DeepSeek and Trump 2.0: The Future of U.S. Industry

Alfred Lam - Mar 26, 2025

Portfolio Construction

Have Trump’s presidency and DeepSeek's launch altered the U.S. equity outlook? Join Munro Partners for an in-depth look at Trump 2.0 and the future of AI.

1. How is Trump’s presidency changing the trades and orders of the world?

We expect Donald Trump in power to be, on balance, positive for U.S. markets. Trump also has 11 billionaires in his cabinet, whereas Biden’s cabinet had a combined net worth of $100M. So many successful businessmen in government suggests a positive private sector tilt going forward. Ultimately, Trump 2.0 is looking to the private sector to help America grow, while also looking to make cuts in the public sector to shrink the deficit. These two forces could counteract each other, but if successful, will ultimately lower long-term interest rates and further stimulate private sector growth.

The signs we would look for are accelerated reshoring and regulatory rollback to provide the greatest stimulus. We have positioned the fund more towards the suppliers of power infrastructure in our climate area of interest (AoI) and lifted the infrastructure AoI via investments in CRH and Comfort Systems. We also consider how the rest of the world will react to Trump and have exposure to European defence names in our security AoI. Tariffs, and the uncertainty around them, are the obvious near-term risk, and we will maintain a low weighting to consumer names until this is resolved or priced in.

Should Trump’s policies prove successful in lowering the deficit and lowering long-term interest rates, then we suspect other countries will attempt to follow suit, which could eventually unlock better returns from lower multiple regions like Europe and China.

2. What lesson did investors learn from the launch of DeepSeek in China?

The main lesson we learned from DeepSeek is that the AI-exposed stocks are probably a lot more crowded than we had initially thought and are, therefore, in need of a correction before going higher.

Fundamentally speaking, we are not surprised to see the cost of AI coming down, and the only real news here is that it was a Chinese company that did it. In our view, this development is actually positive for the broader adoption of AI and overall growth in the space. The AI TAM is very large (i.e., not just about consumer-facing applications driving revenue uplifts), and consequently, cheaper AI, and now Chinese AI, means AI is more likely to be adopted across many industries and countries.

With alternative models now available, the large hyperscalers are now speeding up their AI investments. The initial fear was that the reduced cost of DeepSeek would lead to reduced capital expenditures (capex), but companies like Meta and Google responded to the news by increasing their AI-related capex, confirming the opposite. Data centre capex from the big four hyperscalers is now slated to grow to $350bn in 2025, from $250bn in 2024, up over 40%. This is significantly higher than consensus expectations of $285bn pre-results. Chinese data centre capex is also going higher, with Alibaba announcing a tripling of spending to $50bn over the next three years, looking to take advantage of these new models.

Ultimately, it is important to remember that this phenomenon of cheaper technologies speeding up the overall adoption of those technologies (i.e., Jeven’s Paradox) is not new. Consider the last five decades of the semiconductor industry, where the average semiconductor became exponentially cheaper, going from IBM’s mainframe breakthrough all the way to Apple’s iPhone; the hardware got cheaper, but the adoption of computing as a whole only accelerated as a result. We believe this time it is no different, and as hyperscalers continue to see better outputs with larger clusters of semis/more infrastructure, the risk of an air pocket gets pushed further to the right as AI becomes increasingly useful to corporations and individuals.

3. Are there any changes to the U.S. equity portfolio specifically with respect to Trump and DeepSeek?

As discussed above, we have lifted our exposure to U.S. onshore construction companies and the providers of power generation equipment. The U.S. is short electricity, and as Trump has big plans to become a leader in AI, DeepSeek will only accelerate those plans. We expect sustained/accelerated spending on U.S. power infrastructure and data centre capacity and have tried to position the fund to benefit from this.

We have made no material changes as a result of the arrival of DeepSeek.

This information is general information only and is not intended to include, or constitute, financial product advice. The views held by Munro Partners are current as of February 25, 2025, and are subject to change.

About the Author

Alfred Lam, MBA, CFA

Alfred Lam, Senior Vice President, Co-Head of Multi-Asset, joined CI GAM in 2004. He brings over 23 years of industry experience to his portfolio design, asset allocation, portfolio construction, and risk management responsibilities, which include chairing the multi-asset investment management committee and sizing investment bets to drive added value and manage risk. Alfred holds the CFA designation and an MBA from York University Schulich School of Business. He is a recognized leader in multi-asset investing in Canada. During his tenure, his team has won multiple investment awards, including the Morningstar Best Fund of Funds, and saw assets growing four-fold.

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