Post-Davos slump as reality bites

Jan 30, 2025

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WELL, THAT WAS QUICK. After one of the most upbeat World Economic Forums in recent memory, corporate America was confronted with a new reality Monday as stock markets slumped..

Trump bump meets reality: Concerns that Chinese startup DeepSeek has come up with a powerful new AI model that can do things better, faster and cheaper than the U.S. front-runners rattled stock markets, wiping a whopping $600 billion off chip-maker Nvidia and plunging the Nasdaq into disarray.

Down with a bang: The speed of the market reaction was a sobering antidote to the Donald Trump-fueled exuberance we saw last week in Davos, where corporate America exulted in their recent bumper earnings and the promise of deregulation coming from the White House.

Keep calm and carry on: Markets recovered by midweek, even as doubts continued about the scale of investments U.S. tech giants are planning. The route was limited to the tech sector with big financial institutions still looking like safe bets. Multiple C-suite executives said privately and publicly at Davos that they believe the fundamentals of the U.S. economy are sound, pointing to strong GDP data and America’s continuing divergence with Europe since the global financial crisis. Let’s see how things stand at next year’s Davos.

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Europe's plan: After sustaining a bashing in Davos for its lackluster economy (there are yet more disappointing figures out this morning), the European Union came out with its own “Competitiveness Compass” proposal Wednesday.

“We have a plan,” declared European Commission chief Ursula von der Leyen in Brussels. The problem, of course, is ensuring all of the EU’s 27 (very different) member countries agree.

Details: The proposal promises simpler rules and a reduction in red tape, new AI initiatives and a European Savings and Investments Union, in a bid to progress a long-promised Capital Markets Union for the bloc. POLITICO’s Brussels team has the full rundown here. But given the EU’s penchant for laborious decision-making, it could be a long road ahead.

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PLAYBOOK INTERVIEW

REINING IN BIG TECH: Playbook caught up with Davos regular Helle Thorning-Schmidt, co-chair of Meta’s Oversight Board and the former Danish prime minister, on the World Economic Forum sidelines. Reminder: Meta set up the body just over four years ago as an arms-length oversight board to weigh in on decisions related to content moderation — a political hot potato, particularly as tech giants gain increasing sway over media consumers and voters.

U-turn: The board was caught off guard by Meta boss Mark Zuckerberg’s decision this month to ax fact-checkers in the U.S. The move delighted the political right, and ever since, civil society groups fighting falsehoods online have faced a barrage of political attacks. But having voiced opposition to the move, Thorning-Schmidt argues the previous system was always problematic.

Time for change: Thorning-Schmidt said the board supports the idea of a new, better system. “Anecdotally we’ve had the impression that the fact-checking in particular in the U.S. was perceived to be biased. When fact-checking is perceived to be biased, you probably need to change it,” she said. “We’re quite excited about maybe a system that could be an improved version of community notes, which is crowdsourced.”

Wikipedia leads the way: Thorning-Schmidt pointed to Wikipedia's success as a “crowdsourced fact-finding system.” (Fun Davos fact: Wikipedia co-founder Jimmy Wales, a Davos regular who attended this year’s forum, met his wife Kate Garvey at WEF.)

Hate speech is the biggie, Thorning-Schmidt said. “You have to balance free speech with other human rights and particularly harmful content, content that can harm another person, another group of people. Meta will still have to do that," she warned.

Prioritizing resources: One idea Thorning-Schmidt suggested is a sort of hierarchy of harmful content, with Meta directing resources better to address those at the top. “They need to prevent the most hateful speech on line, maybe an extra gear for the most harmful content like child abuse and terrorist content that could trigger terrorism or violence."

Tech bro culture: With Elon Musk, Zuckerberg and co. riding high in U.S. political culture, is Thorning-Schmidt worried about their dominance? “I like the idea that in a country like America, which is the strongest economy in the world, that politicians and tech have a conversation. I think this is so important,” she said.
“But obviously, as a Democrat, I want policies and politics to be decided by all of us and all of us to have a say in policy and any decision-making. I hope that even though tech has got the ear of the U.S. administration — and it’s very clear that they do — that they won't be the only ones that are being listened to, but all of us as citizens are being listened to.”

The Brussels effect: At a time when the Trump administration, backed by the billionaire owners of tech companies, is slamming EU tech regulation, Thorning-Schmidt had reassuring words for Brussels: “I think that Europe has done an amazing job in trying to regulate this space. I have been a European lawmaker, in the European Parliament, and in government, so I like the European way of doing things and being quite considered about how we regulate. I like the DSA, I like the AI act,” she said, referring to flagship pieces of tech regulation.

But Thorning-Schmidt also had a warning: “I would love more tech companies to be European. I would love for the AI revolution to happen primarily in Europe. But that’s not how it is. You always have to balance regulation with innovation. And I hear American companies say that the last place they will introduce new features in is Europe. And to be honest, that makes an impression on me — that they're literally saying that, for example a Google Maps, might be last in Europe, that should worry us.”

