Evolve ETFs – How Nvidia’s Vision for the Future of Sovereign AI Powers Disruptive Innovation

General Overview Rapid technological evolution continues to reshape industries worldwide, with disruptive innovations driving significant transformations across various sectors. In the automotive realm, Chinese electric vehicle manufacturer Xpeng is poised for aggressive expansion; in cybersecurity, Google CEO Sundar Pichai has underscored the critical intersection of AI and cybersecurity in safeguarding digital infrastructure. Similarly, cloud computing, e-gaming, genomics, fintech, robotics, and 5G technologies are all experiencing disruptive innovations, each presenting unique opportunities and challenges. As companies strive to stay ahead in an increasingly competitive landscape, the integration of disruptive technologies becomes imperative for driving growth, enhancing efficiency, and mitigating risks. The convergence of these innovations signifies a paradigm shift in how businesses operate, heralding a new era of disruption and opportunity in the global marketplace. Sector Specific Updates Automobile Innovation Xpeng, a Chinese electric vehicle manufacturer, plans to expand aggressively, hiring 4,000 new employees and investing 3.5 billion Chinese yuan ($486.2 million) this year in artificial intelligence technology. The company’s driver assistance system, Xpilot, enables semi-autonomous functionality in its vehicles. In a letter to employees, CEO He Xiaopeng outlined plans for Xpeng to launch approximately 30 new or upgraded vehicles over the next three years, all of which would benefit from AI-enabled advances to Xpilot. Xpeng also aims to broaden its market presence by introducing models in price segments above 300,000 yuan and at 150,000 yuan this year. The strategic moves reflect Xpeng’s ambitious growth strategy amidst fierce competition in the Chinese EV sector, which Xiaopeng said could lead to a “knockout round” soon within the industry and one for which he saw Xpeng well-positioned to survive.¹ Cybersecurity At the Munich Security Conference in February, Google CEO Sundar Pichai emphasized the potential of AI to bolster cyber defence at scale. Pichai argued that despite fears of AI’s misuse in cybersecurity, AI could actually speed up threat detection and response, thereby enhancing security measures for governments and corporations. He also introduced Google’s new initiative to deploy AI tools, including the open-source tool Magika for malware detection, aimed at strengthening online security. This initiative is part of a broader movement, as evidenced by a recent pact among major tech firms, including Google, Adobe, Amazon, IBM, Meta, Microsoft, OpenAI, TikTok, and X, to prevent AI’s use in undermining democratic processes such as the upcoming U.S. and U.K. elections, highlighting the industry’s commitment to safeguarding cyberspace with AI’s help.² Cloud Computing OVHcloud’s recent executive report on multi-cloud reveals that 62% of organizations currently operate in a multi-cloud environment, with an additional 18% transitioning into one. The study, based on insights from over 500 IT decision-makers in large U.K. organizations, indicates a significant trend towards multi-cloud adoption. A striking 64% of organizations foresee an increase in their use of multi-cloud over the next two years. Despite the complexities involved, the benefits of multi-cloud are evident to many companies today, with only 3% anticipating a decrease in multi-cloud usage and fewer than 1% having no plans for its adoption. The primary strengths identified by the study include the flexibility of multi-cloud, recognized by half of the respondents, followed closely by improved agility, cost-effectiveness, and reduced organizational risk due to fewer points of failure. This underscores the growing recognition of multi-cloud’s value proposition, with organizations prioritizing its advantages in enhancing operational efficiency and resilience.³ E-Gaming A recent study by AppLovin and analytics firm Adjust reveals a global 4% increase in app installations in 2023, countering the decline seen in 2022 and underscoring mobile’s robust potential for high returns and untapped opportunities. Specifically, gaming app installations saw a notable resurgence, climbing 7% in the fourth quarter of 2023, led by action (18%), hyper-casual (14%), and puzzle (14%) genres. The report highlights the success of the hybrid casual gaming genre in leveraging personalized user experiences (UX) to significantly enhance retention rates and revenue, suggesting that sectors such as e-commerce and finance could benefit from adopting similar data-driven and AI-powered strategies for in-app customization. By utilizing generative AI, developers can segment users and tailor game progression, making it appear as though the game’s difficulty is personalized for each player, demonstrating a cutting-edge approach to enhancing user engagement and satisfaction in the mobile gaming industry.⁴ Genomics Developments in the pharmaceutical industry continue to be dominated by the power and value of weight loss medications. Analysts predict a substantial rise in the number of adults using obesity medications by 2030, with the market potentially reaching $100 billion by the decade’s end.⁵ And these drugs may have additional applications beyond weight loss. Novo Nordisk A/S announced that the European Medicines Agency will decide in April on its request to expand the use of weight-loss drug Wegovy to treat heart attack and stroke risks in overweight individuals. The U.S. Food and Drug Administration granted priority review for this request after August findings showed Wegovy cut the risk of heart attack and stroke by 20% in overweight people with heart disease history. Such approvals could increase the willingness of insurers and governments to cover the drug.