March 12, 2025

Leaving aside the Armageddon scenario, there are three possible economic catastrophes that could arise from President Trump’s policies:

• A trade war escalating into a tit-for-tat cycle, disrupting global trade, driving inflation, and increasing interest rates—ultimately leading to a global economic slowdown.
• Politically driven decisions that undermine confidence in the U.S. dollar’s role as the world’s reserve currency, triggering a financial crisis.
• An AI-driven stock market crash

Three key factors could contribute to a crash in the Silicon Valley high-tech and AI sectors:

• Dependence on international trade – What is new with globalization is not about more trade but rather the fact that the rising integration of world markets has brought with it a disintegration of the production process as manufacturing or services activities done abroad are combined with those performed at home. Multinationals design their products while relying partly or entirely on foreign producers for their final products.  Over the years, some of these foreign producers have become unavoidable partners. A trade war would put at risk many of these companies, particularly US Information and Communications companies.
• Uncertainty in AI’s long-term dominance – AI is still in its early stages of development, and it remains uncertain which companies or countries will emerge as dominant players in the coming years. The potential for volatility is high.
• Weak demand-side response – If demand fails to materialize at a scale sufficient to justify the massive AI investment boom, a market correction could be severe. Without strong adoption and revenue generation, AI investments may struggle to yield expected returns.

This last factor is particularly concerning. In a recent Financial Times article—a mix of fiction and non-fiction—Daron Acemoglu (2024 Nobel Prize winner in Economics) explores potential threats to U.S. prosperity from the perspective of an observer in 2050. One of the key events he envisions is the Big Tech Crash of 2030, when trillions of dollars are wiped out as it becomes clear that AI investments have failed to deliver expected economic returns..

Tentative list – Please refer to the press releases of the companies

OpenAI, Softbank (Japan) and Oracle January 2025 OpenAI, Nvidia and xAI March 2025	President Trump on Tuesday announced a joint venture between OpenAI, SoftBank and Oracle to create at least $100 billion in computing infrastructure to power artificial intelligence. The venture, called Stargate, adds to tech companies’ significant investments in U.S. data centers, huge buildings full of servers that provide computing power. Stargate could eventually invest as much as $500 billion over four years. According According to The New York Times (March 7, 2025), OpenAI is set to complete a $40 billion fund-raising deal that would value the company at $300 billion, nearly double its valuation from just five months ago. Update Marche Axios.com March 21, 2025 The AI Infrastructure partnership announced Wednesday that it was adding Nvidia and xAI as new partners in its fund, which aims to build data centers and energy facilities supporting AI, mostly in the U.S. Microsoft, BlackRock and UAE-based MGX were already key investors in what was announced last September as a $30 billion fund that could be leveraged up to $100 billion. Update March 19, 2025 SoftBank said on Wednesday that it had agreed to pay $6.5 billion for the Silicon Valley chip start-up Ampere Computing, doubling down on a bet that technology that originated in smartphones will come to dominate the world’s data centers.
Microsoft, February 2025	In FY 2025, Microsoft is on track to invest approximately $80 billion in building AI-enabled datacenters to train AI models and deploy AI and cloud-based applications around the world. More than half of this total investment will be in the United States
Amazon, March 2025	Amazon first invested $1.25 billion in Anthropic in September 2023 and another $2.75 billion in the first quarter of 2024. Late last year, Amazon put in another $1.3 billion, and also agreed to invest an additional $2.7 billion by the end of 2025
Anthropic	The start-up Anthropic said on Monday March 3, 2025 that it had completed a new fund-raising deal that valued the company at $61.5 billion.  Led by the venture capital firm Lightspeed Venture Partners, the new round will pump an additional $3.5 billion into the company. Since its founding in 2021, Anthropic has raised more than $14.8 billion from venture firms like Menlo Ventures and tech giants like Amazon, Google and Salesforce. Anthropic builds and operates its A.I. systems using computer data centers owned by Amazon and Google.
Google	Update March 18, 2025 Google agreed to buy Wiz, a fast-growing cybersecurity start-up, for $32 billion in the company’s biggest push to strengthen its cloud-computing business and expand beyond the search engine and consumer internet services that made it a household name. The all-cash deal, announced on Tuesday, would be Google’s largest, easily surpassing its $12.5 billion purchase of Motorola Mobility in 2012.
Google, February 2025	Google plans to invest $75 billion in capital expenditure this year, as it joins Big Tech rivals in accelerating spending on artificial intelligence infrastructure
Google, October 2024	Google has signed a deal to use small nuclear reactors to generate the vast amounts of energy needed to power its artificial intelligence (AI) data centers. The company says the agreement with Kairos Power will see it start using the first reactor this decade
Meta, February 2025	Meta Platforms plans to spend between $60 billion and $65 billion this year to build out AI infrastructure, CEO Mark Zuckerberg said joining a wave of Big Tech firms unveiling hefty investments to capitalize on the technology.
Apple, February 2025	Apple will spend more than $500 billion in the U.S. over the next four years. As part of this package of U.S. investments, Apple and partners will open a new advanced manufacturing facility in Houston to produce servers that support Apple Intelligence.
Musk’s xAI	According to The New York Times (March 7, 2025) xAI is in talks for a new financing round that could value it at as much as $75 billion, up from about $40 billion just two months ago

