Markets on both sides of the Atlantic kicked off the week on a sour note, as Donald Trump’s latest tariff shake-up offered little for businesses and investors to cheer. European carmakers were among the hardest hit after EU leaders decided to freeze ratification of the trade deal signed last summer. They want clarification on the proposed 15% global tariff — what it covers and how long it would last — before moving forward. The US President expressed frustration, but signing an agreement without fully understanding the details is not the European way. As a result, the deal risks unravelling before it is even implemented — a significant waste of time and political capital.
Elsewhere, the AI fear trade spilled over into delivery and payment stocks after research from Citrini outlined a hypothetical — not predictive — scenario in which rapid AI disruption could trigger mass white-collar unemployment within two years, leading to weaker spending, software-loan defaults and broader economic contraction. DoorDash fell more than 6%, American Express more than 7%, Mastercard and Visa lost around 4–5%, and Uber dropped over 4%.
Yet if we follow that scenario to its logical conclusion — that AI destroys jobs and demand — it would ultimately undermine the very incentive to invest in AI. If no one is employed and no one can consume, there is little reason to produce, whether you are Adobe or McDonald’s. The narrative sounds apocalyptic.
Markets appear to be entering a phase where extreme scenarios generate outsized reactions — with one notable exception that warrants genuine caution: capital flows within the software-financing ecosystem.
Software stocks continue to look like falling knives — hardly inviting buyers to step in. But more concerning is that investors are seeking liquidity from instruments tied to software companies, including private credit vehicles.
This is where Blue Owl enters the picture. Blue Owl Capital, a major US alternative asset manager specialising in private credit, including loans to software companies, announced last week that it would halt redemptions and sell more than $1 billion in loans to insurers and large pension funds to manage liquidity pressures. The core issue is a classic liquidity mismatch: as private credit became more accessible to smaller investors with shorter time horizons, the risk of redemption pressure increased. When capital retreats amid rising leverage concerns, inflows and outflows no longer align. Private markets are not designed for sudden exits.
However, selling software-backed loans to insurers and pension funds effectively transfers that leverage — and that risk — to institutions that safeguard long-term household savings. While these are long-horizon investors, their broad exposure means that any mispricing of risk could have far-reaching consequences.
The comparison with past credit cycles is uncomfortable: when leverage migrates rather than disappears, vulnerabilities can resurface elsewhere in the system (think of subprime crisis). If such stress were to build, AI would not be the culprit — financial structuring would.
In short, when a heavyweight such as Blue Owl — focused on supposedly resilient enterprise software debt — restricts redemptions, it signals that leverage may be catching up with slowing growth, leaving broader economy vulnerable.
At the same time, heavy AI-related capital expenditure by Big Tech is no longer unequivocally reassuring investors. As AI fears spill into non-technology sectors, the rotation trade comes under pressure.
In this environment, gold appears to be reclaiming its safe-haven status. The price of an ounce rose more than 2% as the Nasdaq 100 fell 1%, restoring a healthier negative correlation after gold had recently been caught in broader risk selloffs. US 10-year Treasuries also saw demand, despite concerns that shifting trade policies could weigh on tariff revenues.
Elsewhere, China returned from the Lunar New Year holiday to a mixed backdrop, as the new tariff regime lowers effective tariff costs for countries such as Brazil, India, Canada, Mexico and Vietnam. By contrast, the EU and the UK — which believed they had secured favourable trade arrangements — now appear more exposed under the latest reshuffle. With uncertainty high and markets near record levels, the risk of a correction is rising. A correction, however, would also create opportunities once volatility subsides.
Finally, crude oil continues to advance on rising speculation about a potential US military operation involving Iran, even as nuclear talks persist. US crude is approaching the $68 per barrel level on geopolitical concerns. Further escalation could push prices beyond $70 and potentially toward $80 per barrel. However, geopolitically driven rallies tend to prove temporary, suggesting that any sharp upside move may eventually give way to a correction. Timing will be critical. In the meantime, energy stocks continue to outperform sectors pressured by AI fears. If one sector is structurally insulated from AI anxiety, it may well be energy: AI infrastructure is power-intensive, and the rapid expansion of data centres implies sustained demand for energy providers.
