The primary global conflict remains the economic and political rivalry between the U.S. and China, with Europe largely aligning with the U.S. while occasionally striving to maintain autonomy. Despite having economic weight comparable to both superpowers, Europe remains fragmented due to national sovereignty and the lack of a unified foreign policy vision. However, this could change under the potential leadership of Friedrich Merz. As Germany’s next chancellor, he could push for Europe’s strategic autonomy, potentially reducing American influence in the region.

At the same time, the war in Ukraine might conclude sooner than anticipated, with peace terms likely favoring Russia. Nevertheless, Europe is expected to remain cautious about reintegrating Russia into global trade and diplomacy. Faced with increasing geopolitical instability and a potential reduction in U.S. security support, European nations are likely to increase defense spending—albeit gradually and without drastic shifts.

Should Europe truly move towards distancing itself from the U.S., the share of global GDP covered by the American bloc would drop from 70% to 50%, weakening the West relative to China. However, despite discussions on greater European independence, deep political, economic, and security ties are likely to prevent a full break, ensuring that the U.S.-Europe alliance continues, albeit in a modified form.

U.S. Consumer Confidence Declines, Fed Rate Cuts Expected

U.S. consumer confidence fell sharply in February, dropping 7 points to an eight-month low of 98.3—significantly below the forecasted 102.5. This marks the third consecutive monthly decline, driven by growing economic concerns. As a result, markets now anticipate two 25-basis-point rate cuts by the Federal Reserve this year.

Simultaneously, escalating tariff threats from former President Donald Trump have fueled demand for safe-haven bonds. Trump announced that tariffs on Canada and Mexico will take effect next week as the one-month transition period expires, adding further uncertainty to trade relations.

Euro Strengthens on German Fiscal Stimulus Hopes

The euro saw slight gains at the start of the week, supported by optimism surrounding increased fiscal spending in Germany. Reports suggest that Europe’s largest economy is considering a €200 billion emergency defense fund. Additionally, Friedrich Merz (CDU), the incoming German chancellor, has not ruled out reforms to Germany’s fiscal constraints to finance key initiatives, including tax cuts, lower energy prices, and a substantial boost in military spending.

Meanwhile, investors closely analyzed speeches from European Central Bank (ECB) officials ahead of next week’s meeting, where the ECB is widely expected to cut interest rates for the fifth consecutive time.

Nvidia’s Market Position: AI Boom Fuels Growth but Risks Remain

Nvidia’s stock remained volatile despite posting better-than-expected quarterly earnings and an optimistic outlook. The company reported a 78% year-over-year revenue growth, driven by surging demand for its AI-focused graphics processors. Nvidia remains a cornerstone stock in the market as investors bet on the explosive expansion of digitalization, AI, and data centers.

The company’s GPUs power the largest AI models, and demand for its chips continues to outstrip supply. Tech giants have outlined record capital expenditures for 2025, collectively reaching $280 billion, with Alphabet alone committing $75 billion, primarily for AI model development.

Beyond AI, the data center segment is experiencing rapid expansion, as companies transition to more powerful servers capable of processing massive datasets. Nvidia is further pushing technological boundaries with its Digits project, an AI personal supercomputer poised to redefine workstations for data scientists, researchers, and developers. The system enables AI model execution with up to 200 billion parameters and delivers one petaflop of computing power—equivalent to one quadrillion calculations per second. Priced at $3,000, Digits will democratize access to high-performance computing, with advanced configurations supporting multi-system connections for even more demanding applications.

Despite its high valuation (P/E ratio above 40), analysts still see growth potential as AI expands into new sectors such as automotive, healthcare, robotics, and autonomous systems. However, risks remain—competition from AMD and Intel, along with potential semiconductor market regulations, could impact Nvidia’s dominance. Nevertheless, the company is well-positioned to capitalize on the digital transformation shaping entire industries.

Final Thoughts

This week’s developments highlight the ongoing global shifts in economic power, with Europe at a crossroads in its strategic positioning. Meanwhile, economic uncertainty in the U.S. is shaping expectations for Fed policy, while Nvidia’s role in the AI revolution remains a focal point for investors. Looking ahead, markets will continue to monitor geopolitical events, central bank actions, and the evolving landscape of AI-driven innovation.