AI-Driven Resilience: The Hidden Engine Powering Global Growth Amid Trade Uncertainty

The global economy in 2025 is navigating a precarious tightrope: trade policy uncertainty looms large, with tariffs and geopolitical tensions threatening to dampen growth. Yet, amid this volatility, artificial intelligence (AI) has emerged as a critical counterweight, cushioning economies against the drag of protectionism. The OECD's latest forecasts underscore this dynamic, revealing how strategic investments in AI infrastructure and technology equities are reshaping growth trajectories in the U.S., China, and the eurozone. For investors, the challenge lies in balancing the promise of AI-driven resilience with the risks of overvaluation and policy-driven headwinds.

The U.S.: AI as a Fiscal and Monetary Catalyst

The U.S. economy is projected to grow at 2% in 2025, a figure bolstered by aggressive AI investments, fiscal stimulus, and Federal Reserve rate cuts. NVIDIA, the poster child of the AI infrastructure boom, exemplifies this trend. Its Q3 FY2026 revenue surged 62% year-over-year to $57.0 billion, driven by demand for its Blackwell GPU architecture. While its P/E ratio has compressed from 50-55x to 33x, reflecting a maturing valuation, the Buffett Indicator-a gauge of market overvaluation-suggests the U.S. stock market remains overvalued, exceeding 200% of GDP and echoing levels seen during the dot-com bubble. This duality-robust earnings growth paired with stretched valuations-highlights the need for caution. The OECD warns that abrupt corrections in AI-linked assets could destabilize markets, particularly as fiscal support wanes and tariffs on Chinese goods begin to bite.

China: Policy-Driven AI Momentum and Undervalued Potential

China's 2025 growth forecast of 5% is underpinned by state-aligned investments in AI and semiconductor development, including a $47.5 billion semiconductor fund. Chinese tech giants like Alibaba and Baidu have led a stock rally, with AI pure-play valuations ranging from 22x to 37x EV/TTM revenue. Alibaba's Cloud Intelligence Group, for instance, saw 34% revenue growth in Q3 2025, despite broader profitability challenges. While U.S. AI startups raised $160 billion in 2025, Chinese firms secured just $10 billion, creating a valuation gap that analysts argue offers upside potential. Goldman Sachs notes that Chinese AI stocks trade at about one-quarter of U.S. counterparts' valuations, with foreign investors cautiously returning to capitalize on cost-efficient innovation. However, the OECD cautions that new U.S. tariffs on Chinese goods could erode this momentum, slowing growth to 4.4% in 2026.

The Eurozone: Structural Support and Attractive Valuations

The eurozone's 1.3% growth in 2025 is modest but resilient, supported by Germany's €500 billion infrastructure and defense spending plan and the EU's Readiness 2030 initiative, which includes €800 billion in defense spending. European equities have outperformed global peers in 2025, with the Euro Stoxx 600 returning 25% in U.S. dollar terms. Forward P/E ratios for European equities remain at a significant discount to U.S. counterparts, while PEG ratios suggest undervaluation given expected earnings growth according to Cambridge Associates. The EU's Green Deal and Grid Action Plan are further creating opportunities in renewable energy and infrastructure, sectors poised to benefit from AI-driven efficiency gains. However, the OECD notes that trade policy uncertainty and higher tariffs could still disrupt growth, with eurozone GDP projected to moderate to 1.2% in 2026.

Valuation Risks and Strategic Allocation

Across all regions, the OECD has sounded alarms about the fragility of AI-linked valuations. High asset valuations driven by optimistic earnings expectations pose a risk of abrupt corrections, particularly in the U.S., where the Buffett Indicator signals overvaluation according to Reuters. In China, while valuations appear attractive, geopolitical risks and regulatory shifts could disrupt momentum. The eurozone, though structurally supported, faces earnings growth that lags global averages by 4.6 percentage points in 2025.

For investors, the key lies in strategic allocation:
1. U.S.: Prioritize AI infrastructure leaders like NVIDIA but hedge against overvaluation with defensive sectors.
2. China: Target undervalued AI pure-plays and state-backed innovators, balancing exposure to geopolitical risks.
3. Eurozone: Capitalize on discounted valuations and policy-driven growth in infrastructure and green tech, while monitoring trade policy shifts.

Conclusion

AI is not merely a technological revolution-it is an economic stabilizer in an era of trade uncertainty. The OECD's forecasts reveal a world where AI investments can offset the drag of tariffs, but they also highlight the need for disciplined risk management. For investors, the path forward requires a nuanced approach: leveraging AI's growth potential while mitigating the risks of overvaluation and policy volatility. As the OECD notes, the global economy's resilience hinges on its ability to adapt-and AI is proving to be the engine of that adaptation.