General Overview

Advanced technology is both a disruptor and enabler, driving markets and compelling businesses to adapt swiftly or risk obsolescence. Disruptive innovation continues to be pervasive in the technology space, reshaping the future of everything from electric vehicles to cloud computing.

As nations like Canada impose tariffs on Chinese-made EVs, local manufacturers are pushed to innovate and strengthen domestic industries. Meanwhile, Qualcomm’s acquisition of Sequans’ IoT technology signals its commitment to pioneering low-power connectivity solutions, setting the stage for broader 5G deployment. At the same time, Microsoft’s aggressive cloud strategy and the rapid evolution of cybersecurity measures reflect how companies leverage innovation to stay ahead in increasingly digitized environments.

Let’s take a look at some of the ways disruptive innovation impacted these sectors in August.

Sector Specific Updates

Automobile Innovation

In August, Canada became the latest Western country to impose steep tariffs on Chinese-made electric vehicles, following similar moves by the U.S. and E.U. Starting October 1, a 100% levy will be applied to electric vehicles, including certain hybrids, trucks, and buses, in addition to the existing 6.1% tariff on Chinese EVs. The Trudeau government is also limiting electric vehicle incentives to countries with free-trade agreements with Canada and launching a 30-day consultation on potential tariffs for other sectors like batteries, semiconductors, and critical minerals.

This decision aims to protect domestic manufacturers amid a surge in Chinese EV imports, which reached C$2.2 billion in 2023, up from less than C$100 million in 2022. The move could provoke retaliation from China, especially as Chinese automakers, including BYD, express interest in entering the Canadian market. The government plans to review these levies within a year of implementation.¹

Cybersecurity

CrowdStrike, the global cybersecurity company, announced in August that Adam Meyers, its senior vice president of counter-adversary operations, will testify before Congress in September regarding the company’s July IT outage, which disrupted industries globally, including air travel and banking. The incident continues to raise concerns over cybersecurity resilience. While no malicious actor was involved, hackers and other adversaries have likely taken note of the vulnerability exposed by the update failure. In response, CrowdStrike has implemented broad changes to its update testing and deployment processes to mitigate future risks or the possibility of cyberattack.²

Microsoft will also host a cybersecurity summit in September in partnership with CrowdStrike, government officials, and tech firms to address how to prevent future such outages. The event will focus on developing “concrete steps” to protect critical infrastructure and establish both short- and long-term plans for enhanced security and resilience across the industry. While another major cyber incident due to a faulty update cannot be entirely ruled out, experts note that changes made to third-party software oversight since the July outage are promising, suggesting that any future incidents would likely have a much smaller impact.³

Cloud Computing

Microsoft is targeting Y Combinator startups with substantial Azure cloud credits, particularly for AI workloads, as part of its strategy to capture cloud market share away from Amazon Web Services (AWS). The program, launched in partnership with Y Combinator, provides $350,000 in Azure credits and highlights Microsoft’s growing strength in artificial intelligence, aided by its close collaboration with OpenAI. And the strategy looks to be working. As of mid-2023, 58% of Y Combinator companies have accepted Microsoft’s offer.⁴

AWS, however, counters that despite accepting promotional credits, most startups eventually turn to its platform for security and scalability. AWS recently doubled the value of credits offered through its Activate program, with startups that recently secured Series A funding now eligible for $200,000 in AWS credits. These credits will also see their expiration date boosted to three years, up from just one. Likewise, seed-stage startups are eligible for $100,000 in credits.⁵

E-Gaming

The global games market is set to grow modestly, reaching $187.7 billion this year, a 2.1% year-over-year increase, according to the new Global Games Market Report 2024 released in August. North American markets will generate $50.2 billion in revenue, while mobile gaming will claim nearly half of the global market with $92.6 billion in revenue, up 3% year-over-year. Key trends include the dominance of PC and mobile gaming over console platforms, with PC revenue growth outpacing console for 2024. Looking ahead, the global games market is forecast to hit $213.3 billion by 2027, with a compound annual growth rate of 3.1%. PC gaming will account for a growing share of the market, while mobile’s dominance is expected to continue its post-pandemic decline.⁶

