In today’s dynamic landscape defined by disruptive innovation, industries are undergoing transformative shifts driven by groundbreaking technologies. Electric vehicle manufacturers like Rivian are exceeding delivery projections, signaling the electric vehicle’s potential to reshape transportation. The cybersecurity sector adapts with new SEC rules, emphasizing material breach disclosures, while cloud computing rebounds through generative AI investments. Mergers like Microsoft’s acquisition of Activision Blizzard redefine e-gaming dynamics. Healthcare sees progress in genomics with experimental Alzheimer’s drugs. VR training and distributed servo drives revolutionize fintech and robotics. And 5G advancements redefine connectivity.
Amidst these disruptions, industries are reimagining traditional business models, demonstrating the pervasive influence of innovation in shaping the future.
Sector Specific Updates
Rivian’s stock surged in early July on news that the electric vehicle manufacturer had surpassed analysts’ delivery forecasts for the quarter. Rivian achieved 12,640 electric vehicle deliveries in Q2, surpassing analysts’ projections of 11,000 units.
The company, known for producing electric R1T pickups and R1S SUVs, maintained its annual production goal of 50,000 units. In Q2, Rivian manufactured approximately 23,400 electric vehicles, including consumer models and electric vehicle delivery vans.
Despite delays in EV production, Rivian has been actively managing expenses to preserve cash. The positive delivery figures coincided with Tesla’s announcement that it delivered 466,140 electric vehicles globally in Q2, also exceeding analyst estimates and boding well for the growth of these groundbreaking vehicles and the electric vehicle industry.¹
The Securities and Exchange Commission (SEC) is introducing new rules to enhance cybersecurity disclosure by public companies. Under these rules, companies must report “material” cybersecurity breaches within four days of determining their significance.
The SEC aims to protect investors by collecting relevant data promptly. However, companies are pushing back, citing concerns that the short reporting period could harm companies and risk opening them to exploitation by cybercriminals.
The rule change intends to clarify existing reporting criteria, as the SEC finds the current requirements for reporting cybersecurity events inconsistent. Along with the breach disclosure, the SEC seeks additional details like the timing of the incident and its material impact on the company. Management’s expertise in cybersecurity will also need to be disclosed. The final rules will take effect 30 days after publication in the Federal Register.²
According to a new Mizuho Bank survey of CIOs, the rush to develop generative AI is boosting cloud demand and helping make up for the slowdown in demand seen in Q1 of this year.
IT budget cuts made in anticipation of a recession caused cloud deals to take 50% longer to close in Q1, with discounts of 30% to 40% offered on services. However, in Q2, deal cycles have returned to an average range of 30 to 60 days, with price concessions mostly limited to large customers on multiyear contracts. CIOs are now focused on directing savings toward generative AI.
While this is good news for all cloud providers, it could prove a particular boon to Amazon Web Services (AWS). The Mizuho report highlights the appeal of Amazon’s Bedrock model for generative AI development, with around 200 companies already waiting to use it for training and launching generative AI apps.³
Microsoft’s $69 billion acquisition of video game maker Activision Blizzard received a significant boost in July, with U.S. courts allowing the merger to proceed and denying the Federal Trade Commission’s (FTC) appeal to temporarily stop closure of the deal.4
The only remaining hurdle to the deal is the Competition and Markets Authority (CMA) in the United Kingdom. Microsoft has submitted a change of circumstances document to the CMA, arguing that the regulator should take a second look at the proposed acquisition in light of new agreements struck with Nvidia, Boosteroid, Sony and others to ensure Activision Blizzard games remain available on non-Microsoft platforms.5
The CMA is expected to render a decision by the end of August, and Microsoft and Activision Blizzard have mutually agreed to push the closing date of the deal back to October 18 in case they need time to address any additional concerns from the U.K. regulator.6
Meanwhile, Activision Blizzard reported impressive financial results for Q2. Net bookings saw 50% year-over-year growth, while both GAAP operating income and segment operating income experienced over 70% YoY growth. The Activision segment saw 17% YoY growth, with operating income up 80% YoY. The Blizzard segment saw revenue up 160% YoY and operating income more than triple YoY thanks largely to the successful launch of Diablo IV. The success of Diablo IV helped Blizzard achieve its first $1 billion net bookings quarter, setting a new record for segment operating income.7
Eli Lilly’s experimental Alzheimer’s drug, donanemab, showed promising results in a late-stage clinical trial by slowing cognitive decline in patients in the early stages of the disease. Patients receiving the drug demonstrated a 29% reduction in Alzheimer’s progression after 18 months compared to those receiving a placebo. However, the study also revealed some serious side effects, including brain swelling and bleeding. The drug appeared more effective than Eisai and Biogen’s recently approved drug, Leqembi, but its safety profile needs further review.
Both donanemab and Leqembi are monoclonal antibodies targeting Alzheimer’s-related amyloid plaques in the brain. The hope is that by breaking down amyloid, the progress of the disease can be halted. Alzheimer’s affects around 6.7 million adults aged 65 and older in the U.S., making the search for effective treatments critical.8
Bank of America is already leveraging AI, virtual reality, and the metaverse to provide immersive training to 2,000 new hires, signalling a broader trend of VR in the banking sector.
The new employees use VR headsets to experience a 360-degree view of a bank branch, enabling them to learn by doing and receive virtual credit. The training also offers real-world scenarios, such as dealing with customer requests or complaints and engaging in AI-based conversations with client bots. Other modules cover the bank’s history, benefits packages, and even “wellness” experiences on virtual islands.