The AI investment race is largely driven by the “Magnificent Seven”—Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla. As of mid-2024, these tech giants had a combined market capitalization of $15.4 trillion—exceeding the stock markets of the UK, Germany, and France combined. They now account for nearly one-third of the S&P 500’s total market capitalization, underscoring their outsized influence on the broader U.S. economy. 

Beyond these publicly traded firms, AI investments extend to privately held companies such as OpenAI (~$300 billion valuation), Anthropic (~$61.5 billion), and Musk’s xAI, which is in talks for a new funding round that could push its valuation to $75 billion, up from $40 billion just two months ago. These soaring valuations and new funding rounds—along with potential IPOs—signal that investors still see substantial opportunity in AI. The AI race is far from over. 

New funding rounds — and a potential I.P.O. suggest that start-ups and their backers believe there’s still plenty of appetite for promising players in the field.” [i]  Clearly, the AI race is still to win.  

Despite the optimism, the AI boom is fraught with uncertainty:

Technological unpredictability – The AI roadmap is still evolving, with breakthroughs and setbacks reshaping the competitive landscape.

New entrants and disruption – Emerging players could introduce cheaper, more efficient, and more attractive AI solutions, eroding the dominance of today’s leaders.

Regulatory challenges – Conflicting global regulations could restrict growth, limit market access, or impose costly compliance burdens.

Crucially, the dominance of the “Magnificent Seven” is not guaranteed. If they are unable—or legally barred—from limiting competition through mergers and acquisitions, their market grip may weaken. The AI investment boom could either cement their position or expose vulnerabilities that lead to a broader market reckoning.

China

China is embracing an open-source approach to artificial intelligence as a key strategy to drive innovation—and so far, it appears to be yielding impressive results.

In February and March 2025, two Chinese firms made waves in the AI industry by releasing groundbreaking large language models. DeepSeek and Alibaba Cloud’s QwQ-32B stunned U.S. competitors and Wall Street alike, while Chinese AI firm Manus AI introduced a general AI agent, Manus, still in development, which quickly gained traction.

At the end of February, Chinese President Xi Jinping attended a symposium with top entrepreneurs in high spirits. The release of DeepSeek’s AI models had sent U.S. stocks tumbling and prompted Western commentators to declare a “Sputnik moment.” During the event, Xi reaffirmed his support for the private sector. As he spoke, many of the attending executives—reminiscent of university students—were seen diligently taking notes. Among them was Jack Ma, founder of Alibaba and Ant Group, who had previously been the target of a tech crackdown during the pandemic.

According to a press release on March 6, 2025, Alibaba Cloud introduced QwQ-32B, a compact reasoning model with 32 billion parameters, delivering performance comparable to larger state-of-the-art models. Built on Qwen2.5-32B, Alibaba Cloud’s latest large language model, QwQ-32B excels in various benchmarks, including AIME 24 (mathematical reasoning), Live CodeBench (coding proficiency), LiveBench (test set contamination and objective evaluation), IFEval (instruction-following ability), and BFCL (tool and function-calling capabilities). Manus AI’s launch of its general AI agent, Manus, on March 6, 2025, took social media by storm. Many have referred to it as “the second disruptor after DeepSeek” and likened it to “the GPT moment” for AI agents. On March 16, 2025, Chinese tech giant Baidu 
 introduced Ernie X1, a reasoning model that can support tools such as advanced search, generation of AI images, and webpage reading.

Xi Jinping has increasingly emphasized policies aimed at “high-quality development” and “new productive forces,” signaling a shift away from traditional drivers of economic growth—such as property and infrastructure investment—toward high-tech industries like semiconductors, clean energy, and AI.

Throughout China’s annual legislative meeting, Xi made it clear that he intends to push forward China’s ambitions to become a technological superpower, despite economic slowdowns, local government debt, or trade tensions with the U.S.

China’s science and technology budget for 2025 stands at approximately $172 billion—second only to that of the United States. However, potential budget cuts in the U.S. under former President Trump could narrow this lead.

With China’s open-source AI strategy proving effective and its government prioritizing technological advancement, the country is positioning itself as a formidable challenger in the AI race.

