Welcome to this week’s edition of Geopolitics & the Day After. Each week, we curate and synthesize key developments from global politics, economics, and financial markets, drawing from a wide range of trusted sources. Our goal is to provide you with a clear, concise, and insightful overview of the forces transforming the world today and shaping tomorrow. Below is an overview of what we cover this week:
Geopolitics traces how a year of flattery diplomacy toward Washington has given way to open European rebellion, as Russia, Sudan’s Rapid Support Forces, and SpaceX each show how quickly power fills a vacuum once a traditional guarantor of order loses credibility.
Geoeconomics examines how a record $2.8 trillion first half of dealmaking, SoftBank’s leveraged AI bets, and China’s stalled consumption rebalancing are together straining the trade relationship between Beijing and Brussels.
Global Junctions covers how the infrastructure of security and commerce, from data centers and subsea cables to lithography machines, is drawing new scrutiny, even as early signs in AI token pricing raise questions about the capital flowing into it.
Global Trajectories follows a rotation out of tech-led markets and Michael Burry’s expanded short bets, alongside the rerouting of undersea cables away from Chinese waters and a parallel shift underway in how physicists think about dark matter.
Geopolitical Concerns
‘There Is No Going Back’: The Inside Story of Europe’s Rupture With America
Joe Parkinson, Drew Hinshaw, and Daniel Michaels, WSJ
Ian Bremmer, Project Syndicate
How a Sudanese Militia Built a Military and Economic Empire
The Economist
The Geopolitics of SpaceX and Elon Musk
Ravi Agrawal and Quinn Slobodian, Foreign Policy
For a year, Europe’s leaders managed Donald Trump through what the continent’s press dubbed flattery diplomacy, with NATO Secretary-General Mark Rutte engineering a headline defense-spending pledge of 5% of GDP by 2035 to keep Washington committed to the alliance. That strategy reached its limit at a January emergency session in Brussels, where nearly thirty heads of government spent five hours debating how to manage what amounted to a structural breakup with the United States. French soldiers stood alongside Danish special forces in Greenland after Trump briefly threatened to seize the territory, and Emmanuel Macron told the room there was no going back. The result has been a quiet but accelerating campaign of de-Americanization, with France and the Netherlands stripping American software from government systems and European capitals studying how their American-made weapons would function without Washington’s authorization. Canadian Prime Minister Mark Carney, whose ascent was itself triggered by Trump’s threats to annex Canada, has become the intellectual anchor of this shift, arguing the West’s dependency on a single unpredictable country is untenable. Even Italy’s Giorgia Meloni, once the strongest defender of engagement with Trump, has spoken less favorably of him.
This unraveling of alliance trust is compounding a set of separate but related power vacuums elsewhere. Vladimir Putin, cornered by a war of attrition that has cost roughly 450,000 Russian lives for territorial gains that have barely moved in three years, faces a widening risk of escalation as Ukraine’s strikes on Crimea and the Russian interior erode the narrative that the war remains contained. Russian casualties now outnumber new recruits, and Putin is still betting that Trump will undermine Ukraine’s resupply while elections next year in France, Britain, and Germany unsettle European support for Kyiv. In Sudan, a similar logic of fragmentation plays out through the Rapid Support Forces, which has built a transnational military and business empire spanning Chad, Libya, Ethiopia, and the Gulf, sustained by Colombian mercenaries and Emirati backing, exploiting the vacuum left by an absent international response. In orbit, Elon Musk’s SpaceX has assembled its own concentration of power, controlling over half of global satellite launches, and its role in the Russia-Ukraine war has shown that a single executive can affect a battlefield’s connectivity. Each case reflects the same structural pattern: when traditional guarantors of order (an alliance, a state, an international system) lose credibility or capacity, non-state and personalist actors expand to fill the space, and the resulting order becomes harder to reverse the longer it persists.