⁶ Fintech Mastercard has unveiled its latest fraud detection tool, Decision Intelligence Pro, as a response to the growing cybersecurity challenges. This advanced iteration of its Decision Intelligence (DI) solution integrates generative AI to bolster consumer protection in the payments ecosystem. Scheduled for release later this year, the tool will analyze an extensive 1 trillion data points to predict transaction authenticity. It swiftly evaluates relationships between transaction entities, enhancing the DI score in under 50 milliseconds. Initial tests indicate a notable improvement, with a potential for improvement of between 20% and 300% fraud detection. Moreover, the tool promises to reduce false positives by over 85%, ensuring legitimate transactions aren’t mistakenly flagged as fraudulent. Mastercard’s initiative marks a significant step forward in combating financial fraud.⁷ Robotics & Automation Nvidia Corp.’s CEO, Jensen Huang, emphasized the growing global demand for artificial intelligence (AI) infrastructure, citing countries like Canada, France, India, and Japan investing in “sovereign AI capabilities.” Huang highlighted the importance of nations refining and producing their data domestically. Speaking in Canada, he pointed out Canada’s burgeoning need for supercomputers to leverage its academic breakthroughs in generative AI systems. Huang, co-founder of Nvidia, advocated for keeping data and intelligence local, a stance he’s maintained for months. Nvidia, a leading chipmaker, expects a doubling of sales in the fiscal year, primarily driven by AI spending from major customers like Microsoft, Meta Platforms, Amazon, and Alphabet. Huang aims to broaden Nvidia’s customer base by encouraging corporations and governments to build out their AI infrastructure. Analysts project Nvidia’s strong revenue growth to propel it to the top spot in the chip industry by 2025. Unlike some tech rivals, Nvidia has consistently exceeded earnings expectations, fueled by the AI boom. Its success in AI-driven revenue growth sets it apart in the industry.⁸ 5G Palo Alto Networks has introduced comprehensive private 5G security solutions and services, collaborating with key private 5G partners, such as Ataya, Celona, Druid, NETSCOUT, NTT DATA, and NVIDIA. This initiative integrates Palo Alto Networks’ enterprise-grade 5G Security with partner integrations, aiming to simplify network deployment, management, and security across the 5G landscape. The move aligns with Palo Alto Networks’ strategic vision of an integrated ecosystem approach to safeguarding 5G deployments. The advent of 5G networks brings speed, reliability, and flexibility crucial to national infrastructure but also exposes vulnerabilities to threat actors due to the vast data transmission. Nearly 70% of C-level executives see 5G-connected devices as growing threat vectors. Additionally, with 5G expected to contribute $1 trillion to the global economy by 2030, the urgency to secure networks, cloud solutions, and distributed environments is paramount.⁹ 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, Arm Holdings plc made the largest contribution to the Fund, followed by Coinbase Global Inc and Evolve Cyber Security Index Fund. The largest detractors to performance for the month were Exact Sciences Corp, followed by Sony Group Corporation and KDDI Corporation. Sources Kharpal, A., “Xpeng plans to hire 4,000 people, invest in AI as CEO warns intense EV rivalry may end in ‘bloodbath’,” CNBC, February 19, 2024; https://www.cnbc.com/2024/02/19/xpeng-plans-to-hire-4000-people-invest-in-ai.html Gilchrist, K., “AI can ‘disproportionately’ help defend against cybersecurity threats, Google CEO Sundar Pichai says,” CNBC, February 23, 2024; https://www.cnbc.com/2024/02/23/ai-can-help-defend-against-cybersecurity-threats-google-ceo-sundar-pichai.html MacRae, D., “64% of organisations see their use of multi-cloud increasing in the next two years,” Cloud Computing News, February 5, 2024; https://www.cloudcomputing-news.net/news/2024/feb/05/64-of-organisations-see-their-use-of-multi-cloud-increasing-in-the-next-two-years/ “Adjust and AppLovin Reveal Ways AI-Powered Personalization Will Drive Next Mobile App Growth Phase,” AppLovin, February 20, 2024; https://investors.applovin.com/news/news-details/2024/Adjust-and-AppLovin-Reveal-Ways-AI-Powered-Personalization-Will-Drive-Next-Mobile-App-Growth-Phase/default.aspx Constantino, A.K., “Weight loss drugs are still hard to find — but Novo Nordisk and Eli Lilly are trying to change that,” CNBC, February 10, 2024; https://www.cnbc.com/2024/02/10/weight-loss-drugs-novo-nordisk-eli-lilly-are-tackling-supply-issues.html Roach, A., “EU Regulator Set to Decide on Wegovy’s Heart Benefits in April,” Bloomberg, February 22, 2024; https://www.bloomberg.com/news/articles/2024-02-22/eu-regulator-to-decide-in-april-on-novo-nordisk-s-obesity-shot-label-change “Mastercard launches GenAI tool to combat fraud,” FinTech Global, February 2, 2024; https://fintech.global/2024/02/02/mastercard-launches-genai-tool-to-combat-fraud/ King, I. & Ludlow, E., “Nvidia CEO Says Nations Seeking Own AI Systems Will Raise Demand,” Bloomberg, February 1, 2024; https://www.bloomberg.com/news/articles/2024-02-02/nvidia-ceo-says-nations-seeking-own-ai-systems-will-raise-demand “Palo Alto Networks Launches Private 5G Security Solutions with Partner Ecosystem,” Palo Alto Networks, February 26, 2024; https://investors.paloaltonetworks.com/news-releases/news-release-details/palo-alto-networks-launches-private-5g-security-solutions Header image source: Getty Images