In a recent look into future business trends, Financial Times journalists explored how “sovereign” artificial intelligence is gaining attention, the outlook for electric vehicle sales, and the possibility of influential investors handling your retirement funds.
Technology
Upcoming Trend
The journey of generative artificial intelligence (AI) has primarily been marked by a competition among leading companies to create advanced language models. However, experts predict that by 2025, the focus will shift from depth to breadth as more countries and businesses aim to harness this critical technology for national and economic benefits.
Countries are already working on their own AI infrastructure as part of what is being termed “sovereign AI.” This is driven largely by the need to protect their economies. Reports indicate that around 10% of Nvidia’s income stems from sales of chips to these nations, and this percentage is expected to increase as AI becomes an unavoidable consideration for governments.
With the rise of powerful “open” AI models, companies are likely to divert resources toward creating their own models, enhancing their influence over generative AI by 2025.
Company on the Radar
Elon Musk, who was deep into his Twitter acquisition during the ChatGPT launch, has since caught up with the generative AI wave by raising $12 billion for his startup, xAI. Musk’s knack for drawing in talented engineers has propelled xAI rapidly into the spotlight, now valued at $50 billion. With his strong ties to Donald Trump and his involvement in shaping U.S. government initiatives, xAI is anticipated to play a significant role in the political landscape.
While OpenAI has established a firm business foundation through its AI models, xAI could emerge as a key player, particularly if Trump returns to the presidency.
Greatest Risk
Identifying when a tech boom transforms into a bubble is notoriously tricky. There’s a consensus that it might take years for many companies and governments to effectively integrate generative AI into productive use. As the value of businesses developing AI infrastructure continues to climb, the potential for a tech market slump also increases. While investors remained optimistic through mid-2024, there’s uncertainty about their stance in 2025.
Potential Surprise
One surprising event could be Microsoft deciding to acquire OpenAI outright, reinforcing its partnership with the AI firm. However, OpenAI’s ambitious leader, Sam Altman, seems focused on building a tech giant rather than selling.
Private Capital
Trend to Keep an Eye On
Private equity giants like Blackstone, KKR, and Apollo Global have traditionally invested on behalf of sovereign wealth funds. Now, they are eyeing a new target: individual retirement savers. Trump’s potential re-election might create opportunities for these companies to deregulate the U.S. investment framework, which currently restricts many ordinary investors from accessing certain assets.
Company of Interest
Medline Industries, which had previously flown under the radar, became spotlighted after a $34 billion buyout in 2021 by private equity firms. Despite a challenging market since then, Medline’s growth has put it in a position for a public offering which could provide a boost of confidence to private equity firms in the buyout market.
Major Risk
While AI could enhance efficiencies in the financial sector, it also poses challenges for private equity, especially in the software industry. There is a risk that increased productivity could lead to decreased demand for certain services, putting pressure on investment firms.
Biggest Surprise
Increased optimism on Wall Street has spurred a rise in deal activity, yet factors such as tariffs and labor-related issues might affect this trend as the economy strives to stabilize.
Automotive
Trend to Monitor
Carmakers are navigating challenges with electric vehicle (EV) sales which saw a slowdown in 2024. While some industry leaders believe that EV rollouts were purposely delayed for regulatory reasons, others point out persistent consumer hesitations regarding EVs. EVs constituted around 20% of global car sales in 2024, with significant growth rooting from China.
Company to Watch
Since Trump’s election, Tesla shares surged nearly 70%, partly due to its CEO being one of Trump’s closest advisors. However, the future remains uncertain as California’s government hinted that Tesla could miss out on important tax incentives, and potential tariffs could impact its operations.
Key Risk
The industry faces significant risks should supply chain issues arise, particularly among smaller parts suppliers vulnerable to disruption. Major automakers may struggle to support these suppliers financially as they themselves experience demand pressure.
Surprising Event
An unexpected management change at Stellantis serves as a reminder of the ever-evolving landscape within the automotive industry, with the upcoming leadership change sparking speculation.
Luxury
Trend to Watch
China’s luxury market, which had been a powerhouse, faces unpredictability post-pandemic. Despite flat global luxury sales in 2024, experts predict a slowdown in luxury goods in 2025, putting pressure on brands to find innovative ways to attract customers.
Company Highlight
Kering, previously a leader, has struggled post-pandemic, especially with its Gucci brand. The newly appointed leadership is being urged to turn around the brand in the wake of declining profits.
Main Risk
With Trump’s re-election, the luxury sector could face heightened uncertainty from proposed tariffs that could impact various goods. An escalated trade war may further strain sales in this segment, especially linked to Chinese markets.
Potential Surprises
Noteworthy events could include sweeping mergers in the luxury sector or unexpected leadership shifts among major brands as the industry recalibrates in light of evolving market dynamics.
Renewable Energy
Trend to Observe
As investment enthusiasm wanes, several renewable energy firms are shifting to private ownership. This trend reflects a belief that these companies are undervalued, compelling actions like IPO withdrawals and buyouts.
Company Watch
RWE, known for its ambitious green energy targets, has announced a planned reduction in renewable spending amidst a challenging market outlook.
Key Risk
Trump’s policies could heavily impact the renewable sector, particularly his inclination to roll back subsidies and claim the U.S. would exit the Paris climate agreement, adding another layer of uncertainty regarding the future.
Surprising Development
A potential reengagement with Russian gas post-conflict may reshape energy dynamics in Europe, defying current trends toward renewable energy and triggering a reevaluation of the sector’s future.
The above article distills trends and expectations across various sectors for the coming years, highlighting notable companies and the risks they face.