Genomics

There’s growing evidence that drugs like Ozempic from manufacturer Novo Nordisk (held by the Fund) might also curb nicotine cravings. Researchers from Case Western Reserve University found that semaglutide—the active ingredient in both Ozempic and Wegovy—reduced risk of alcohol use disorder by 50%, and semaglutide users with diabetes were 30% less likely to need help quitting smoking compared to those on insulin.⁷ Likewise, Eli Lilly’s weight-loss drug tirzepatide, marketed as Zepbound and Mounjaro, slashed the risk of prediabetics developing full Type 2 diabetes by 94%, according to early results from a long-term study. The same late-stage trial also showed that patients taking the highest dose of tirzepatide experienced a 22.9% average weight reduction over nearly three years, compared to just 2.1% for those on a placebo.⁸

Fintech

Shopify exceeded Q2 expectations, demonstrating strong demand despite a challenging consumer environment. The Canadian e-commerce giant reported revenue of $2.05 billion, beating Wall Street’s forecast of $2.01 billion. Gross merchandise volume (GMV) increased by 22% to $67.2 billion, topping estimates of $65.8 billion.

Shopify, which provides software and services like advertising and payment processing to online merchants, continues to gain market share, according to CFO Jeff Hoffmeister. Despite cautious consumer spending, which has impacted competitors like Amazon, Etsy, and Wayfair, Shopify’s diverse range of merchants helped it navigate the slowdown.

President Harley Finkelstein emphasized that Shopify’s broad merchant base across various industries and regions has contributed to its resilience. Looking ahead, Shopify projects Q3 revenue growth in the low-to-mid 20% range, in line with analysts’ expectations of a 21% year-over-year increase to $2.07 billion.⁹

Robotics & Automation

Apple is eyeing robotics as its next potential breakthrough, aiming to integrate the technology into homes and expand its product offerings. Apple is exploring how mobile devices with robotic functions could provide new consumer experiences.

The initial push includes a tabletop device, codenamed J595, featuring an iPad-like display and robotic capabilities, with potential launch by 2026. Future plans hint at more advanced robotics, possibly mobile or humanoid robots. AI will play a critical role in these devices, leveraging Apple’s strength in sensors, batteries, and hardware design.

Despite these ambitions, robotics remain in early development, and the path ahead presents technical and financial challenges. Apple will need more engineers and expertise to create compelling consumer products. However, if successful, this move could position Apple as a leader in smart-home devices, an area where it lags behind competitors like Amazon and Google.¹⁰

5G

Qualcomm has reached a deal to acquire Sequans Communications’ 4G IoT technology, strengthening its industrial IoT portfolio and advancing its push toward 5G. The acquisition, which includes assets, employees, and licenses, is part of Qualcomm’s strategy to enhance its low-power cellular connectivity solutions for IoT applications. Sequans retains a license to continue using its 4G technology and will focus on building its 5G capabilities.

This move highlights Qualcomm’s intention to lead in digital transformation at the edge, offering ready-to-deploy IoT solutions that optimize operations and drive innovation. By adding Sequans’ 4G technology, Qualcomm bolsters its presence in the IoT space, positioning itself for future growth into 5G deployment.

Sequans CEO Georges Karam noted that the deal provides his company with capital to expand its 5G development. With this transaction, Sequans aims to accelerate its advancements in AI-powered IoT applications while strengthening its market presence.¹¹

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 Cyber Security Index Fund made the largest contribution to the Fund, followed by Fortinet Inc and Adyen NV. The largest detractors to performance for the month were Intel Corp, followed by Evolve Automobile Innovation Index Fund and Coinbase Global Inc.

