Stephan Langen: Let European capital serve European goals from now on
This column was originally written in Dutch. This is an English translation.
By Stephan Langen, Head of Portfolio Management at ASN Impact Investors
Now that the American markets have fallen out of favour, investors will have to rethink their strategy. Do we remain focused on America and its tech giants, or do we seriously reinvest in a sustainable, safe and humane European future?
Last year, investors had some explaining to do if they ignored American big tech. I have previously warned about the dangerous dominance of Google, Amazon, Microsoft and the rest. The recent volatility on the US stock markets confirms my concerns. Focusing on the Magnificent Seven is therefore no longer the holy grail for a robust portfolio.
A different view of Europe
Disappointment about the financial markets is currently coinciding with an unprecedented political debacle in the US. This means that we, as investors, also need to adjust our world view. We are going to look at ourselves and at Europe differently.
It is true that European stock markets have performed relatively better in the short term, with a broader base across different sectors. But this renewed interest in the Old World is about much more than that. As the pressure on the US to create a fair, sustainable and inclusive society grows week by week, it is becoming increasingly clear what makes Europe so European and why we should cherish that identity.
Work to be done for investors
Americans may call Europe a museum, but it is a museum with a fantastic collection. In addition to the classic pavilion with values such as equality, sustainability and inclusivity – values that the US is now throwing out with the trash – there is a modern wing with potential unicorns that is still under construction.
So there is work to be done, for governments, for businesses, but certainly also for investors to keep Europe and its technological innovation sustainable, secure and human. This is a task we must undertake from a position of sovereignty.
European cloud is 80% American
In this respect, the reality is sobering: 70% to 80% of European cloud infrastructure is controlled by American tech giants. This dependence not only creates technological vulnerability and a risk to our privacy, but also a constant flow of capital to Silicon Valley instead of to European innovation.
And this at a time when Europe is crying out for hundreds of billions of pounds a year in investment in strategic autonomy, in security against cyber attacks that could bring down the entire infrastructure, and in the energy transition that will increase our energy independence.
AI Continent Action Plan
That is called making a virtue out of necessity. Now that the US is threatening to become a value-free no-go area, investors can once again invest their European money in Europe itself.
Earlier this month, the European Commission presented its AI Continent Action Plan, which aims to free up €200 billion for ‘European’ AI that runs on sustainable data centres, better meets ‘our’ standards and has the potential to make an enormous contribution to security and sustainability.
Because yes, AI is also an American and, increasingly, a Chinese party. But Europe's distinctive strength also lies in its values and regulations, which need not be obstacles to innovation but can, on the contrary, be a competitive advantage. Europe must continue to position itself as a pioneer in responsible and sustainable technology, even now that a harsh headwind has picked up.
Honesty is the best policy
In fact, it's a matter of fair wins longest. Sustainable investors have this in their DNA. They are focused on the long term and were not tempted last year by the quick wins promised by Google, Facebook and other success stories. They will be ‘repaid’ for this in the first months of 2025.
As European investors, let's take this lesson to heart, because even outside big tech, American companies are less European than ever in their standards and values, while there is a clear mandate to strengthen and make Europe more sustainable. The money of European investors would be better spent on causes that better serve our goals and values.
Stephan Langen is Head of Portfolio Management at ASN Impact Investors. The information in this column is not intended as professional investment advice or as a recommendation to make certain investments.