The R&D World Index (RDWI) for the week ending August 30, 2024 closed at 3,969.84 for the 25 companies in the RDWI. The Index was up 0.57% (or 22.41 basis points). Seventeen RDWI members gained value last week from 0.08% (Microsoft) to 7.30% (Intel). Eight RDWI members lost value last week from -0.12% (Stellantis NV) to -2.42% (Alibaba).

Notable developments this week include IBM’s decision to shutter its R&D operations in China, the continued dominance of AI as a driving force in the tech sector, sparking demand for data centers and specialized servers, yet concerns continue to mount over the ROI of some AI investments. See the table below for more details.

IBM shutters China R&D arm, putting 1,000 jobs at risk

RDW Index member IBM, Armonk, New York, announced last week that the company would close its R&D arm in China, as Reuters has reported. The company’s R&D teams have operated in China for decades and employ thousands of people in several cities including Beijing, Shanghai and Dalian. More than 1,000 jobs could be impacted.

Under the plan, R&D operations in China will be moved to another country. IBM executives stated that the company faced fierce competition with its infrastructure businesses declining over the past few years. The company’s revenue in China declined 19.6% in 2023. China’s government has pushed Chinese buyers to purchase more from domestic technology suppliers in a program dubbed “Delete America“. Employees from the closed IBM labs said they have been approached by headhunters over openings related to artificial intelligence (AI) and cloud computing at Chinese technology companies.

This move by IBM is part of a broader trend of U.S. tech companies reevaluating their presence in China. The Wall Street Journal reported in May 2024 that RDW Index member Microsoft had asked hundreds of China-based employees in its cloud computing and AI operations to transfer out of the country. Companies ranging from Airbnb (withdrew in 2022) to Microsoft subsidiary LinkedIn (exited in 2021) have also scaled back or withdrawn from the Chinese market.

China proposes nuclear defense against asteroids

A recent report from China’s deep space exploration program stated that the risk of asteroid impacts on earth is much higher than previous assessments have suggested and urged decision makers to think long-term. The report states that the best option to minimize the chance that an asteroid smashes into earth and causes catastrophic damage is through the use of nuclear weapons. The technologies most needed require a rapid response ability to launch nuclear warheads with an ultra-narrow time window from seven days to one month and a precise strike ability with a margin of error of less than 100 meters and the ability to be stored in space for more than 10 years. The researchers also back technological alternatives given the complexity of mounting a short-term nuclear defense in space, such as kinetic impact and high-power laser weapons, to combat the threat.

Some universities let professors set AI coursework rules

Last week, WSJ reported that institutions like Cornell University and Columbia University are empowering their professors to determine the role of AI tools like OpenAI’s ChatGPT in their coursework. This includes the option to fully ban the technology. After years of research, these universities claim a clearer understanding of AI’s capabilities and limitations in educational settings, though they acknowledge it’s an ongoing learning process. They also concede that enforcing AI policies in the classroom may prove challenging. Simultaneously, OpenAI offers an educational offering for universities.

AI stoking data center demand

The number of AI-based data centers continues to expand. In a recent deal, a startup data center land-development firm paid $136 million for a 2,100-acre site outside of Phoenix, with a 15-year plan to convert it into one of the U.S.’s largest data center complexes with upwards of $20 billion worth of data center equipment and infrastructure. AI has turbocharged demand for data centers because it requires far more energy capacity than other more basic cloud applications. Facilities with more than 4.5 GW of capacity will be under construction by 2025, according to CBRE.

Dell up while Super Micro dips in AI server market

Dell Inc., Round Rock, Texas, reported last week that its fiscal second quarter results showed that server revenue surged 80% year over year to $7.76 billion. Shipments of AI-based servers nearly doubled in that quarter to $3.1 billion. The company’s operating margin for the quarter for servers picked up 3 percentage points from the 7-year low the company reported in May 2024 for its first quarter. Not all AI suppliers are quite so positive. Super Micro, San Jose, California, which is Dell’s arch rival in AI servers, lost 47% as profits have disappointed and a short-selling firm questioned the company’s accounting. The AI server business is not a stable business, according to analysts and not all server customers are ready to deploy them now.

