General Overview

Disruptive innovation continues to shape the future of industries, and across sectors like genomics, fintech, and e-gaming, ground-breaking innovations promise to redefine healthcare, finance, and entertainment experiences. Whether it’s AI-driven disease detection or fingerprint payments in vehicles, these innovations are poised to revolutionize their respective industries.

Digital disruption transformation disruptive innovation concept. Robot pressing button on screen 3d render.

We delve into innovations in these areas and others, with each heralding a new era of disruption and opportunity in its own domain.

Sector Specific Updates

Automobile Innovation

Employees at GM, Ford, and Stellantis went on strike in September, a move which could compound Tesla’s advantage in the electric vehicle (EV) market. EVs have fewer components than traditional gas-powered vehicles, which will likely mean fewer assembly line workers are needed in an EV-focused automotive industry due to a simplified assembly process.

Gas-powered vehicles typically contain over 1,000 parts, whereas modern electric engines have approximately 50 components, making EVs more straightforward to manufacture and assemble. This aspect of the auto industry’s pivot towards EVs has received limited attention despite its radical and disruptive nature.

While domestic production of EV powertrains could create employment, it will likely require fewer workers overall due to the simplicity of battery pack assembly and the use of labour-efficient electronic sensors. Reducing labour costs is a key competitive strategy for companies, and the efficiency of EV manufacturing is a driving force behind their adoption.¹

Cybersecurity

The FBI announced that it has dismantled a global network of compromised computer devices responsible for extorting millions worldwide. Known as “Qakbot,” this network played a pivotal role in cyberattacks against various entities both globally and in the United States since it became operational in 2008. U.S. officials estimated that in its decade-plus of operation, Qakbot infected approximately 200,000 U.S. computers and 700,000 worldwide, making the takedown of this network a significant victory in the ongoing battle against cyber threats.²

Cloud Computing

IDC reports that in Q2 2023, spending on cloud computing and storage infrastructure surged nearly 8% YoY to $24.6 billion. IDC’s full-year forecast anticipates a 10.6% growth in cloud infrastructure spending compared to 2022, reaching $101.4 billion, while non-cloud infrastructure will decline by 7.9% to $58.5 billion. This widening gap emphasizes the dominance of shared cloud infrastructure, which is projected to hit $72 billion for the year. IDC attributes this growth to the demands of complex processing tasks required by AI applications.

In the long term, IDC envisions a continued upward trend, with cloud infrastructure spending expected to reach $156.7 billion by 2027, boasting a CAGR of 11.3% and accounting for nearly 70% of total computing and storage infrastructure expenditure.³

E-Gaming

Activision Blizzard’s $69 billion deal to be acquired by Microsoft has received preliminary approval from the UK’s Competition and Markets Authority (CMA), ending more than 18 months of limbo for the biggest-ever gaming deal.⁴

Initially, the CMA had blocked the acquisition due to concerns related to cloud gaming. However, Microsoft recently restructured the agreement, transferring cloud gaming rights for both current and future Activision Blizzard games to Ubisoft for the next 15 years. The CMA has deemed this revised deal to effectively address their earlier concerns.

It’s important to note that this preliminary approval is a significant milestone, though it is not the final decision. The CMA is actively seeking input from third parties regarding the proposed remedies offered by Microsoft and Activision Blizzard. The deadline for providing feedback is October 6. The CMA intends to reach a final ruling before the deal’s extended closing deadline of October 18.⁵

Genomics

For the first time, scientists have used AI to detect and predict Parkinson’s disease, heart attacks and strokes from patients’ retinal imaging. The eye’s retina offers a non-invasive window into a patient’s nervous system and capillary network, which are crucial for proper functioning of the brain, heart, and kidneys.

To develop the tool, called RETFound, researchers employed a dataset of 1.6 million retinal scan images from Moorfields Eye Hospital. Testing shows that RETFound consistently outperforms other AIs across complex clinical tasks, especially excelling in diagnosing within diverse populations and in patients with rare diseases. Notably, it achieves label efficiency, needing only 10% of the dataset labels required by other AI systems, thanks to an innovative self-supervising approach. Labelling datasets is usually a laborious and time-intensive task for human researchers and has created research bottlenecks in the past.⁶

Fintech

Mercedes-Benz has joined forces with Mastercard to introduce an innovative payment system for its cars, enabling owners to make payments with a simple fingerprint scan on the vehicle’s infotainment system. This collaboration makes Mercedes-Benz the first automaker globally to incorporate Mastercard’s Secure Card on File for Commerce platform directly into their vehicles. This technology ensures the encryption of transaction data through unique cryptograms, enhancing security.