Geoeconomics
Mega Takeovers Drive Record $2.8tn in Dealmaking
Ivan Levingston and Oliver Barnes, Financial Times
Son Remakes SoftBank in His Own Image
David Keohane, Financial Times
The Hottest Stock Markets Lead to the Biggest Losses
Jeff Sommer, New York Times
Stephen S. Roach, Project Syndicate
Are the EU and China Heading for a Trade War? 5 Things to Know
Clement Ngu, Nikkei Asia
Mergers and acquisitions worth $2.8 trillion were agreed globally in the first half of 2026, a 49% increase year-over-year. Loosened antitrust enforcement under the Trump administration and the scramble to position for AI both pushed companies toward mega-mergers rather than smaller deals, and the overall number of transactions actually fell to its lowest level since 2020. The wave included SpaceX’s $60 billion all-stock acquisition of the coding tool Cursor and Rocket Lab’s $8 billion purchase of satellite operator Iridium, both signs that the AI and space infrastructure race is now being financed as much through acquisition as fresh capital. Masayoshi Son’s SoftBank embodies the concentration risk underlying this boom. Having overtaken Toyota as Japan’s most valuable company, SoftBank has bet roughly $64.6 billion on a stake near 13% in OpenAI, financed partly through leveraged margin loans against its Arm holdings. Analysts at Jefferies have drawn a direct comparison to WeWork, the SoftBank-backed collapse that once nearly ended Son’s career. A century-spanning dataset from Arizona State University’s Hendrik Bessembinder makes a related point. His data show that the market’s worst wealth-destroying stocks, from WorldCom to Rivian, were consistently the hottest names of their era before they crashed, while the ten best-performing companies of the past hundred years generated 29% of all market wealth against barely 1% destroyed by the ten worst.
China’s household consumption is still stuck at 39.9% of GDP, essentially unchanged from the 2005 level that first alarmed then-Premier Wen Jiabao, and retail sales fell year-over-year in May for the first time in three and a half years. That weak domestic demand keeps pushing Chinese exports outward, and Europe is absorbing much of it. The EU’s goods deficit with China reached 359.8 billion euros in 2025, effectively a billion euros a day, and Volkswagen has cited Chinese competition in EVs and batteries as one reason it may cut up to 100,000 jobs and close four German plants. EU Trade Commissioner Maros Sefcovic and Chinese Commerce Minister Wang Wentao agreed in early July to open a new ministerial dialogue, with Brussels aiming for tangible results by October. Brussels has also moved on narrower fronts in the meantime, fining Chinese e-commerce platform Temu 200 million euros in May for selling unsafe products and introducing a new customs fee on low-cost parcels shipped from China. Brussels is also developing sharper trade tools of its own, including a possible European analog to Section 301 of the U.S. Trade Act, though its existing Anti-Coercion Instrument has never actually been used. China, for its part, has signaled it is prepared to let relations deteriorate further rather than concede ground on subsidies.
Global Junctions
Wars Are Blurring Lines Between Corporate and National Security
Stephen Kalin and Daniel Michaels, WSJ
Has China Obtained the World’s Most Important Machine?
The Economist
The Faltering Engine of Germany’s Auto Industry
Editorial Board, Financial Times
The AI Trade Is Losing One of Its Key Signals
Jan-Patrick Barnert and Michael Msika, Bloomberg
A New Telescope Will Find Billions of Asteroids, Galaxies and Stars
The Economist
Modern warfare increasingly targets the civilian infrastructure that underpins commercial and financial life, forcing a convergence between corporate and national security that neither companies nor governments have fully priced. Iran’s war with the United States and Israel saw strikes on oil refineries, petrochemical facilities, desalination plants, and Amazon data centers rather than purely military targets, while subsea cables from the Baltic to Taiwan have suffered a string of disruptions attributed to vessels flagged in China, Russia, and elsewhere. NATO’s 32 members have folded critical infrastructure protection into their new defense-spending framework, allocating 1.5 percentage points of the 5%-of-GDP target to items like cybersecurity, ports, and rail. Companies from German utilities to New Zealand infrastructure operators are resisting the compliance costs, arguing that physical and digital resilience against state-level threats should be a public good rather than a private liability. The same chokepoint logic now governs the world’s most sensitive supply chain: semiconductor lithography. The Trump administration alleges that an ASML extreme ultraviolet machine may have reached China, although ASML firmly denies it, saying it can account for the location of every one of the 340 machines it has ever produced. The dispute has reopened a broader question of whether Washington or its allies should set the terms of technology access to China, with the proposed MATCH Act threatening to extend American export law extraterritorially to Dutch firms.
