Look at an acceleration of the global race for building mega data centres in 2025 to meet the increasing demand for data to leverage the expanding AI potential. What has been a market dominated by deep pockets companies, especially US and China Big Tech, is evolving into an international race with major implications. In China, data centres development is now an important part of Beijing's strategic goal of achieving global leadership in AI and in digital infrastructure.
In India, data centres capacity is expected to double in the next three years, driven by government policies and domestic and foreign investments; smaller players are getting active such as Malaysia, becoming a regional hub for data centres, the UK, Germany or the Nordic countries. Expect a number of issues raised by the multiplication of mega data centres such as privacy protection, cybersecurity, environment concerns generated by the huge power generation capacity required by these centres, coming to the fore in 2025.
Increasing focus on - and demand for - sustainable technology
As the pressure to fight climate change keeps growing and deadlines get closer to lower emissions levels, corporations will increasingly be looking at ways for leveraging AI models to reduce their environmental footprint, especially in areas such as optimisation of supply chain management, use of materials or waste reduction. Expect a new wave of innovations in the domain of renewable energy with a focus on expanding the efficiency of solar and wind power, and development of new sources of offshore renewable energy.
Expect innovations in the domain of mobility with enhanced battery technologies, carbon capture and storage technologies, and new developments in the agritech domain to reduce water waste and pesticide use. We should see a greater involvement of impact investors, family offices, in sustainability technologies as well as more startups getting into that domain.
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Diversification of funding sources for startups
Shifting capital markets will increasingly drive startup founders to diversify their funding sources beyond Venture Capital. The year 2025 will see more recourse to alternative funding sources. Equity crowdfunding is expected to achieve mainstream recognition in several countries, attracting different kinds of investors. Corporate Venture Capital, as well as family offices are expected to be more active in funding startups, whether because of the increasing need to connect with technology innovators, or because several family offices are positioning themselves as impact investors, contributing to the developments of clean and sustainability tech.
While angel investors have been quite active in funding startups, 2025 will see an expansion of Cross-border angel networks. This growing diversification of funding sources will allow founders to shape their capital acquisition strategy more fittingly to their need and their long-term goal.
A multimodal world of innovation hubs
2025 will confirm the emergence of a new global innovation landscape in which tech hubs keep developing and multiplying in all parts of the world, whether in Mexico City and Sao Paulo, or Bengaluru, Chennai, Hyderabad, Mumbai, or Beijing, Shenzhen, Shanghai, or the Houston Innovation Corridor, Austin, Boston or Phoenix, Tel Aviv, the Rhine-Main and Rhine-Neckar metropolitan regions in Germany, Stockholm, London or Toronto, Nairobi, Singapore or Dubai.
This decentralisation of innovation capabilities is reducing what had been an over-dependency on very few innovation powerhouses. These hubs also act as multipliers of economic growth, attracting talents and new activities with a major impact on national development. This decentralisation of innovation will be another factor in the present process of reshaping the geopolitical landscape, spurring new technology and R&D alliances.
Escalation of government and public scrutiny of the Big Tech
Microsoft, Google, Meta, Amazon will be even more in the bull’s eye of the European Commission and subject to increased suspicion and scrutiny from the public in the US as well as in the EU, accused of monopolistic practices detrimental to consumers. In the EU, the denomination of the new competition commissioner as commissioner for “clean, just, and competitive transition” is an indication that she will pursue – and maybe amplify – the policy of her predecessor who fought several lawsuits against US Big Tech.
In the US, however, the aggressive antitrust policy against Big Tech and big business in general, pursued by the present head of the Federal Trade Commission, will come to an end with the start of the Trump administration. Big tech and big business executives have been queuing to meet Mr. Trump to ask – and get – her removal. However, expect the public pushback against “hyper powerful” Big Tech to continue and acquire additional momentum, fed by national consumer organisations and other NGOs.
An exacerbation of the US-China technology war
Expect an intensification of the US-China technology confrontation in 2025, as US concerns grow about China’s unrelenting technological catch-up process putting into question America’s global prominence. This intensified confrontation is playing out in almost every domain and especially in AI, 5G, semiconductors, with both countries striving for technological supremacy.
