General Overview

Disruptive innovation continues to reshape various sectors, bringing profound changes to industries from automotive to biotechnology.

President Biden’s recent tariffs on Chinese electric vehicles and other high-tech products signal a geopolitical shift that could reshape the landscape of EV adoption in the U.S. Meanwhile, partnerships like that of CrowdStrike and Amazon Web Services exemplify the synergies driving advancements in cybersecurity and cloud computing. These collaborations not only enhance security protocols but also accelerate the development of generative AI, underscoring the rapid evolution within the tech sector. Nvidia’s soaring earnings and Telefonica Germany’s pioneering 5G migration to AWS reflect the accelerating adoption of AI and cloud technologies across diverse fields.

These narratives illustrate the dynamic forces of disruptive innovation, reshaping markets and redefining the future of technology and commerce.

Sector Specific Updates

Automobile Innovation

In May, President Biden announced significant new tariffs on a range of Chinese goods, including electric vehicles (EVs), semiconductors, batteries, solar cells, steel, and aluminum, amongst other products. The tariffs on Chinese electric cars will increase to 100%, quadrupling the current 25% rate.¹

However, these tariffs will likely have minimal immediate impact due to the limited presence of Chinese-made electric cars in the United States. Chinese-made EVs account for just over 2% of all EV sales in the U.S.

The tariffs are more likely to have secondary negative effects on U.S. consumers. Free trade expert Gary Hufbauer from the Peterson Institute for International Economics warns that excluding Chinese EVs, batteries, and solar products from the U.S. market could lead to higher prices and slower adoption of climate-friendly technology amid ongoing U.S.-China trade tensions.²

Cybersecurity

CrowdStrike and Amazon Web Services (AWS) have expanded their strategic partnership to enhance cloud-based cybersecurity. Amazon has consolidated its security on the CrowdStrike Falcon platform and is using Falcon Next-Gen SIEM for big data security. Additionally, Amazon will deploy Identity Threat Detection and Response to counter identity-based attacks.

CrowdStrike will leverage AWS services like Amazon Bedrock and SageMaker to innovate in cloud security and AI. This collaboration aims to accelerate generative AI development and enhance cybersecurity solutions, ensuring robust protection and streamlined operations for cloud-based businesses.³

Cloud Computing

Amazon Web Services (AWS) announced a $9 billion investment in Singapore over the next five years, aiming to enhance its cloud services and infrastructure. This move underscores AWS’s belief in ASEAN region growth, which began in 2010 with its first Asia-Pacific region in Singapore. Since then, AWS has invested approximately $8 billion in Singapore, establishing robust cloud infrastructure.

The new investment will bolster data centre capabilities in the Asia-Pacific Singapore region. The firm has trained more than 400,000 individuals in cloud skills in Singapore since 2017 and plans to continue investing in upskilling to boost productivity.⁴

E-Gaming

Microsoft will launch its long-rumoured Xbox mobile game store in July, according to Xbox President Sarah Bond at the Bloomberg Technology Summit. This initiative aims to circumvent Apple’s strict App Store rules by offering a web-based platform that operates outside the traditional closed ecosystem stores. The Xbox store will feature first-party video game titles like Candy Crush and Minecraft, accessible across all devices and countries.⁵ Gamers will also be able to get discounts on in-game items for mega-hits like Call of Duty: Mobile and Candy Crush Saga if they use the Xbox mobile store.⁶

Genomics

Google DeepMind has made significant strides with its latest version of AlphaFold, advancing human understanding of molecular interactions crucial to drug discovery. AlphaFold previously stunned the scientific community by predicting the structures of 200 million proteins. The new iteration goes further by revealing how proteins interact with other molecules like DNA and RNA, a critical step in developing new drug therapies.

For example, scientists can compare AlphaFold’s static predictions of the normal and mutated structures of proteins to better understand disease mechanisms. Novartis and Eli Lilly (both held by the Fund) have partnered with Isomorphic Labs, a DeepMind offshoot, to leverage advances such as these in drug discovery.⁷

Fintech

Mastercard has unveiled the Start Path Acceptance program, a new initiative aimed at fostering collaboration with fintech startups worldwide to enhance digital payments. Mastercard’s global acceptance has surged, doubling in the past five years to over 3.3 billion cards. The company is now leveraging its growth by teaming up with fintech innovators to drive solutions for the digital economy’s pressing issues.

The program has already enrolled six companies: Cardstream, Gr4vy, Hook, Nearpay, Omniretail, and Tazapay. These startups are focused on developing affordable solutions for small businesses, enabling acceptance through unconventional channels, and offering integrated business management tools in the payments sector.

