What a year it has been!
Thanks to Trump, the year felt like a decade.
The year began with the impending ascension of Trump to the presidency. He entered office and put Elon Musk in power of DOG-E, and American government Workers faced uncertainties, the likes of which they had not since the Second World War. He promised to reverse all of the policies that Biden had put in place and declared “Drill baby drill”.
The Climate
This year we had wildfires in Russia, Turkey, Syria, South Korea, Albania, Bulgaria, Croatia, Cyprus, France, Germany, Greece, Montenegro, the Netherlands, Portugal, Spain, United Kingdom. In addition to that, 25 US states recorded wildfires burning 5 million acres and taking a lot of celebrity homes in LA. Canada remained the unrivalled champion with 160 fires burning through 21 million acres.
In addition to that, there was flooding in Milwaukee and Texas in the US. Queensland and New South Wales in Australia. Bolivia, Indonesia, Vietnam, Philippines, Indian, Pakistan, Sri Lanka, Nepal, United Kingdom, South Africa, Botswana, and Bolivia.
Then a bunch of world leaders flew into the Amazon to agree on doing nothing, for now, about the climate. They all have, at most, a decade or a bit more to live and that time would be better used creating “shareholder value” rather than taking decisions which will cause inconvenience and disruption to their “economic models”.
Shifting Sands
The tariff wars that were unleashed in April drove the panic purchase of more goods across the world. Markets gyrated at first and then just disregarded any talk of tariffs. The Financial Express wrote, “like a dog to a bone, Donald Trump seems to run back to Tariffs”. He alienated friends while foes rejoiced. Europe and Japan were made to accept one-sided deals, which they happily did. At the same time, Indian and China defied the US and did not accept any deal. These economies that like to call themselves the global North could not stand up to bullying!
2025 was an important year to unveil the new world order. Whatever the motivation Trump may have had, he exposed the weakness of the G7. The erstwhile colonial powers do not have any.
Killing Fields
To add insult to injury, the US has put the burden of bankrolling the Ukraine war on the Europeans. Trump was making changes to the immigration policy that would destroy the pipeline of talent that flows into the US using the H1B visa. For a brief moment, the Europeans thought they could roll out plans to attract that talent. Now that money will be spent buying arms to keep the war in Ukraine alive.
India attacked Pakistan to avenge the civilians killed in Pahalgam. For a period of time in India, it seemed like war. Cell phone networks were being jammed in India. A lot of “information” was being provided from the areas of conflict. Then both sides declared victory, and the war was over.
Israel, in the meantime, bombed half a dozen Middle Eastern countries. Israel attacked Iran unnecessarily. Iran turned out to be far more restrained and calculated than it is given credit for. They launched a bunch of missiles towards the US base in Qatar to demonstrate what contagion in that region could look like. The US made Israel immediately back down.
AI
In 2022, ChatGPT was released, and it captivated the imagination of many. Riding on the back of the “imagination”, OpenAI pushed for incredible amounts of capital to be committed towards the build-out of infrastructure to support AI expansion. The year was dominated by trillion-dollar investment talk and trillion-dollar scale, while the reality stayed far away.
Oracle leveraged its Balance Sheet to build capacity for OpenAI. Nvidia started investing in OpenAI. Even the house of the mouse, Disney, committed capital to OpenAI. All the money is being spent on creating data centres and building power capacity to meet the needs of AI. On paper, yes, they are building out infrastructure.
The wrinkle in the story - chips do not last as long as other infrastructure does. Spending trillions on building roads, rail, ports, or airports is fine. It gives you returns over decades. Chips are finished in 5 - 7 years. Imagine building an entire road network all over again every 7 years!
Is AI economically viable?
As the year draws to a close, an uneasy question about a small number of companies making circular payments to each other is beginning to rear its head. In the meantime, China is releasing models of comparative capabilities working at a fraction of the cost. America’s decision to ban Nvidia from shipping chips to China forced them to adapt.
The rise of China during the early part of this century was powered by cheap steel that it dumped into global markets. It seems like the US ensured that it would do the equivalent by dumping cheap AI models into the market and destroying the US AI industry.
Looking forward to 2026 -
The AI thesis will really be put to the test, and there will be a crash or a correction depending on who writes the headlines.
European governmental budgets will buckle under the load of defence spending on behalf of Ukraine. Will they call Zelensky corrupt and cut him loose, handing over territory to Russia? Will they risk fomenting unrest in their countries to continue a war for purely ideological purposes?
The Insurance industry will come under pressure both from Climate and Trump policies in both health and trade. Already, an insurance industry CEO was shot. Rising premiums will result in hard questions.
Merry Christmas and Happy New Year. Keep doing this good work