Allianz Trade: Economy Divided into Three Speeds by AI and Geopolitics

Allianz Trade's 'Sector Atlas 2026' report reveals a global economy bifurcating into three distinct speeds, driven by artificial intelligence investments, geopolitical tensions, and market fragmentation. The report forecasts global growth to ease to +2.5% in 2026, before rebounding to +2.9% in 2027. AI investments are projected to significantly bolster US growth, though the economic landscape would be markedly slower without this pillar.

The semiconductor industry is benefiting from the AI supercycle, with global chip sales potentially reaching $1.5 trillion. Hyperscaler investments in cloud infrastructure are also expected to see substantial growth. Concurrently, demand for software and IT services remains robust, but investor confidence has been shaken by concerns regarding AI's impact on existing solutions. Computer and smartphone volumes are declining, with industry players contending with component shortages and squeezed margins.

Traditional cyclical sectors, including automotive, construction, retail, and textiles, are facing headwinds from higher interest rates, geopolitical turmoil, and trade disputes. Chinese EV competition is particularly affecting Europe. In construction, data center demand is supporting the sector, while residential and commercial real estate demand remains soft. Retail is experiencing a consumer shift towards lower-cost options, eroding margins. The chemicals sector in Europe faces challenges due to high energy costs, impacting its competitiveness against the US and Middle East.

Established defensive sectors like pharmaceuticals continue to benefit from strong patents and pricing power, insulating them from global disruptions. In the energy sector, oil and gas companies, especially in the US, are profiting from elevated oil prices, while renewable energy may find support as energy policies increasingly emphasize sovereignty and resilience.

The report indicates that corporate earnings remain generally resilient, but growth is increasingly concentrated in AI, defense, and energy. US revenue growth was strong, particularly in semiconductors and energy. European earnings also showed strength, with growth concentrated in similar areas, while automotive, transportation, and retail continued to struggle with weak demand and high financing costs.