Participants in the Start Path Acceptance program will receive hands-on mentoring and access to Mastercard’s extensive network of banks, merchants, and digital entities. Mastercard aims to spur innovation, allowing startups to refine their solutions while aligning with Mastercard’s broader payments strategy.⁸

Robotics & Automation

Nvidia reported fiscal Q1 earnings in May that surpassed expectations for both sales and earnings, pushing its stock price above the $1,000 per-share mark in extended trading. The results indicate a robust demand for Nvidia’s AI chips and highlight the growing potential in its automotive chip segment.

For the quarter ending April 28, Nvidia posted a net income of $14.88 billion, a substantial increase from the $2.04 billion reported in the same period last year. Nvidia’s core data centre business, which includes its AI chips and related components, soared 427% year-over-year to $22.6 billion on the back of strong sales to companies like Google, Microsoft, Meta, Amazon, and OpenAI.⁹

5G

Telefonica Germany transitioned one million 5G customers to Amazon Web Services (AWS) cloud in May, marking a significant move for the U.S. retailer into the global telecommunications sector. This shift, disclosed by company executives to Reuters, represents the first instance of an established mobile operator moving its core network to a public cloud.

Major cloud-computing giants like Amazon and Microsoft have been eyeing the lucrative telecom market, driven by the potential for substantial revenue. However, telecom operators have been hesitant about public clouds’ ability to manage mobile networks effectively.

Mallik Rao, Chief Technology & Information Officer at O2 Telefonica Germany, stated his intention to observe the cloud integration over the next one to two quarters. He aims to have a roadmap for migrating 30-40% of the customer base by 2025-2026. Telefonica Germany serves 45 million customers, highlighting the scale of this ambitious endeavour.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 Automobile Innovation Index Fund made the largest contribution to the Fund, followed by Qualcomm Inc and Evolve E-Gaming Index ETF. The largest detractors to performance for the month were Evolve Cloud Computing Index Fund, followed by Exact Sciences Corp and Evolve Cyber Security Index Fund.

 

Sources

1. Cordes, N. & Watson, K., “Biden announces new tariffs on Chinese EVs, semiconductors, solar cells and more,” CBS News, May 14, 2024; https://www.cbsnews.com/news/biden-to-announce-new-100-tariffs-on-chinese-evs/
2. Subramanian, P., “Why Biden’s tariffs on Chinese EVs will have little immediate impact on the US auto market,” Yahoo Finance, May 15, 2024; https://finance.yahoo.com/news/why-bidens-tariffs-on-chinese-evs-will-have-little-immediate-impact-on-the-us-auto-market-140135630.html
3. “CrowdStrike and AWS Extend Strategic Partnership to Accelerate Cloud Security and AI Innovation,” CrowdStrike, May 2, 2024; https://ir.crowdstrike.com/news-releases/news-release-details/crowdstrike-and-aws-extend-strategic-partnership-accelerate
4. Chiang, S., “Amazon’s AWS to double down on Singapore with additional $9 billion cloud investment,” CNBC, May 7, 2024; https://www.cnbc.com/2024/05/07/amazons-aws-to-invest-nearly-9-billion-in-singapore.html
5. Warren, T., “Microsoft’s new Xbox mobile gaming store is launching in July,” The Verge, May 9, 2024; https://www.theverge.com/2024/5/9/24153245/microsoft-xbox-mobile-gaming-store-july-launch
6. D’Anastasio, C. & Bass, D., “Microsoft Plans Mobile-Game Store, Vying With Apple, Google,” Bloomberg, May 9, 2024; https://www.bloomberg.com/news/articles/2024-05-09/microsoft-to-launch-mobile-game-store-vying-with-apple-google
7. Jarvis, L., “Inventing Drugs Is One of the Most Exciting Uses of AI,” Bloomberg, May 9, 2024; https://www.bloomberg.com/opinion/articles/2024-05-09/alphafold-from-google-deepmind-could-make-ai-drugs
8. Kirui, J., “Mastercard Teams Up with Fintech Startups to Accelerate Digital Payment Solutions,” Finance Magnates, May 3, 2024; https://www.financemagnates.com/fintech/mastercard-teams-up-with-fintech-startups-to-accelerate-digital-payment-solutions/
9. Leswing, K., “Nvidia shares pass $1,000 for first time on AI-driven sales surge,” CNBC, May 22, 2024; https://www.cnbc.com/2024/05/22/nvidia-nvda-earnings-report-q1-2025-.html
10. Mukherjee, S., “Exclusive: Amazon breaks into Europe 5G networks with Telefonica cloud deal,” Reuters, May 8, 2024; https://www.reuters.com/business/media-telecom/amazon-breaks-into-europe-5g-networks-with-telefonica-cloud-deal-2024-05-08/

Header image source: Getty Images, Credit: Yuuji

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