Testify Merger Will Benefit Consumers,” The New York Times, June 28, 2023; https://www.nytimes.com/2023/06/28/business/microsoft-activision-ceo-testify.html
- Novet, J., “The biggest takeaways from Microsoft’s courtroom showdown with the FTC over Activision Blizzard,” CNBC, June 30, 2023; https://www.cnbc.com/2023/06/30/microsoft-activision-showdown-with-ftc-biggest-takeaways.html
- Silcoff, S., “Novartis buys Chinook for US$3.2-billion, latest in string of big exits for Canadian biotechs,” The Globe and Mail, June 12, 2023; https://www.theglobeandmail.com/business/article-novartis-to-buy-chinook-drug-developer/
- “Novo Nordisk enters exclusive negotiations to acquire a controlling stake in BIOCORP, to be followed by a tender offer on all remaining shares,” Novo Nordisk, June 5, 2023; https://www.novonordisk.com/content/nncorp/global/en/news-and-media/news-and-ir-materials/news-details.html?id=166114
- Hagy, P., “How payments giant Mastercard is revamping its work culture to lure developers — from free days to work on passion projects to $200,000 salaries,” Business Insider, June 29, 2023; https://www.businessinsider.com/mastercard-hiring-technologist-software-engineer-payments-fintech-2023-6
- Novet, J., “AWS is investing $100 million in generative A.I. center in race to keep up with Microsoft and Google,” CNBC, June 22, 2023; https://www.cnbc.com/2023/06/22/aws-invests-100-million-in-generative-ai-as-it-sees-a-long-race-ahead.html
- Love, J., “Google Cloud Launches Consulting Services to Help Clients Use AI,” Bloomberg, June 7, 2023; https://www.bloomberg.com/news/articles/2023-06-07/google-cloud-launches-consulting-services-to-help-clients-use-ai
- “UScellular Launches 5G Mid-Band Network,” UScellular, June 22, 2023; https://www.prnewswire.com/news-releases/uscellular-launches-5g-mid-band-network-301857138.html
- “Verizon lights up 5G Ultra Wideband across Indiana,” Verizon, June 7, 2023; https://www.verizon.com/about/news/verizon-lights-5g-ultra-wideband-across-indiana