Convictions

Long-term themes in a fragmented world

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EU total annual military spending based on GDP ratio targets (2035)

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  • A political shift across the continent is accelerating initiatives aimed at reinforcing Europe’s position as a global actor.
     
  • Innovation is underpinned by a robust R&D ecosystem, with a growing focus on AI, robotics, and collaboration with tech start-ups. However, despite world-class academic institutions and strong public support for innovation, fragmented markets, regulatory complexity, and constrained fiscal space can slow the scaling up of digital transformation.
     
  • Decarbonisation and green infrastructure are long-term trends supported by the Clean Industrial Deal, which targets the decarbonisation of energy-intensive industries and clean technology production. Germany, in particular, has initiated a significant fiscal stimulus package aimed at revitalising its economy, with a focus on infrastructure investments.
     
  • Security and defence have become central priorities in Europe. The ReArm Europe plan allows countries to increase defence spending without penalty, promotes R&D in defence and supports the establishment of robust supply chains.
     
  • Financial stability is improving as countries work to correct past fiscal mismanagement and imbalances. 

  • Strategic competition between the US and China remains a defining global dynamic. China continues to narrow the gap with the US across several areas, including AI, quantum computing, and renewable energy. In specific areas, such as rare earth processing, it has already established a leadership position.
     
  • Policy moves on both sides are intensifying the dynamic, with the US tightening export controls and restricting technology transfers, while China is ramping up its state-led innovation strategy through industrial policies and targeted subsidies. These trends have contributed to a rebound in Chinese equities and further momentum for its innovation agenda.
     
  • In the tech race, the US and its allies maintain an edge in capital markets and innovation ecosystems. Asia holds an advantage in producing sophisticated IT hardware, underpinned by supply chains that are hard to relocate.
     
  • China’s ability to sustain its momentum will depend on how well it aligns its state-led approach with market-driven forces such as consumer demand and private-sector innovation. Amid ongoing restrictions on technology transfers, trade, and capital flows, a gradual reconfiguration of global tech supply chains is expected to continue shaping investment and manufacturing decisions. 
China’s internationally recognised patents as a share of global IP5 patent families

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Source: Amundi Investment Institute, Mid-Year Outlook - Ride the policy noise and shifts, June 2025.

Marketing material for professional investors only

Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of August 2025. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results.

Date of first use: 20 August 2025

Doc ID: 4744936