 

Sources

1. Platt, B., “Canada to Hit China With Tariffs on Electric Vehicles, Steel,” Bloomberg, August 26, 2024; https://www.bloomberg.com/news/articles/2024-08-26/canada-to-hit-china-with-tariffs-on-electric-vehicles-steel
2. Tarabay, J., “CrowdStrike VP Set to Testify to Congress on IT Outage,” BNN Bloomberg, August 30, 2024; https://www.bnnbloomberg.ca/business/2024/08/30/crowdstrike-vp-set-to-testify-to-congress-on-it-outage/
3. Brice, J., “Microsoft is organizing a special summit with CrowdStrike, government officials, and tech firms to prevent another global computer meltdown,” Yahoo Finance, August 23, 2024; https://ca.finance.yahoo.com/news/microsoft-organizing-special-summit-crowdstrike-200752033.html
4. Novet, J., “Microsoft’s cloud is ‘no-brainer’ for some AI startups, helping Azure gain ground on AWS,” CNBC, August 2, 2024; https://www.cnbc.com/2024/08/02/microsoft-touts-cloud-momentum-from-y-combinator-startups.html
5. Zulhusni, M., “AWS boosts startup credits, challenges Microsoft in AI cloud battle,” CloudTech, July 1, 2024; https://www.cloudcomputing-news.net/news/aws-boosts-startup-credits-and-challenges-microsoft-in-ai-cloud-battle/
6. Buijsman, M., “The global games market will generate $187.7 billion in 2024,” NewZoo, August 13, 2024; https://newzoo.com/resources/blog/global-games-market-revenue-estimates-and-forecasts-in-2024
7. Kresge, N., “Ozempic and Wegovy Could Help Smokers Kick the Habit,” Bloomberg, August 16, 2024; https://www.bloomberg.com/news/newsletters/2024-08-16/ozempic-wegovy-could-help-you-quit-smoking
8. Constantino, A.K., “Eli Lilly’s weight loss drug slashes the risk of developing diabetes in long-term trial,” CNBC, August 20, 2024; https://www.cnbc.com/2024/08/20/eli-lilly-weight-loss-drug-cuts-risk-of-developing-diabetes-in-trial.html
9. Palmer, A., “Shopify shares soar 17% after earnings top expectations, company gives upbeat forecast,” CNBC, August 7, 2024; https://www.cnbc.com/2024/08/07/shopify-shop-earnings-q2-2024.html
10. Gurman, M., “Apple Explores Robotics in Search of Life Beyond the iPhone,” Bloomberg, August 25, 2024; https://www.bloomberg.com/news/newsletters/2024-08-25/apple-plans-tabletop-robot-while-exploring-mobile-bots-and-humanoid-machines-m09kawex
11. “Qualcomm and Sequans Reach Agreement on Sale of 4G IoT Technology,” Qualcomm, August 23, 2024; https://www.qualcomm.com/news/releases/2024/08/qualcomm-and-sequans-reach-agreement-on-sale-of-4g-iot-technolog

 

Header image source: Getty Images Credit: suwadee sangsriruang

The contents of this blog are not to be used or construed as investment advice or as an endorsement or recommendation of any entity or security discussed. These contents are not an offer or solicitation of an offer or a recommendation to buy or sell any securities or financial instrument, nor shall it be deemed to provide investment, tax or accounting advice. The information contained herein is intended for informational purposes only.

Commissions, management fees and expenses all may be associated with exchange traded funds (ETFs). Please read the prospectus before investing. The indicated rates of return are the historical annual compound total returns net of fees (except for figures of one year or less, which are simple total returns) including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. ETFs are not guaranteed, their values change frequently and past performance may not be repeated..

Certain statements contained in this blog may constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking information may relate to a future outlook and anticipated distributions, events or results and may include statements regarding future financial performance. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “anticipate”, “believe”, “intend” or other similar expressions concerning matters that are not historical facts. Actual results may vary from such forward-looking information. Evolve Funds undertakes no obligation to update publicly or otherwise revise any forward-looking statement whether as a result of new information, future events or other such factors which affect this information, except as required by law.