The European Union

At the Artificial Intelligence (AI) Action Summit in Paris, Commission President Ursula von der Leyen has launched InvestAI, an initiative to mobilise €200 billion for investment in AI, including a new European fund of €20 billion for AI gigafactories. This large AI infrastructure is needed to allow open, collaborative development of the most complex AI models and to make Europe an AI continent.

In addition, the European High Performance Computing Joint Undertaking (EuroHPC JU), jointly funded by the Member States, the European Commission and associations, selected the following “AI-Factories”, which are overwhelmingly not factories but universities and public funded research centers.

• Finland (LUMI AI Factory)
• Germany (HammerHAI)
• Greece (Pharos)
• Italy (IT4LIA)
• Luxembourg (L-AI Factory)
• Spain (BSC AI Factory)
• Sweden (MIMER
• The AI Factory Austria (AIT)
• The Bulgarian AI Factory BRAIN
• The AI Factory France (AI2F)
• Germany JUPITER AI Factory
• Poland (PIAST)
• Slovenia (SLAIF)

This highly bureaucratic construction contrasts with the US « Wild West » approach, which is dominantly developed outside universities, from the pure research stage to the “mortar and bricks” stage, one reason being the huge sunk cost of AI general purpose models. 

What raises questions is the fact that Chinese firms managed to bypass the obstacle using open-source tools available on the Internet, an idea that not a single European company seems to have had.

AI Regulatory frameworks

Since the release of ChatGPT in November 2023, AI has made the headlines and reached the top of the political agenda worldwide.  Furthermore, the 2024 Nobel Committee awarded the Nobel Prize to five AI scientists (on the nine scientific winners) acknowledging artificial intelligence as a technological breakthrough of historical significance.

David Balker (Chemistry) used computer-based methods, which he had developed. Demis Hassabis (Chemistry) and John Jumper (Chemistry) used an AI model called AlphaFold2. John J. Hopfield (Physics) and Geoffrey Hinton (Physics) founded machine learning with artificial neural networks.

The laureates did not fail to highlight the potential of artificial intelligence but also the risks of its current and future developments, calling for a regulatory framework at the international level. 

Geoffrey Hinton expressed his concerns at the Nobel Prize banquet, 10 December 2024.  “Unfortunately, the rapid progress in AI comes with many short-term risks. (…) All of these short-term risks require urgent and forceful attention from governments and international organizations. There is also a longer-term existential threat that will arise when we create digital beings that are more intelligent than ourselves. We have no idea whether we can stay in control. But we now have evidence that if they are created by companies motivated by short-term profits, our safety will not be the top priority. (1)

At the Paris Summit on A.I., Demis Hassabis said the need for norms and rules grows as the world gets closer to so-called artificial general intelligence (AGI), meaning advanced AI systems that can do a broad range of tasks faster and better than humans. “But it has to be international,” Hassabis said. “Otherwise, you’ll get nations competing and other things like that.” The more artificial intelligence becomes a race, the harder it is to keep the powerful new technology from becoming unsafe, Google DeepMind CEO Demis Hassabis told Axios. (2)

Since the beginning of this year and the election of President Trump, fears about existential threats have been largely ignored.  But the issue remains

If the European Union lags in AI, it is also, by far, the most advanced in the regulation of the Internet in general (data protection) and AI.  The European AI Act entered into force on 1 August 2024. The AI Act, which aims to promote innovation while ensuring high levels of health, safety, and fundamental rights protection, classifies AI systems into different risk categories, including prohibited, high-risk, and those subject to transparency obligations.

The AI Act foresees a scientific panel of independent experts on AI to assist the AI Office and national authorities in the implementation and enforcement of the AI Act. This advisory body will play a key role in the governance, offer technical advice and input on enforcement, including the ability to alert the AI Office of risks posed by a general-purpose AI model.

In a speech during the Mobile World Congress, Chairman of the US Federal Communication Commission (FCC) Brendan Carr, warned that AI cannot be developed with “ideological bias”, and that he will defend American companies if Europe takes “protectionist regulations”.

(1) Geoffrey Hinton – Banquet speech. NobelPrize.org. Nobel Prize Outreach 2025. Wed. 26 Feb 2025. https://www.nobelprize.org/prizes/physics/2024/hinton/speech/

(2) Axios.com, https://www.axios.com/2025/02/14/hassabis-google-ai-race-hazards

(4) Is Xi’s Sudden Embrace of Business for Real? China Is Left Guessing. New York Times Feb 22, 2025, https://www.nytimes.com/2025/02/22/business/xi-jinping-jack-ma.html

(5) What does Jack Ma’s return to the spotlight mean? BBC https://www.bbc.com/news/articles/c5yvyl710jpo

---