Bank of America has already implemented this technology for over 200,000 staff globally, with positive feedback and faster absorption of training material than traditional methods. 97% of participants who trained in VR reported feeling more comfortable performing the real-world version of tasks after the simulation.
The bank is also exploring use of the metaverse at career fairs to attract younger potential hires, providing a glimpse into the life of an associate through VR experiences.9
Robotics & Automation
Rockwell Automation, Inc. introduced the ArmorKinetix Distributed Servo Drives in July, an extension of its Kinetix 5700 platform. These servo drives offer a scalable solution, enhancing machine designs for greater efficiency. These new servos address the needs of manufacturers looking to embrace scalable options that streamline control architectures, lower component count, and boost productivity. The ArmorKinetix housing servos externally, allowing for modular design, reduced cabinet size, and minimized cabling and cooling needs.
This innovation gives manufacturers the chance to curb costs, enhance control architecture scalability, and improve energy efficiency. Distributed servo technology drives down overall expenses, augments productivity, and elevates uptime for manufacturers, making it an attractive choice for the next generation of production machinery.10
T-Mobile unveiled a significant enhancement of its 5G standalone network in July, introducing four-carrier aggregation to elevate speeds and performance. This advancement promises faster speeds and reduced latency, enhancing the user experience. By integrating multiple 5G channels, T-Mobile effectively transforms its network into a high-speed superhighway, benefiting customers across the nation.
The introduction of four-carrier aggregation is especially noteworthy due to T-Mobile’s distinction as the sole provider of a nationwide 5G standalone network. The innovation brings ultrafast speeds, exceeding 3.3 Gbps, to users throughout the United States.
T-Mobile’s commitment to expansive coverage is evident, as its 5G network encompasses 326 million individuals across two million square miles. Additionally, the Ultra Capacity 5G currently serves over 275 million people, with plans to extend coverage to a total of 300 million by year-end, enhancing connectivity and performance for consumers.11
EDGE ETF: Investment in Innovation
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, electric vehicle innovation, 5G, fintech, genomics, and robotics & automation. For more information on EDGE ETF, visit our website or click here. 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 Cyber Security Index Fund (CYBR) and Evolve Cloud Computing Index Fund (DATA ETF). The largest detractors to performance for the month were AT&T Inc, followed by KDDI Corporation and Verizon Communications Inc. On last rebalance, these securities were added to the portfolio: Renesas Electronics Corp and Rockwell Automation Inc.
- Wayland, M., “Rivian shares surge as second-quarter EV deliveries top estimates,” CNBC, July 3, 2023; https://www.cnbc.com/2023/07/03/rivian-shares-surge-as-second-quarter-ev-deliveries-top-estimates.html
- Pisani, B., “The SEC wants corporate America to tell investors more about cybersecurity breaches and what’s being done to fight them,” CNBC, July 26, 2023; https://www.cnbc.com/2023/07/26/sec-wants-to-know-whats-being-done-to-fight-cybersecurity-breaches.html
- Thomas, E., “Generative AI is bringing back cloud demand after IT budgets were slashed, which could be a big win for Amazon,” Business Insider, July 10, 2023; https://www.businessinsider.com/generative-ai-cloud-deals-demand-amazon-web-services-aws-2023-7
- Novet, J., “FTC loses appeals court bid to temporarily block Microsoft-Activision deal,” CNBC, July 15, 2023; https://www.cnbc.com/2023/07/14/ftc-loses-appeals-court-bid-to-temporarily-block-microsoft-activision-deal.html
- Novet, J. & Goswami, R., “Microsoft and Sony sign deal to keep Activision’s Call of Duty on PlayStation,” July 16, 2023; https://www.cnbc.com/2023/07/16/microsoft-and-sony-sign-deal-to-keep-activisions-call-of-duty-on-playstation.html
- Warren, T., “Microsoft argues its Activision Blizzard case with UK regulators,” July 31, 2023; https://www.theverge.com/2023/7/31/23813956/microsoft-activision-blizzard-cma-argument-uk-regulator
- “Activision Blizzard Announces Second Quarter 2023 Financial Results,” Activision Blizzard, July 19, 2023; https://investor.activision.com/news-releases/news-release-details/activision-blizzard-announces-second-quarter-2023-financial
- Lovelace Jr., B., “Eli Lilly’s experimental Alzheimer’s drug slows progression of the disease, study finds,” NBC News, July 17, 2023; https://www.nbcnews.com/health/health-news/eli-lillys-alzheimers-drug-slows-memory-decline-study-finds-rcna94530
- Doherty, K., “Bank of America Is Using AI and Metaverse to Train New Hires,” Bloomberg, July 13, 2023; https://www.bloomberg.com/news/articles/2023-07-13/bank-of-america-is-using-the-metaverse-ai-to-train-its-hires
- “Rockwell Automation Reduces Material and Labor Costs with new ArmorKinetix® Distributed Servo Drive,” Rockwell Automation, July 27, 2023; https://www.rockwellautomation.com/en-us/company/news/press-releases/Rockwell-Automation-Reduces-Material-Labor-Costs-with-ArmorKinetix-Distributed-Servo-Drive.html
- “T‑Mobile Revs Up 5G with Four‑Carrier Aggregation,” T‑Mobile, July 25, 2023; https://www.t-mobile.com/news/network/t-mobile-revs-up-5g-with-four-carrier-aggregation