These frictions are surfacing at the same time evidence is accumulating that the economics of the AI buildout may be shifting. Volkswagen’s plant closures point to one side of that story, as Chinese EV makers have already surpassed the German auto industry on software. On the other side, Bloomberg’s Silicon Data index, which tracks what AI users actually pay per token, is down almost 20% from its May high. This could point to healthy demand-driven price competition, or conversely could mean that AI providers are starting to lose pricing power after helping justify more than $700 billion in hyperscaler capital spending. Both dynamics share a common thread: large, fixed investments in fabrication capacity, vehicle retooling, or AI infrastructure are being made against demand and policy assumptions that can shift faster than the investment cycles themselves. On another note, the Vera Rubin Observatory is about to begin its ten-year sky survey, which will generate more astronomical data in its first year alone than every other optical telescope in history combined, providing one more example of how much new infrastructure, across different fields, is coming online at once.
Global Trajectories
This Market Rotation From Tech Could Be a Longer-Term Adjustment
Barron’s
Michael Burry Cites ‘Beginning of the End’ With New AI Short Bets
Kevin T. Dugan, WSJ
The AI Boom and Geopolitics Are Rewiring Asia’s Oceans
The Economist
Physicists Are Reimagining Dark Matter
The Economist
A rotation is underway in equity markets as the AI trade shows signs of fatigue. The PHLX Semiconductor Index tumbled over 6% amid concerns about AI computing overcapacity, South Korea’s KOSPI fell nearly 8% overnight, and investors began rotating into healthcare, industrials, and financials. Whether that marks a temporary rebalancing or the start of a longer shift away from tech-led market leadership is still an open question. Michael Burry has expanded his short positions against Tesla, Caterpillar, and a semiconductor ETF, framing a newly announced $500 billion South Korean chip investment not as a bullish catalyst but as a sign that capital is chasing a narrative divorced from underlying returns. This view is supported by data from Allianz Research, which puts the gap between AI investment and AI-linked sales at 46%, wider than the divergence seen just before the 2001 telecom bust. Burry has made similar bets before, shorting Nvidia and Palantir in November on the argument that circular financing arrangements and government-contract dependency, respectively, left both companies overvalued, though both stocks have moved only modestly against him since.
The physical architecture of the internet is being redrawn around the same geopolitical fault lines reshaping trade and security more broadly. Hyperscalers like Google and Meta, which now finance subsea cables unilaterally rather than through the sprawling telecom consortia of past decades, are routing new fiber-optic networks across the open ocean from the Middle East through Australia specifically to avoid Chinese-controlled waters and chokepoints like the Strait of Malacca. No new cable has been approved between the United States and China since the Obama administration. Subsea infrastructure still carries 99% of the world’s intercontinental data despite the rise of satellite alternatives like Starlink, so this quiet bifurcation may prove more durable than any tariff regime, since cables take years to plan and decades to replace. Physicists are undertaking a similarly quiet reordering of their own foundational assumptions. After more than four decades of failed searches for Weakly Interacting Massive Particles, researchers are increasingly exploring Self-Interacting Dark Matter, a framework involving new dark particles and forces that better explains observed anomalies in galaxy structure and satellite counts. Some have gone further, proposing a second Dark Big Bang that produced dark matter independently of ordinary matter, an event that would have left a detectable signature in the frequency of gravitational waves. Researchers at the University of Texas have also identified several candidate “dark stars,” ancient objects glowing from dark matter and antimatter annihilation, using data from the James Webb Space Telescope, which could offer one of the first direct tests distinguishing between competing dark matter theories.
