Navigating the New Cold War Economy: Investing in Germany's Tech Renaissance

The global economy is entering a new era of systemic competition, where the U.S.-China rivalry has redefined trade, technology, and geopolitical alliances. In this high-stakes landscape, Germany under Chancellor Friedrich Merz is positioning itself as a strategic linchpin of European resilience. Merz's policy of Systemwettbewerbsfähigkeit—systemic competitiveness—offers investors a roadmap to capitalize on industries insulated from trade wars while avoiding overexposure to volatile U.S.-China supply chains. Here's how to profit from Germany's tech-driven realignment.

The Geopolitical Pivot: From Export Champion to Strategic Autonomy

Germany's traditional economic model, built on export dominance and global supply chains, is under siege. U.S. tariffs, Chinese subsidies, and energy crises have exposed vulnerabilities in sectors like automotive and manufacturing. Merz's response? A radical shift toward strategic self-reliance.

The chancellor's agenda focuses on three pillars:
1. Reducing dependencies on China and the U.S., particularly in semiconductors, AI, and defense tech.
2. Boosting EU internal demand through infrastructure spending and “European preference” in public procurement.
3. Fostering innovation ecosystems to create “strategic indispensability” in cutting-edge sectors.

This pivot is not just about risk mitigation—it's about turning Germany into a geoeconomic powerhouse.

The Merz Blueprint: Where to Invest

1. Semiconductors & Advanced Manufacturing

Germany's semiconductor sector is undergoing a renaissance. Under the EU's European Chips Act, the government has committed over €10 billion in subsidies to attract global giants like Intel and TSMC. Domestic leaders like Infineon Technologies (IFX:GR) are already scaling production of automotive and industrial chips, with 50% of their revenue now tied to EU-based manufacturing.

Investors should prioritize firms with dual-use capabilities (civilian and defense applications) and EU-funded R&D pipelines.

2. Defense & Infrastructure Tech

Merz's plan to build Europe's strongest conventional army by 2030 will fuel demand for defense tech. Companies like Rheinmetall (RHM:GR) and Diehl Defence are poised to benefit from contracts for drones, cyber systems, and armored vehicles.

Meanwhile, infrastructure spending—aimed at reducing energy and logistical dependencies—will boost firms like Siemens Energy (SI:GR), which is leveraging AI to optimize grid resilience.

3. Green Tech & Digital Sovereignty

The EU's push for climate neutrality has created a $1 trillion opportunity in green tech. German firms like Bosch (ETR:BOS) are leading in hydrogen fuel cells and EV battery recycling, while SAP (SAP:GR) is fortifying European data sovereignty with cloud infrastructure.

Risks to Avoid: Overexposure to U.S.-China Supply Chains

Not all German industries are winners. Sectors deeply reliant on U.S.-China trade, such as automotive, face headwinds. While companies like Volkswagen (VOW:GR) continue heavy investment in China's EV market, they remain vulnerable to tariffs and geopolitical friction.

Investors should avoid firms where 60%+ of revenue comes from U.S.-China trade or where supply chains lack diversification.

The Bottom Line: Act Now on Germany's Geoeconomic Play

The U.S.-China rivalry has created a binary choice: risk exposure or strategic resilience. Germany's focus on systemic competitiveness offers a clear path to the latter.

Recommendations:
- Buy: Infineon (IFX:GR), Siemens Energy (SI:GR), Diehl Defence (DEH3:GR).
- Avoid: Auto firms with China-dependent supply chains (e.g., BMW, Daimler).
- Monitor: EU policy updates on “Made in Europe” clauses and export controls.

The window for investing in Germany's tech renaissance is narrowing. As Merz's policies take hold, companies building European-centric supply chains and dual-use tech will outperform in the years ahead. This is not just about profit—it's about owning a stake in the future of geoeconomic power.

Stay ahead of the curve. Deploy capital where geoeconomics and innovation intersect.