General Overview

The global landscape is witnessing a seismic shift as disruptive innovation redefines traditional industries. From the rapid rise of electric vehicles (EVs) to the evolution of cloud computing and the emergence of new gaming ecosystems, innovative technologies are reshaping consumer behaviors and business strategies worldwide.

Electric vehicles have reached a tipping point, with over 31 countries surpassing the critical 5% mark in new car sales, signaling mass adoption. The cybersecurity industry is rapidly coming to rely on AI-driven security solutions. A new study shows the surging adoption of cloud computing, while in the pharmaceutical sector, advancements in genomics highlight the transformative potential of targeted therapies.

The Evolve Innovation Index Fund (EDGE ETF) offers investors an opportunity to capitalize on these disruptive innovation themes across diverse sectors, providing portfolios with a competitive edge in an era defined by transformative change.

Sector Specific Updates

Automobile Innovation

Electric vehicles (EVs) are hitting a tipping point globally, with 31 countries surpassing the crucial 5% mark in new car sales, marking the beginning of mass adoption. This milestone, identified by Bloomberg Green’s analysis, indicates a significant shift in consumer preferences towards EVs. The trend is evident across four continents, with Eastern Europe and Southeast Asia emerging as some of the fastest-growing markets.

Thailand and Turkey exemplify this shift, with Thailand becoming Southeast Asia’s EV growth leader, going from 5% of new car sales in Q1 2023 to nearly 13% by last quarter. Likewise, Turkey is rapidly climbing the ranks to become Europe’s fourth-largest EV market by Q3 2023. Factors driving this surge include opening domestic EV factories and releasing competitive models like the Turkish-made T10X SUV, challenging Tesla’s dominance. However, the United States still lags behind comparatively due to preferences for larger vehicles and range anxiety, despite crossing the 5% tipping point in 2021.

Overall, falling battery prices, expanded charging infrastructure, and improved performance continue to drive the competitiveness of EVs, with global sales reaching 12% in Q4 2023.

Analysts foresee a 22% increase in global EV sales this year. With two-thirds of global auto sales coming from countries past the tipping point, significant markets like India, Indonesia, and Poland are on the cusp. Similarly, initiatives in South America, notably in Brazil, could ignite widespread EV adoption.¹

Cybersecurity

Zscaler finalized the acquisition of Israeli AI-enhanced data security startup Avalor in March in a cash-and-stock deal worth approximately $310 million. The move comes as part of Zscaler’s strategy to bolster its cloud security offerings through innovative technology acquisition.

Avalor, supported by Salesforce Ventures, utilizes artificial intelligence to analyze data for security insights, a feature deemed advantageous for Zscaler’s corporate clientele. Zscaler, actively seeking startups with fresh security approaches, anticipates Avalor’s data analysis methods will enhance its security capabilities significantly.

The acquisition aligns with a trend of Israeli startup acquisitions, with notable recent purchases by Palo Alto Networks Inc., Crowdstrike Holdings Inc., and CheckPoint. Avalor’s CEO Raanan Raz expressed confidence in the integration, highlighting Zscaler’s abundant data as a perfect fit for Avalor’s analytical prowess.²

Cloud Computing

The Flexera 2024 State of the Cloud Report, often regarded as a benchmark industry study, was released in March. Drawing from a survey of 753 cloud decision-makers and users globally, the report sheds light on the strategies employed by organizations to navigate use of the cloud and underscores key trends and challenges shaping the cloud computing industry.

The report finds that cloud usage is on the rise, with nearly half of all workloads and data now hosted in the public cloud. It also reveals a widespread adoption of multi-cloud strategies, with 89% of respondents employing them—a slight increase from the previous year. Notably, hybrid cloud strategies are maturing, with an increasing number of businesses looking to hybrid deployments as a way to manage costs, including for software licensing in the cloud.

And it is the cost of managing cloud expenses that has emerged as the primary challenge for the second consecutive year, surpassing security concerns. A significant portion of respondents (36%) spend more than $12 million annually on public cloud services (up from 29% last year), indicating a growing trend in migrating workloads to the cloud and prioritizing cost optimization initiatives. Many companies report an increasingly centralized approach to cloud management as a way to deal with top challenges, including spending, security, and expertise.³

E-Gaming

South Korea’s gaming giant, Krafton Inc., announced plans for a strategic expansion this year through significant mergers and acquisitions and the development of new franchises based on its blockbuster PUBG intellectual property. The plans for diversification span beyond gaming and into the entertainment and software sectors. This initiative follows Krafton’s notable $45 million investment in Pratilipi, an Indian web novel platform, in 2021, showcasing its ambition for broader investment horizons.

Recently, Krafton pledged $570 million for game development and external game production studios, signalling its commitment to fostering innovative gaming experiences. Central to its strategy is the franchising of PUBG, aiming to create a sustainable gaming ecosystem that could extend the game’s life span by decades through collaborations with external studios.

In addition to leveraging generative AI technology in new games like InZoi, a life simulator game, Krafton is focusing on the burgeoning Indian market. The company aims to capitalize on India’s gaming market potential by introducing localized games and has already established partnerships, such as with DevSisters Corp., to publish “Cookie Run” in India. With plans to invest $150 million in India over the next few years, Krafton is positioning itself as a key player in one of Asia’s most rapidly growing mobile gaming markets, marking a significant return to India.⁴

Genomics

Pfizer announced in March that its drug Adcetris demonstrated prolonged survival rates in patients with the most prevalent form of lymphoma during a late-stage study. This development strengthens Pfizer’s efforts to broaden the application of the treatment, acquired through a $43 billion acquisition of Seagen in 2023. Pfizer acquired Seagen specifically for its targeted cancer therapies to fortify its pipeline in the face of waning COVID-19-related sales.

