General Overview

The landscape of innovation continues to evolve rapidly across diverse sectors, from automotive technology to cybersecurity, cloud computing, and beyond. In a recent development, Volkswagen unveiled a breakthrough in solid-state battery technology with the potential to disrupt the automotive industry. This achievement not only showcases the potential of disruptive innovation in the automotive sector but also highlights the collaborative efforts between traditional automakers and cutting-edge technology firms.

And disruptive innovation extends beyond the automotive realm. In cybersecurity, Fortinet introduces integrated solutions to tackle evolving threats, while Amazon Web Services is investing billions in expanding cloud infrastructure, anticipating the growing demand for AI services. Additionally, Nintendo gears up to unveil a new Switch console, banking on the success of its hybrid gaming design. These developments underscore the transformative power of innovation across industries, reshaping consumer experiences and market dynamics.

As companies embrace technological advancements and market shifts, investors seek opportunities to capitalize on disruptive innovation themes. The Evolve Innovation Index Fund (EDGE ETF) offers a diversified approach to investing in disruptive technologies, spanning sectors such as cloud computing, fintech, genomics, and robotics & automation. In a dynamic market landscape, staying ahead requires not only understanding disruptive forces but also strategically positioning investments to harness their potential.

Sector Specific Updates

Automobile Innovation

In January, Volkswagen Group’s PowerCo division revealed a promising development in solid-state batteries, teasing a new battery capable of powering a vehicle for over 500,000 km with no noticeable range loss. The technology, still in its developmental stages, is a collaboration with QuantumScape, a California-based company specializing in solid-state lithium-metal batteries, which has partnered with VW since 2012.

In recent testing at PowerCo’s lab in Germany, however, the QuantumScape battery retained an impressive 95% capacity after more than 1,000 charging cycles, equivalent to travel of approximately half a million kilometres, surpassing industry standards. The success addresses durability concerns, a crucial step in the technology’s advancement. While Volkswagen aims for solid-state batteries in the second half of this decade, challenges in scaling up production remain. Other industry players, including Toyota, are actively pursuing similar advancements in battery technology.¹

Cybersecurity

Fortinet has unveiled the industry’s first integrated Wi-Fi 7 secure networking solution, combining the FortiAP 441K access point and FortiSwitch T1024 10 Gigabit Power over Ethernet switch. These innovations aim to deliver not only enhanced cybersecurity protections but double the speed and capacity of existing solutions, addressing the escalating demands of modern enterprise wireless networks.

Fortinet’s Chief Marketing Officer, John Maddison, emphasizes the convergence of networking and AI-powered security in their comprehensive solution, providing unmatched security, visibility, and control. The integration ensures enterprise-grade protection, AI-powered security, and AIOps automation capabilities, addressing the cybersecurity challenges posed by the increased data-rich traffic associated with Wi-Fi 7 adoption. The FortiAP 441K and FortiSwitch T1024 collectively enable organizations to fully leverage the benefits of Wi-Fi 7 while maintaining a secure and efficient wireless environment.²

Cloud Computing

Amazon Web Services (AWS) announced a $15.24 billion investment in Japan running through 2027 to expand cloud infrastructure to support AI services in that country. This investment in the digital backbone for the cloud across Japan will help AWS drive growth in the cloud computing industry there, particularly in the metropolises of Tokyo and Osaka. AWS already supplies Japanese corporate customers like Asahi Group, Marubeni, and Nomura Holdings with generative AI services. This money is in addition to $10. 2 billion invested by AWS between 2011 and 2022 to boost cloud capacity in Japan.³

E-Gaming

Nintendo is poised to unveil a new Switch console in Q4 of this year, according to analysts, as the game company banks on the enduring popularity of characters like Mario and Zelda. The original Switch, launched in March 2017, revolutionized gaming with its hybrid design, allowing seamless transitions between TV play and on-the-go gaming. With over 132.46 million units sold, it stands as Nintendo’s second-most successful console.

Details on the new console remain speculative, but analysts expect it will maintain the “Switch 1” hybrid model but with upgraded controller capabilities. Success hinges on product availability, with projections suggesting sales matching the original Switch’s early performance of seven to eight million in its first quarter of sales.⁴

Genomics

In January, Eli Lilly announced a move to offer telehealth prescriptions and direct home delivery of certain drugs through its new platform, LillyDirect. While this move alone might not significantly disrupt the traditional drug distribution system, it does signal a shift in the pharmaceutical industry towards direct-to-consumer models and sets a precedent for other companies to follow suit.