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THE FORGOTTEN WAR

FOREIGN AFFAIRS took something of a back seat at last week’s World Economic Forum as Trump’s inauguration sucked most of the oxygen from the room. But behind closed doors, senior figures from the aid and NGO world pow-wowed about some of the big international crises facing the world (and gossiped about what the new U.S. admin would mean for their jobs and work).

Playbook had a post-Davos catch-up with one of those attendees, United Nations High Commissioner for Human Rights Volker Türk.

Early signs: Sudan was one of the first places Türk visited after his appointment in 2022, honoring the women and students who had been involved in overthrowing autocratic President Omar al-Bashir. There were already signs of the power struggle between the Sudanese Army General Abdel Fattah Al-Burhan and the Rapid Support Forces that would erupt in civil war months later. “I could see at the time that there were huge tensions between the two, that it was already possible.”

On the ground: Today, the situation in Sudan is “an absolute disaster,” said Türk, with “the essential erosion of a whole country, sexual violence, famine conditions. Essentially it is two men and their armies fighting it out — who has control over resources, who has control over the territory and essentially, who can dominate.”

Laying blame: A handful of U.N. staffers are back in Port Sudan, with more also in neighboring countries which are absorbing up to 11 million migrants fleeing the chaos. “There is absolutely no respect for international military law by both sides,” said Türk. “In particular, we have some gruesome reports about what RSF is doing and its affiliated militias in Darfur. But also, the indiscriminate bombardments by the Sudanese Armed Forces.”

When is genocide not genocide: But the U.N. has not followed the U.S. decision to brand the actions of the Rapid Support Forces as genocide, taken in the final weeks of the Biden administration. “Genocide is a very, very difficult thing to determine. The threshold is very high. Generally, it is a court that has to come to this conclusion,” Türk said. “We can document the facts, we can apply the law … what we can definitely say is that atrocity crimes, war crimes, potentially crimes against humanity may well have been committed.”

Proxy wars: The role of other players in the bloody war is also getting attention, with the UAE under pressure from U.S. lawmakers for supplying weapons to the RSF. “Whoever has influence over the parties need to use it,” said Türk. “Whoever supplies arms to either of them needs to know that there is an obligation under international law that they are not used for the commitment of crimes.”

Trump effect: The U.N. is braced for impact, with Trump’s decision to suspend of foreign aid already hitting the agency. “I hope it’s just a suspension. We need to work on making sure that that gets lifted as quickly as possible,” said Türk. “We will have to make the case how important human rights are in this world, and how important it is in the national self-interest of the United States.”

Really? Convincing Trump will be, let’s say, an uphill battle. But NGOs are ready with some talking points. “You need international relations, you need to negotiate … Human rights is a stabilizing factor. If you want to do business with any country, you need some level of stability. Human rights provides this.”

It also gives an early indication of when things can go wrong, he said.

Early-warning system: “Take Bangladesh. We saw the red flags for a couple of years — the more restricted civil space, clampdown on freedom,” said Türk. “When the red flags go up and there’s no reaction to it, at some stage something will happen, so it’s worth investing in human rights because they are deemed a tool of not only early warning but also hopefully trigger action.”

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SEEN AND HEARD

MIGRATION BATTLES: Friedrich Merz, the man widely tipped to be the next leader of Germany after an election next month, brought forward proposals to radically tighten the country’s migration laws — an indication of the tilt of the likely next government.

Details: The German parliament on Wednesday narrowly passed a motion to restrict immigration, including rejecting asylum-seekers at the border, with the help of votes from the far-right Alternative for Germany (AfD) party.

Fighting back? German parliamentarians will start debating today whether the AFD is anti-constitutional, the first step to potentially banning the party beloved by Elon Musk. But many political leaders argue such a move would backfire.

SCANDIS STICK TOGETHER: At a time when isolationism seems to be back in vogue, here’s a pic to warm your heart: Denmark’s Prime Minister Mette Frederiksen (a recent Global Playbook interviewee), hosting the Finnish, Norwegian and Swedish leaders in her home in Copenhagen.

WOMEN RULE: Congratulations to Belén Martínez Carbonell, who replaces Stefano Sannino as the secretary-general of the EU’s foreign policy wing, the EEAS, this Saturday. She joins a pantheon of women at the top of EU officialdom (the part that actually gets things done), including Secretary-General of the Council of the European Union Thérèse Blanchet, and the European Commission’s sec-gen Ilze Juhansone.

NEW JOB 2: Gina Raimondo, commerce secretary in the Biden administration and former governor of Rhode Island, is joining the Council of Foreign Relations as a distinguished fellow.

NEW JOB 3: Former Irish leader Leo Varadkar is joining Harvard Kennedy School’s Center for Public Leadership as a Hauser Leader.

POWER PLAY: Host of POLITICO’s Power Play podcast Anne McElvoy sits down with LinkedIn co-founder Reed Hastings to talk AI, regulation and Elon Musk. Listen here.

PROGRAMMING NOTE: Global Playbook will be coming to you from the Munich Security Conference next month.

THANKS TO: Global Playbook Editor Zoya Sheftalovich.

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