Despite increasingly stringent restrictions enforced on technology transfers by America and its allies, China will continue narrowing the gap, maybe at a slower pace in semiconductors, or will confirm its parity with the US for instance in new materials technology or will reinforce its superiority in sectors such as renewable energy, EVs and battery technology, supercomputing or hypersonic aviation. The evolution of this technology confrontation will have a growing geopolitical impact, with continuous “preventive” measures from the part of the US, and China’s new initiatives to accelerate its technological rise.
Watch out for more collateral damage of the US-China tech war
The trend of decoupling of the US-China technology ecosystems will accelerate in 2025. Increasing obstacles to technology transfers will continue generating disruptions of global supply chains. Stringent restrictions on exports of semiconductors to Chinese firms will keep creating shortages in various industries. The leveraging by China of its quasi monopoly on rare earth metals crucial for high-tech products will aggravate uncertainties about supply and prices of these materials for the US and its allies. Countries and companies in-between will be facing more pressures to decide which side they want to align themselves with.
Business logic and economic considerations will sometimes be superseded by geopolitical imperatives. Only few countries, given their geographic strategic position or a specific value they represent for both camps, will be able to play one against the other and escape difficult choices.
Europe falling further behind
Europe will continue to fall further behind the US and China in 2025 in technology development. The gap in R&D investment between Europe and America and China will continue to widen, limiting Europe’s ability to compete successfully in cutting-edge technologies such as AI, 5G, and quantum computing, new materials. This leads to a technology talent brain drain as high-skilled tech professionals are increasingly attracted to other regions with greater financial resources, a more vibrant innovation ecosystem and a greater eagerness for technology adoption.
Another impediment will remain: The regulatory straitjacket enforced by Brussels bureaucrats, stifling innovation. This innovation gap means a limited ability of European corporation to leverage disruptive technologies for cost cutting and efficiency improvement, compared to their American or Chinese competitors, with a widening overall productivity gap that will continue unabated in 2025.
Digital sovereignty as a national priority
2025 will see more actions from several countries to achieve a greater digital sovereignty by increasing control on their digital infrastructure, technology innovation ecosystems and the data generated domestically. Data is now addressed and managed as a strategic national asset in a context of global geopolitical and technological polarisation. More countries in 2025 will be stipulating that all data generated domestically be stored and processed locally. Whether it is the EU, China, India or even the US, there is the same drive towards creating national sourcing of digital infrastructure and trying to rely less on foreign ones. The semiconductor and the AI sectors are a major focus of this digital sovereignty trend, with huge investments in chip manufacturing facilities. This drive towards digital sovereignty goes with a greater emphasis on cybersecurity as a priority to protect strategic national assets - digital infrastructures and data - from ever more sophisticated threats.
The big comeback of the industrial-military complex
2025 will confirm the big comeback of the industrial-military complex, as, trusting conventional wisdom, war would seemingly be everywhere on the horizon. When Dwight Eisenhower alerted against the Industrial-Military Complex in his farewell address in 1961, he was speaking about the US. This trend is now sweeping a huge part of the world. The new NATO secretary general wants Europe to go into a “war economy” mode and asks NATO countries “to make sacrifices” to boost military spending beyond the 2 per cent of GDP target some of them cannot even achieve.
While the departing Biden administration submitted to Congress a request for a US$ 850 billion military budget, the Pentagon would want more to confront China’s rising military capabilities. In India, the allocation for the Ministry of Defence was the highest of all the ministries of the Union in the financial year 2024-25. Military chiefs and executives of the defence sector will keep clamoring for ever more resources to prepare their respective countries to face “existential threats”. And wait for President Trump to twist the arms of US allies, including Japan, to spend more and more on armaments, hoping that a great part of the money allocated will feed the growth of the US defence sector.
Need for a silver lining? Many startups will benefit from government funding to develop new technologies if they have a link with defence.
(The writer is the chairman of Smadja & Smadja Strategic Advisory and founder of the India Global Innovation Connect)
Disclaimer: These are the personal opinions of the writer. They do not reflect the views of www.business-standard.com or the Business Standard newspaper