Eli Lilly’s move follows other industry shifts towards simplifying drug pricing and distribution, such as CVS Health’s adoption of a model similar to Cost Plus Drugs, aiming to reduce medicine prices. With increasing pressure for cost transparency and accessibility, more pharmaceutical companies may explore direct-to-consumer approaches, potentially reshaping the traditional drug supply chain.⁵

Fintech

In a game-changing shift in policy, the U.S. Securities and Exchange Commission voted in January to grant mainstream investors the opportunity to easily trade bitcoin alongside stocks and mutual funds. This approval paved the way for the launch of the first U.S. exchange-traded funds directly holding bitcoin, also in January.

The move was prompted by market demand and propelled bitcoin prices to their highest levels in two years. Previously, investors navigated cumbersome processes involving crypto exchanges or indirect investment vehicles. Now, spot-bitcoin ETFs offer a direct route to bitcoin ownership. This development comes after the SEC greenlit all 11 applications, a departure from previous rejections. The shift follows a 2023 court ruling favouring Grayscale, prompting regulators to re-evaluate their stance. With the regulatory barrier lifted, investors gain easier access to the cryptocurrency market, potentially reshaping investment strategies and market dynamics.⁶

Robotics & Automation

Microsoft achieved a huge milestone as it briefly reached a historic $3 trillion market valuation in January, driven by optimism surrounding its strategic focus on AI and cloud computing.

Investor enthusiasm over AI, particularly generative AI, has propelled Microsoft’s growth, with its offerings positioned as significant assets in this domain. The company’s partnership with OpenAI Inc. and its AI-supported services has solidified its market position.

Microsoft’s AI and cloud computing offerings align with long-term revenue growth expectations, with revenue projected to increase by 15% in fiscal year 2024, outpacing the overall tech sector. This surge underscores the increasing demand for AI services and the cloud infrastructure to support them, positioning Microsoft as a key player in shaping future technological landscapes.⁷

5G

UBC Okanagan researchers are harnessing artificial intelligence to advance wireless technology beyond 5G. Led by Dr. Anas Chaaban, the Communication Theory Lab aims to enhance data transfer speeds and reliability to meet escalating demands. Dr. Chaaban emphasizes AI’s pivotal role in optimizing future wireless systems, foreseeing seamless connectivity between devices and users.

Departing from traditional methods, the team employs transformer-masked auto-encoders to boost efficiency and adaptability. This innovation is poised to integrate virtual reality into everyday communication, revolutionizing cellular communication. The researchers underscore AI’s capacity to drive complex cellular architectures, essential for navigating evolving technological landscapes. By embracing these advancements collectively, the next generation of wireless networks promises adaptive, efficient, and secure communication channels.⁸

EDGE ETF: Investment in Disruptive 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 Nvidia Corporation. The largest detractors to performance for the month were Evolve Automobile Innovation Index Fund, followed by BeiGene Ltd and Intel Corporation.

 

Sources

1. McIntosh, J., “VW’s solid-state battery could go 500,000 km with no range loss,” Driving, January 6, 2024; https://driving.ca/auto-news/technology-news/volkswagen-vw-solid-state-battery-quantumscape-development
2. “Fortinet Announces the Industry’s First Wi-Fi 7–Enabled Secure Networking Solution,” Fortinet, January 16, 2024; https://investor.fortinet.com/news-releases/news-release-details/fortinet-announces-industrys-first-wi-fi-7-enabled-secure
3. Swift, R., “Amazon’s AWS to invest $15 bln to expand cloud computing in Japan,” Reuters, January 19, 2024; https://www.reuters.com/technology/amazons-aws-invest-15-bln-expand-cloud-computing-japan-2024-01-19/
4. Kharpal, A., “Nintendo is expected to launch the ‘Switch 2’ console this year. Here’s what to expect,” CNBC, January 7, 2024; https://www.cnbc.com/2024/01/08/nintendo-switch-2-console-coming-in-2024-analysts-say.html
5. Constantino, K., “Eli Lilly’s direct drug sales alone may not upend the industry, but others could follow suit,” CNBC, January 5, 2024; https://www.cnbc.com/2024/01/05/eli-lilly-weight-loss-drug-site-may-not-upend-industry.html
6. Ge Huang, V. & Kiernan, P., “SEC Approves Bitcoin ETFs for Everyday Investors,” The Wall Street Journal, January 10, 2024; https://www.wsj.com/finance/regulation/sec-approves-bitcoin-etfs-for-everyday-investors-dc3125ef
7. Vlastelica, R., “Microsoft Closes at Record, Ends Just Shy of $3 Trillion Value,” Bloomberg, January 24, 2024; https://www.bloomberg.com/news/articles/2024-01-24/microsoft-hits-3-trillion-value-cementing-strength-of-ai-rally
8. Gibson, R., “UBCO researchers use artificial intelligence to improve wireless technology,” Castanet, January 14, 2024; https://www.castanet.net/news/Kelowna/466559/UBCO-researchers-use-artificial-intelligence-to-improve-wireless-technology

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