8 December 2023

General Overview

Ground-breaking developments are reshaping industries and challenging conventional norms every day, and that was certain true in November across the most disruptive and innovative sectors of the economy. From startups providing mobile charging solutions to EV drivers, to the unforeseen consequences of ransomware attacks on financial institutions, to major restructuring in the field of artificial intelligence, let us explore the constant pursuit of innovation that spans across automobile technology, cybersecurity, cloud computing, e-gaming, genomics, fintech, robotics and automation, and 5G connectivity. 

Sector Specific Updates

Automobile Innovation

To address “charging anxiety” amongst EV drivers (and prospective drivers), startups are developing mobile chargers that will come to you when your EV needs a charge. 

Such units range from sleek robots like EV Safe Charge’s ZiGGY, designed for reserved parking spaces, to Lightning eMotors’ Lightning Mobile, which, at a hefty 9,900 pounds and over $300,000, serves as a portable generator, accommodating up to four vehicles simultaneously. Lightning eMotors notes increased demand, especially on the West Coast. Even AAA has introduced a roadside charging assistance program, dispatching mobile chargers in 24 cities. 

While these mobile chargers offer interim solutions for charging deserts and emergencies, experts anticipate their demand may wane as public charging infrastructure improves, making them a transitional measure until the network is fully built out and EV drivers trust its availability.¹

Cybersecurity

In November, the U.S. arm of China’s Industrial and Commercial Bank of China (ICBC), the world’s largest bank, suffered a ransomware attack by the Russian-linked Lockbit ransomware group. Reports indicate that within days, ICBC paid a ransom.²

The severity of the attack led to disruptions in the U.S. Treasury market after ICBC could not settle a number of transactions. The bank was forced to courier a USB thumb drive to the affected parties in order to provide the required settlement details. This has exposed the possibility of a worst-case scenario long feared by cybersecurity experts: a hack that incapacitates a vital part of the financial system, leading to a cascade of negative consequences for lenders and governments around the world. This breach will be carefully examined by regulators and put financial institutions on high alert.³ 

Cloud Computing

Alibaba Group Holding Ltd. has abruptly cancelled the spinoff of its cloud business due to heightened U.S. restrictions on advanced chips for China, leaving investors stunned. The e-commerce giant characterized the move as a “reset,” abandoning the plan to split off its cloud services division and hold an IPO. Instead, Alibaba will attempt to foster organic growth in the unit and instead distribute an inaugural annual dividend of $2.5 billion to shareholders. 

The decision comes amid escalating competition in the cloud services sector, compounded by U.S. limitations on AI chips crucial for data centres and high-end computing. The Biden administration’s efforts to restrict China’s access to cutting-edge chips it fears may be used for military purposes are now unexpectedly impacting the private sector. This development also jeopardizes Alibaba’s earlier-announced strategy to divide into six main units, with most slated for eventual public offerings.⁴

E-Gaming

Netflix’s foray into gaming, first announced in 2021, was a play to maintain subscriber engagement between major show releases. The streaming giant has tripled its game library to 77 titles in recent months and hired notable gaming industry talent. Despite this, however, figures released in November indicate fewer than 1% of Netflix’s 247 million subscribers play games daily. 

Netflix’s co-CEO Greg Peters remains optimistic about their gaming strategy and following a “crawl, walk, run” approach. He acknowledges challenges but sees long-term potential, likening the rollout of games to past expansion trajectories for the company.⁵ The company, avoiding direct competition with consoles and PCs, seeks to carve a niche in mobile gaming and has plans for its own AAA game development and cloud gaming expansion, expressing confidence in the enduring value of gaming within its entertainment ecosystem.⁶

Genomics

Novo Nordisk A/S revealed data in November from a pivotal study supporting the efficacy of Wegovy in mitigating heart attacks and fatalities among patients with obesity and heart disease. The study, hailed as “game-changing,” garnered enthusiastic applause at the American Heart Association’s annual conference in Philadelphia. In addition to promoting weight loss, the highest Wegovy dose demonstrated notable reductions in blood sugar and inflammation, both key indicators of heart disease. These outcomes align with the substantial decrease in heart attacks in patients taking the drug reported by Novo Nordisk in August. The latest results suggest the benefits of incorporating Wegovy into treatment plans for high-risk individuals. As heart disease remains the leading cause of death in the U.S. and a significant global contributor, Novo Nordisk will seek approval for using Wegovy to diminish the risk of heart attack in overweight adults with heart disease.⁷

Fintech

Mastercard’s joint venture in China, Mastercard NUCC Information Technology (Beijing), has received formal approval from the People’s Bank of China to commence domestic payments. The joint venture aims to actively contribute to expanding the issuance and acceptance of Mastercard-branded products in China. After obtaining in-principle approval in February 2020, the joint venture has spent nearly four years establishing its infrastructure, rules, structures, and standards to meet local regulatory requirements. 