GM delays EV battery plant, citing slow EV adoption

RDW Index member General Motors, Detroit, Michigan, and its partner Samsung SDI, Yongin, South Korea, announced last week that they would delay the start of production of its planned battery plant in New Carlisle, Indiana by about a year to 2027. GM said it is still positioning itself for an all-electric future, even if it is slower to materialize than they originally expected. The company states that more customers need to experience their electric vehicles (EVs) , the charging infrastructure needs to build out and EV segments need to expand. GM expects to assemble more than 200,000 EVs in 2024.

Nokia to boost fiber, Wi-Fi R&D in India

Nokia, Espoo, Finland, announced last week that it will expand its Fixed Networks R&D facility in Chennai, India. The new facility will foster innovations in fiber, Wi-Fi and fixed wireless technologies, strengthening the company’s fixed networks portfolio. The new lab will be one of Nokia’s largest globally and the largest for its Fixed Networks business. The local government facilitated the expansion, providing essential infrastructure, regulatory and policy support.

The R&D World Index

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) who 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.

Company	Ticker	Exchange	2020 R&D billions$	08/23/24	08/30/24	8/23/24 to 8/30/24	1/1/22 to 8/30/24
Alphabet/Google	GOOGL	NASDAQ	27.303	167.43	165.11	-1.39%	13.99%
Microsoft	MSFT	NASDAQ	17.198	416.79	417.14	0.08%	24.03%
Volkswagen AG	VWAGY	OTC	17.259	10.80	10.60	-1.85%	-63.70%
Apple	AAPL	NASDAQ	18.667	226.84	229.00	0.95%	28.96%
Facebook/Meta	META	NASDAQ	13.874	528.00	521.31	-1.27%	54.99%
Intel	INTC	NASDAQ	14.503	20.54	22.04	7.30%	-57.20%
Johnson & Johnson	JNJ	NYSE	13.750	164.13	165.86	1.05%	-3.05%
Roche Holdings AG	RHHBY	OTC	14.143	41.71	42.33	1.49%	-18.12%
Merck & Co.	MRK	NYSE	11.381	116.60	118.45	1.59%	54.55%
Novartis	NVS	NYSE	9.387	118.56	120.89	1.97%	38.21%
Toyota	TM	NYSE	10.724	185.09	189.80	2.54%	2.43%
Pfizer	PFE	NYSE	8.336	28.90	29.01	0.38%	-50.87%
Alibaba	BABA	NYSE	6.006	85.41	83.34	-2.42%	-29.84%
GM	GM	NYSE	6.727	48.57	49.78	2.49%	-15.09%
Honda	HMC	NYSE	8.806	32.69	32.95	0.80%	15.82%
Ford	F	NYSE	9.340	11.27	11.19	-0.71%	-46.12%
AbbVie	ABBV	NYSE	13.949	197.55	196.45	-0.56%	-45.09%
Sanofi SA	SNY	NYSE	7.750	56.21	56.26	0.09%	12.30%
Cisco	CSCO	NASDAQ	6.331	50.74	50.54	-0.39%	-20.25%
Bristol-Myers Squibb	BMY	NYSE	7.130	48.11	49.95	3.82%	-19.89%
Astra Zeneca PLC	AZN	NYSE	6.056	86.66	87.62	1.11%	50.42%
IBM	IBM	NYSE	5.368	196.10	202.13	3.08%	51.23%
Oracle	ORCL	NYSE	6.928	139.19	141.29	1.51%	62.01%
Eli Lilly & Co.	LLY	NYSE	8.606	952.74	960.02	0.76%	247.56%
Stellantis NV	STLA	NYSE	5.309	16.80	16.78	-0.12%	-14.12%
Total			269.522	3947.43	3969.84	0.57%	40.79%
ICT			115.6	1831.04	1831.90	0.05%	26.37%
Automotive			59.8	305.22	311.10	1.93%	-9.01%
Biopharmaceutical			83.6	1811.17	1826.84	0.86%	77.67%