That Donald Trump would be a disruptor on the world stage was expected. His plans to start a global trade battle was a known unknown risk, in the parlance. It was factored-in to people’s expectations for how 2025 would play-out.
But, the roller-coaster ride of market shocks and surprises that we have experienced over recent years due to the Covid pandemic and the invasion of Ukraine etc., is not over, because the biggest upset so far this year came not from President Trump, but from a wholly unexpected quarter.
The launch of DeepSeek R1, the Chinese AI app that undercuts both Chat GPT and Open AI on cost, has cast significant doubt on the assumption that the ‘US Tech Bros’ are the dominant players in the global tech market that they, and everyone else, thought they were.
Investors are rattled. Tech stocks sank everywhere and in the financial heartland of the US, in particular. Billions were wiped from the value of companies such as, Nvidia. A spokesperson for Invesco, said: “the intensity of the market’s reaction to DeepSeek’s news is a reflection of the massive expectations, high valuations and market concentration in US tech stock”.
Enter President Trump stage left. The unilateral imposition of tariffs on Mexico, Canada and China, caused a further wobble on Wall Street, and US tech stocks took the heaviest tumbles again. Part of China’s retaliation involves the launch of an investigation into Google on suspicion of violating antitrust laws. Added to that, Alphabet missed its quarterly revenue estimates and its shares slid. Sales of Apple’s latest iPhone have struggled to take-off and the share price fell in January 2025. The value of cryptocurrencies also tanked following the announcement of US tariffs, as investors dumped their riskier investments worried about the impact of a tariff war on the US economy.
Big Tech could never have imagined that 2025 would start like this. There is an entire generation of investors that have grown-up watching technology stocks rise and rise further that have had the rug pulled from under them. Confidence in US technology stocks has been dented.
People are fickle and such a knock can cause them to reassess their options and perhaps bring about a change in perspective. As a consequence, some investors are asking whether the US market is over-valued; has it peaked?
Over time, investors have reduced their exposure in Europe and shifted their investments to the US because of the higher share values and bigger multiples on flotation on the NYSE and NASDAQ. Europe has been largely over-shadowed by the US markets and their high-performing technology stocks.
The reset in thinking that the impact of DeepSeek and the trade tariffs has prompted, is leading some fund managers to take another look at the European markets. They are beginning to realise that there’s a selection of very good companies on the various European exchanges and that their shares are undervalued, largely because nobody has been paying them any attention. These stocks and shares are good value and may offer greater long-term potential than can be found in the US. Investors can also put more eggs in their basket for the same level of investment.
Markets can shift quickly, and in an effort to avoid risk and take advantage of the growth potential of European stocks and shares, investors may look to diversify their investment strategy across different industries and re-balance their portfolios away from the US.
What opportunities does that bring to London? It may be no coincidence that the FTSE 100 has achieved a series of record highs at the start of 2025. At its core, London is a good market. It’s still attractive and it offers some good opportunities. There are potentially some billion pound IPOs in the near future such as, Verisure, Shein, and we may see Unilever choose London for the spin-off of its ice-cream division, if London can close these deals. London’s stability is its strength, and assuming that the UK dodges the worst of any additional tariffs from the US, it may be appreciated more than ever during the turbulent times ahead.
This article was originally published in the February 2025 Corporate Advisers Rankings Guide. For more information, please contact Joseph Archer.
