BREAKINGVIEWS-The Week in Breakingviews: Davos makes history

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Peter Thal Larsen

LONDON, Jan 24 (Reuters Breakingviews) - Welcome back! I just returned from the World Economic Forum in Davos, where the elite talking shop hosted historic events – for once. My observations on a frantic week are below. As always, let me know what you think. Was this newsletter forwarded to you? Sign up here to receive it free every Saturday.

OPENING LINE

“The Trump administration’s embrace of artificial intelligence will face an affordability challenge in 2026.”

Read more: US midterm elections are ripe for AI backlash.

FIVE THINGS I LEARNED FROM BREAKINGVIEWS THIS WEEK

1. There are more active private equity firms in the world than McDonald’s outlets in the United States.

2. Walmart-owned PhonePe processes 46% of transactions going through India’s bank-to-bank mobile system.

3. Spot prices of beef used to make Nathan’s hot dogs are up 84% since 2020.

4. The value of global stock market listings last year was still a third below its 2021 peak.

5. Ukrainian banks have fewer bad loans than before Russia invaded.

POLES APART

The conventional critique of the World Economic Forum is that it’s a talking shop where nothing happens. Not this year. The elite gathering in Davos provided a scenic backdrop to geopolitical thuggery, economic bombast, and frenzied diplomacy. In the end, participants and financial markets breathed a sigh of relief that a showdown over Greenland had been averted. Yet future historians may mark the week in the Swiss mountain resort – held under a banner of “The Spirit of Dialogue” – as the moment the eight-decade-old transatlantic military alliance definitively unravelled.

The immediate crisis began and ended with Donald Trump. The U.S. president’s threat to slap fresh tariffs on several European countries unless the United States was allowed to buy Greenland prompted protests and hurried discussions about retaliation. It culminated on Wednesday with Trump’s rambling Davos speech, where he pledged not to take the Danish territory by force but issued a threat with all the subtlety of a mob boss: “You can say yes and we will be very appreciative. Or you can say no and we will remember.” A few hours later, the former reality TV star declared he had reached a deal with NATO Secretary General Mark Rutte. Although their agreement to cooperate on security in the Arctic remains vague, stock markets rallied on both sides of the Atlantic.

Even so, European leaders must now confront a future outside the American security umbrella. They have increased defence spending in response to Trump’s justified complaint that they were contributing too little, boosting the stock market appeal of European defence manufacturers like CSG CSG.AS. But the president’s transactional approach devalues any promise of future support. Even before the latest showdown, many military analysts questioned whether the U.S. would step in if Russian President Vladimir Putin threatened a NATO member. The Greenland crisis confirms the club urgently needs alternative arrangements.

The consequences of ripping up the global order stretch far beyond military matters. As Canadian Prime Minister Mark Carney declared in a powerful and clear-eyed Davos speech on Tuesday: “We are in the midst of a rupture, not a transition.” Behind closed doors, financiers and business leaders debated the ongoing consequences for trade, capital flows, and technology. One recurring theme was that investors are diversifying away from the United States, seeking fresh opportunities in Europe, the Middle East and Asia.

The world cannot collectively dump U.S. financial assets without a corresponding shift in trade flows. Even so, large institutions that previously slashed their holdings of Chinese stocks are rebuilding exposure to the world’s second-largest economy. Financial protectionism is also on the rise. One private equity executive said a Scandinavian institution had ruled out investing in funds managed by an American firm. Denmark’s AkademikerPension declared it was selling its $100 million portfolio of U.S. Treasury bonds, prompting Scott Bessent to dismiss the investment – and Denmark itself – as “irrelevant”.

Trump’s Arctic antics drowned out the other main topic of debate: artificial intelligence. That was partly because the assembled tech tycoons, including Nvidia’s NVDA.O Jensen Huang, Microsoft’s MSFT.O Satya Nadella and Tesla TSLA.O boss Elon Musk, had relatively little new to report about the revolutionary technology. Consumers are embracing large language models: Meta Platforms META.O executives say over a billion people a month use AI tools embedded in WhatsApp, Instagram and Facebook. However, companies are often getting stuck in what one consultant dubs “pilot purgatory” – the limbo state that afflicts many corporate AI experiments.

Meanwhile, discussions about the environment and climate change – previously a key Davos theme – were pushed to the sidelines. Companies and consultants eager to tackle green issues turned to words like “resilience” as cover for conversations about environmental sustainability. The linguistic gymnastics mask a sobering shift: while previous debates focused on limiting global warming, the focus now is on coping with a hotter planet.

Finally, the Davos crowd inadvertently provided a lesson in how false information spreads. Ahead of Trump’s arrival, multiple executives told me with great certainty that mobile phone signals in the resort would be switched off or scrambled during the president’s visit as a security precaution. Delegates claimed to have heard the news from organisers, and brandished forwarded WhatsApp messages. The story was bogus. On Wednesday afternoon I strolled down the town’s main drag, streaming Trump’s speech on my phone with a full 5G signal. The Davos crowd often frets about the dangers of technology spreading disinformation. On this evidence, global elites are just as gullible as everyone else.

CHART OF THE WEEK

Reciprocal deposits are a curious feature of U.S. banking. Though federal insurance on bank deposits is capped at $250,000, customers can spread their savings between multiple institutions. Technology enables them to do so at scale. The sums benefiting from this workaround have almost tripled since 2022, to $438 billion. Now the spotlight is pointing at IntraFi, the private equity-backed firm which dominates this business. Stephen Gandel explains what’s at stake.

THE WEEK IN PODCASTS

The mining industry is gripped in a frenzy of mergers. After BHP’s BHP.AX failed tilts at Anglo American AAL.L, Rio Tinto RIO.L and Glencore GLEN.L are now talking about a $215 billion tie-up. George Hay and Karen Kwok joined Aimee Donnellan and Jonathan Guilford on the Viewsroom to debate what’s going on, and what will happen next.

Venezuela was the focus of this week’s episode of The Big View. Following the Trump administration’s dramatic arrest of the country’s president, I talked to Ed Crooks, vice chair of the research firm Wood Mackenzie, about the murky economics and politics of the country’s oil industry.

PARTING SHOT

The high price of rice is a sticky political topic in Japan. The cost of the staple, which has more than doubled since 2024, helped clear the way for Prime Minister Sanae Takaichi to take office last year. But dealing with the problem is harder. Hudson Lockett explains the humble grain’s tricky politics.

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(Editing by Liam Proud; Production by Oliver Taslic)

((For previous columns by the author, Reuters customers can click on LARSEN/peter.thal.larsen@thomsonreuters.com))