The geopolitical risk and tensions over energy supplies are permanently reinforcing the themes of energy independence, defense, and sovereignty.
### A structurally unstable world
The return of Donald Trump to power has accentuated geopolitical polarization between major blocs, in a context of increased rivalry for access to natural resources. The situation in the Middle East, already fragile, has further deteriorated since the October 2023 attacks. More broadly, the multiplication of shocks (geopolitical, climatic) reflects a profound transformation of the world order, favoring the emergence of populist leaders and reinforcing polarization.
Several investment themes arise from this, which we discuss below:
### Energy independence and the nuclear theme
Europe and Asia’s dependence on fossil fuels is a major source of vulnerability, which has been reinforced in recent weeks.
Long hindered by the traumas of Chernobyl and Fukushima, the sector is gradually regaining a central role in energy policies, driven by a common imperative: to produce stable, decarbonized, and sovereign energy.
In 2022, the European Union integrated it into its green taxonomy, officially recognizing its contribution to the fight against climate change. This decision has paved the way for a massive return of institutional investments in the sector. France has started building six new reactors, Japan has reopened its plants closed since 2011, and over twenty nations have committed to tripling global nuclear capacity by 2050.
### Insecurity and the defense theme
The war in Ukraine, tensions in the Middle East, and the relative disengagement of the United States reinforce the perception of insecurity.
In this context, the arms race is intensifying. The decision of NATO member countries to raise military spending targets from 2% to 5% of GDP by 2035 embeds this dynamic in the long term. Such a budget trajectory implies not only a modernization of armed forces but also massive investments in infrastructure, cybersecurity, defense industrial capacities, and technological innovation.
Furthermore, this power buildup is no longer limited to Western democracies: all major regions, from Asia to Europe through the Middle East, are increasing defense budgets to anticipate a more chaotic geopolitical environment.
### A more global theme: sovereignty
The concept of sovereignty encompasses aspects of defense, energy independence as mentioned earlier, but also includes digital autonomy and securing supplies of health, food, and raw materials.
This is a topic receiving particular attention in Europe, especially since the structural vulnerabilities revealed by the 2020 health crisis.
One of the most striking diagnoses concerns the accumulated lag in the digital field. While other regions have heavily invested in artificial intelligence, digital infrastructure, or semiconductor manufacturing, Europe has experienced slower progress, resulting in an innovation deficit and declining productivity.
From a financial market perspective, these investment themes are attractive as they are supported by strong economic policies that are sustainable. At Kepler Cheuvreux, with the support of analyst teams, we have identified a set of values to make these themes investable.
