The R&D World Index (RDWI) for the week ending November 4, 2022, closed at 2263.55 for the 25 companies in the RDWI. The Index was down -2.35% (or 54.36 basis points) from the week ending October 28, 2022. Nine of the 25 RDWI members gained value during the past week from 0.39% (General Motors) to 9.52% (Alibaba). Sixteen of the 25 RDWI members lost value last week from -0.22% (Stellantis NV) to -11.15% (Apple).
A report by Cambridge Associates LLC, Boston, has noted that the investment returns for U.S. university endowments have fallen over the past year, after scoring their largest gains in more than 30 years in 2020. According to Cambridge, this is the result of a sharp sell-off of stocks, bonds, and other assets over the past year. The median result for endowments and foundations in the fiscal year ending June 30, 2022, was a 7.8% loss, the worst showing since 2009. The results would have been even worse if venture capital (VC) and private-equity valuations fully reflected the deep declines in public markets. Surging VC returns boosted returns in 2020. Academic endowments are used to fund research, faculty salaries, and capital projects.
RDW Index member Johnson & Johnson, New Brunswick, New Jersey, announced last week that it has agreed to buy heart-device maker, Abiomed Inc., Danvers, Massachusetts, for $16.6 billion. J&J has announced that it plans to separate its consumer products unit into a stand-alone company, which will allow J&J to focus on pharmaceuticals and medical devices. Abiomed’s heart pump is used to treat heart attacks, heart failure, and clogged arteries. The purchase is expected to close by the end of 1Q 2023. Abiomed is one of the fastest-growing areas of the medical device industry.
Emerson Electric Co., St. Louis, announced last week that it is selling a majority (55%) interest in its climate-technologies business to global investment firm Blackstone Inc.., New York City, in a deal valued at $14 billion. Blackstone would contribute $4.4 billion in equity to the deal, which would be supplemented by $5.5 billion of debt financing. Emerson equity would account for the remainder. Due to the stock market decline, Blackstone had to place this debt itself since traditional banks aren’t currently offering syndicated financing. Emerson has a full market value of about $50 billion and is selling its other businesses to other interested parties.
The European Central Bank, Frankfurt, Germany, last week announced that the Eurozone inflation rate reached 10.7% in October from a year earlier, the fastest rate of increase since Eurozone records began in 1997. As measured by Eurostat, Italy’s inflation rose to 12.8% in October, while Germany’s rose to 11.6%. Spain’s inflation fell to 7.3% in October from 9% in September. The U.K. inflation rate rose to 10.1% in October. The Bank of England last week announced that it was raising its key interest rate by 0.75% to 3.0%. This was followed by a day that the U.S. federal reserve made its fourth consecutive 0.75% interest rate increase to a range between 3.75% and 4.00%. The fed stated that it still had a way to go to fight inflation and signaled plans to keep increasing rates, possibly in smaller (than 0.75%) increments, but to higher levels than previously anticipated. The fed announced in September that they would need to raise the benchmark rate to about 4.6% early in 2023. The fed did not release any new rate projections at their meeting last week.
Chip maker Advanced Micro Devices (AMD) Inc., Santa Clara, California, announced last week that it was cutting its previously announced investments (including R&D) due to a declining PC market that could fall by close to 20% in 2022. AMD’s chip sales for video gaming and server chips continue to rise from 14% to 45%.
And while global chip demand is softening in some areas, automakers still have semiconductor chip shortfalls for their production lines. RDW Index member Toyota Motor Corp., Toyota City, Japan, lowered its production target by more than 5% last week, citing the risk of chip-supply issues. Analysts and chip executives state that this shortage could continue to drag on for years, especially for a strong automotive marketplace. Chip suppliers were quoted last week as stating their backlog of automotive orders remains well above the current and planned manufacturing capacity through 2023.
Electric vehicle (EV) automaker Tesla Inc., Austin, Texas, received approval last week from the city of Southfield, Michigan, to move forward with expanding a building for R&D and a repair facility for EVs. Tesla plans to expand an existing Southfield building to 34,500 ft2.
Data from China’s Ministry of Industry and Information Technology, Beijing, revealed that China’s internet companies increased their spending on R&D in the first three quarters of 2022. Those companies invested $7.8 billion in R&D during this period, up 8.8% year-on-year. The business revenues of China’s major internet companies and related service companies were about $150 billion, down about 0.9% from 2021, according to the Ministry.
RDW Index member Apple Inc., Cupertino, California, announced last week that it has paused hiring for many jobs outside of R&D, which is an escalation of an existing plan to reduce their operating budgets heading into 2023. The pause is like one used previously by the company during a holiday period. It generally does not apply to teams working on future devices and long-term initiatives (for example R&D). Analysts noted that these actions are like those of other tech giants in response to sluggish consumer spending and higher interest rates. Some teams within Apple are still able to hire in special circumstances. Apple’s 4Q report confirmed that its R&D budget is not getting squeezed and its R&D investments rose by 20% in fiscal 2022.
R&D World’s R&D Index is a weekly stock market summary of the top international companies involved in R&D. The top 25 industrial R&D spenders in 2020 were selected based on the latest listings from Schonfeld & Associates’ June 2020 R&D Ratios & Budgets. These 25 companies include pharmaceutical (10 companies), automotive (6 companies), and ICT (9 companies) which invested a cumulative total of nearly 260 billion dollars in R&D in 2019, or approximately 10% of all the R&D spent in the world by government, industries, and academia combined, according to R&D World’s 2021 Global R&D Funding Forecast. The stock prices used in the R&D World Index are tabulated from NASDAQ, NYSE, and OTC common stock prices for the companies selected at the close of stock trading business on the Friday preceding the online publication of the R&D World Index
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