As part of the announcement, Mastercard emphasized its strong cross-border portfolio in China, boasting “tens of millions” of bank cards and “millions” of acceptance points nationwide. These achievements were made possible through partnerships with local players such as Alipay and Tencent. The approval signifies a significant step for Mastercard in strengthening its presence and influence in the Chinese domestic payments landscape.⁸

Robotics & Automation

Amazon’s recently formed artificial general intelligence (AGI) group is undergoing significant restructuring just four months after its inception. The AGI team is dividing into six key areas, as outlined in a leaked internal email. 

The six focus areas within the AGI unit, detailed in the email, provide insight into Amazon’s strategy to compete with AI rivals like Microsoft and Google. Notably, the restructuring involves migrating teams handling Alexa-focused features to the Devices team. 

The newly formed AGI teams include AGI Product, AGI Data Services, AGI Foundational Models, AGI Sensory and Machine Learning Builder Services, AGI Conversational Assistant Services, and AGI Information. These teams aim to develop foundational models, sensory services, conversational assistants, and information infrastructure, showcasing Amazon’s commitment to advancing AI technologies.⁹ 

5G

Innovation, Science & Economic Development Canada (ISED) concluded the 3800MHz 5G spectrum auction at the end of November, awarding 4,099 licenses to 20 bidders. Notably, small and regional providers secured 870 licenses, doubling their spectrum holdings when combined with the 2021 3500MHz auction. ISED emphasized that this will enhance the ability of smaller providers to offer competitive 5G services across the country, including in rural and remote areas. 

The auction generated a total value of $2.16 billion ($1.59 billion U.S.), with major players Telus acquiring 1,430 licenses ($619.64 million), Bell Canada obtaining 939 licenses ($518.07 million), Rogers Communications gaining 860 licenses ($474.77 million), and Videotron securing 305 licenses ($298.90 million). 

The licenses, covering all service areas, carry deployment obligations, ensuring timely spectrum use for mobile or fixed wireless services. This auction is expected to accelerate the rollout of high-quality 5G network services nationwide.¹⁰

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/. Give your portfolio an EDGE. 

Portfolio Strategy and Activity

For the month, Evolve Cloud Computing Index Fund made the largest contribution to the Fund, followed by Evolve Cyber Security Index Fund and Evolve E-Gaming Index. The largest detractors to performance for the month were VMware Inc, followed by Illumina Inc and Corteva Inc. 

 

Sources

1. Pashankar, S., “These Electric Vehicle Chargers Will Come to You,” Bloomberg, November 4, 2023; https://www.bloomberg.com/news/articles/2023-11-04/these-electric-vehicle-chargers-will-come-to-you
2. Pearson, J., “Chinese lender ICBC paid ransom over hack that disrupted U.S. Treasury market, gang says,” The Globe and Mail, November 13, 2023; https://www.theglobeandmail.com/business/international-business/asia-pacific-business/article-chinese-lender-icbc-paid-ransom-after-hack-that-disrupted-markets/
3. Doherty, K., Capo McCormick, L. & Harris, A., “World’s Biggest Bank Has to Trade Via USB Stick After Hack,” Bloomberg, November 9, 2023; https://www.bloomberg.com/news/articles/2023-11-10/world-s-biggest-bank-forced-to-trade-via-usb-stick-after-hack
4. Zhang, J., “Alibaba Tumbles After Nixing Cloud Spinoff on US Chip Curbs,” Bloomberg, November 16, 2023; https://www.bloomberg.com/news/articles/2023-11-16/alibaba-calls-off-cloud-spinoff-in-major-blow-to-overhaul-effort
5. Gu, T., “Netflix is adopting a ‘crawl, walk, and run’ games market strategy, and more from the games market,” Newzoo, November 8, 2023; https://newzoo.com/resources/blog/gaming-industry-trends-roundup-november-8
6. Wijman, T., “Netflix is adding more games to its library, Microsoft gaming revenues will likely exceed Sony’s, and more games market news,” Newzoo, November 23, 2023; https://newzoo.com/resources/blog/gaming-industry-trends-roundup-november-22
7. Muller, M. & Kresge, N,. “Wegovy Study Bolsters Use In Patients With Obesity and Heart Disease,” Bloomberg, November 11, 2023; https://www.bloomberg.com/news/articles/2023-11-11/wegovy-weight-loss-drug-may-also-treat-heart-disease-study-shows
8. Khairnar, S., “Mastercard’s joint venture receives approval to commence domestic payments in China,” Fintech Futures, November 22, 2023; https://www.fintechfutures.com/2023/11/mastercards-joint-venture-receives-approval-to-commence-domestic-payments-in-china/
9. Kim, E., “Leaked email outlines Amazon’s big plans for ‘AGI,’ the AI tech all of Silicon Valley is chasing,” Business Insider, November 21, 2023; https://www.businessinsider.com/amazon-agi-ai-restructuring-new-products-2023-11
10. “20 bidders spend CAD2.16bn in Canada’s 3800MHz 5G auction,” Comms Update, December 1, 2023; https://www.commsupdate.com/articles/2023/12/01/20-bidders-spend-cad2-16bn-in-canadas-3800mhz-5g-auction/

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