Pfizer reported $46 million in total sales from the drug last year thanks to its commercialization rights for Adcetris in the U.S. and Canada. The company intends to seek regulatory approval for treating the kinds of patients who participated in the study. If successful, approval for treating the most common type of lymphoma will mark the drug’s eighth such approval, enhancing Pfizer’s oncology portfolio with over 25 approved therapies.⁵

Fintech

In March, RelyComply announced its new Perpetual KYC (pKYC), powered by AI, as a way to revolutionize customer due diligence (CDD). Unlike periodic reviews, pKYC utilizes AI and machine learning to continually assess customer data in real-time, enhancing accuracy and efficiency while reducing human intervention.

AI integration not only maintains current customer data but also aids in detecting irregularities, minimizing false positives, and pinpointing illicit activities. Additionally, AI automates identity verification through biometric checks and document analysis, expediting onboarding while ensuring compliance. By integrating diverse data sources and employing natural language processing, AI tackles operational silos and improves accuracy.

The advantages of AI in continuous KYC monitoring span risk mitigation, operational efficiency, regulatory compliance, and cost reduction. Financial institutions will continue to leverage AI to fortify their compliance efforts in an ever-evolving landscape.⁶

Robotics & Automation

Apple and Google are in negotiations to integrate Google’s Gemini AI into the iPhone for upcoming software features. A potential deal between Apple and Google could expand AI services to over 2 billion active Apple devices while aiding Google’s bid to compete with Microsoft-backed OpenAI. Analysts suggest this alliance fills a crucial gap in Apple’s AI strategy and reinforces Google’s position amidst competition. Previously, Google partnered with Samsung to deploy Gemini in its Galaxy S24 series, aiming to bolster its usage.⁷

5G

In March, two U.S. senators unveiled a bill, dubbed the “Spectrum Pipeline,” aimed at auctioning off U.S. government-owned spectrum to bolster 5G networks. The move comes after Congress allowed the Federal Communications Commission’s authority to auction spectrum to lapse in March 2023, sparking debate over repurposing Defense Department spectrum.

Demand for spectrum is soaring thanks to advances like drones and self-driving vehicles. The new bill mandates the Commerce Department to identify 2,500 MHz of mid-band spectrum for non-governmental or shared use within five years. At least 1,250 megahertz must be auctioned for commercial wireless, including 5G, within six years, and 600 MHz within three years. The move aligns with the White House’s spectrum strategy.

Industry group CTIA welcomed the bill, foreseeing benefits for wireless data use, national security, and broadband competition. Spectrum auctions have historically been lucrative for the U.S. government, generating $233 billion over the last three decades.⁸

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, Coinbase Global Inc made the largest contribution to the Fund, followed by Nvidia Corp and Evolve Cloud Computing Index Fund. The largest detractors to performance for the month were Evolve Cyber Security Index Fund, followed by Evolve Automobile Innovation Index Fund and Arm Holdings PLC.

 

Sources

1. Randall, T., “Electric Cars Pass the Tipping Point to Mass Adoption in 31 Countries,” Bloomberg, March 28, 2024; https://www.bloomberg.com/news/articles/2024-03-28/electric-cars-pass-adoption-tipping-point-in-31-countries
2. Roof, K., “Zscaler Buys Israeli AI-Enhanced Data Security Startup Avalor,” Bloomberg, March 14, 2024; https://www.bloomberg.com/news/articles/2024-03-14/zscaler-buys-israeli-ai-enhanced-data-security-startup-avalor
3. Flexera 2024 State of the Cloud Report,” Flexera, March 2024, https://info.flexera.com/CM-REPORT-State-of-the-Cloud-2024-Thanks
4. Lee, J-H., “Krafton eyes mega M&A, PUBG franchise deals: Krafton chair,” The Korea Economic Daily, March 20, 2024; https://www.kedglobal.com/korean-games/newsView/ked202403200021
5. Jain, P., “Pfizer’s blood cancer therapy Adcetris succeeds in late-stage trial,” Reuters, March 12, 2024; https://www.reuters.com/business/healthcare-pharmaceuticals/pfizers-drug-meets-main-goal-late-stage-blood-cancer-trial-2024-03-12/
6. “How AI transforms KYC into a continuous compliance powerhouse,” FinTech Global, March 27, 2024; https://fintech.global/2024/03/27/how-ai-transforms-kyc-into-a-continuous-compliance-powerhouse/
7. Coulter, M., “Apple in talks to let Google’s Gemini power iPhone AI features, Bloomberg News says,” Yahoo Finance, March 18, 2024; https://finance.yahoo.com/news/apple-talks-let-googles-gemini-054341739.html
8. Shepardson, D., “US senators seek to reallocate government spectrum to boost 5G networks,” Reuters, March 11, 2024; https://www.reuters.com/business/media-telecom/us-senators-seek-reallocate-government-spectrum-boost-5g-networks-2024-03-11/

Header Image Source: Getty Images Credit: Yuichiro Chino

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