Mercedes-Benz’s fingerprint payment authorization marks a pioneering instance of in-car payments at the point of sale. Presently operating at over 3,600 connected service stations across Germany, the company plans to extend this feature to additional car models and other European markets. This innovative use of Mastercard’s Secure Card on File for Commerce promises a more seamless and secure way for car owners to handle transactions while on the road.⁷

Robotics & Automation

OpenAI has launched ChatGPT Enterprise, a corporate version of its chatbot, aimed at attracting a wider range of business customers and increasing revenue. This tool features unlimited access to OpenAI’s GPT-4 AI model, enhanced data encryption, and a commitment not to use customer data for AI training purposes. It also allows users to input significantly longer prompts.

The release of ChatGPT Enterprise is part of OpenAI’s strategy to monetize its popular chatbot, which is resource-intensive due to the computational power required for robust AI models. OpenAI has already pursued revenue generation through methods like premium subscriptions and paid access to its API for integrating the chatbot into other applications.

OpenAI collaborated with over 20 companies, spanning startups to larger enterprises, to test ChatGPT Enterprise. These early customers are employing the tool to automate tasks such as coding and addressing routine business inquiries. This launch represents a significant step forward for OpenAI in expanding the utility of its chatbot for the corporate sector.⁸

5G

Qualcomm has announced that it will supply Apple with 5G modems for iPhones until 2026, contrary to prior expectations of Apple developing its own 5G modem by 2024. This extended partnership is expected to boost Qualcomm’s handset business, which had $5.26 billion in sales in the recent quarter. Approximately 21% of Qualcomm’s fiscal 2022 revenue of $44.2 billion came from Apple.

While Apple had been working on its own modems, its transition away from Qualcomm chips may be challenging due to their complexity. The two companies continue to operate under a six-year agreement established after a 2019 legal battle over royalties. Qualcomm expects to provide only 20% of the modems required for Apple’s 2026 smartphone launch, indicating anticipation of a decline in Apple’s business.⁹

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, 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. Give your portfolio an EDGE.

Portfolio Strategy and Activity

For the month, Veralto Corp made the largest contribution to the Fund, followed by KDDI Corporation and SoftBank Corp. The largest detractors to performance for the month were Evolve Automobile Innovation Index Fund, followed by Evolve Cloud Computing Index Fund and Evolve Cyber Security Index Fund.

 

Sources

1. Barr, A., “The UAW strike and the inexorable math of electric vehicles,” Business Insider, September 17, 2023; https://www.businessinsider.com/uaw-strike-inexorable-math-electric-vehicles-elon-musk-tesla-ford-2023-9
2. Murphy, M., “FBI Dismantles a Malware System That Took Millions in Ransom,” Bloomberg, August 29, 2023; https://www.bloomberg.com/news/articles/2023-08-29/fbi-dismantles-a-malware-system-that-took-millions-in-ransom
3. Bourne, J., “Cloud infrastructure spending ticks over thanks to complex workloads and AI,” Cloud Computing News, October 3, 2023; https://www.cloudcomputing-news.net/news/2023/oct/03/cloud-infrastructure-spending-ticks-over-thanks-to-complex-workloads-and-ai/
4. Gemmell, K., “Microsoft’s Activision Deal Set to Clear Final UK Hurdle,” Bloomberg, September 22, 2023; https://www.bloomberg.com/news/articles/2023-09-22/microsoft-s-activision-deal-set-to-get-uk-s-cma-approval
5. Ricker, T., “Microsoft’s Activision Blizzard deal gets preliminary approval from UK regulator,” The Verge, September 22, 2023; https://www.theverge.com/2023/9/22/23885176/microsofts-activision-blizzard-uk-cma-preliminary-approval
6. Barber, D., “Eye-scanning AI predicts and detects disease in world-first, study suggests,” Health Data research UK, September 15, 2023; https://www.hdruk.ac.uk/news/eye-scanning-ai-predicts-and-detects-disease-in-world-first-study-suggests/
7. Poultney, L., “Mercedes-Benz owners can now pay for fuel with an in-car fingerprint sensor,” Yahoo Finance, October 2, 2023; https://finance.yahoo.com/news/mercedes-benz-owners-now-pay-165824238.html
8. Metz, R., “OpenAI Unveils ChatGPT for Businesses, Stepping Up Revenue Push,” Bloomberg, August 28, 2023; https://www.bloomberg.com/news/articles/2023-08-28/openai-unveils-chatgpt-for-business-customers-stepping-up-revenue-push
9. Leswing, K., “Qualcomm says it will supply Apple with 5G modems for iPhones through 2026,” CNBC, September 11, 2023; https://www.cnbc.com/2023/09/11/qualcomm-to-supply-apple-with-5g-modems-for-iphones-through-2026.html

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