Europe's Strategic Autonomy

Geopolitical risks, conflicts and the experiences of recent years have clearly highlighted Europe’s dependencies in key areas. Whether in defense, energy supply, or key technologies, the European Union is increasingly pursuing the goal of expanding its strategic autonomy and reducing critical dependencies. This is giving rise to a long-term investment cycle that could attract billions in both public and private investments.

For investors, the question arises as to which companies could benefit most from this development.

A key component of strategic autonomy is Europe’s defense capability. Against the backdrop of the changing security situation in Europe, numerous European countries have increased their defense budgets and launched long-term investment programs. At the same time, there is a growing political will to build up military capabilities more strongly within Europe. Regardless of individual ESG preferences, the security and defense sector is now one of the strategic priorities of European industrial policy.

Rheinmetall is frequently mentioned in this context. In recent years, the company has emerged as one of Europe’s leading defense contractors and is benefiting from strong demand for ammunition, military vehicles and defense systems. Its well-filled order books point to high revenue visibility in the coming years.

Opportunities lie in long-term government investment programs and stronger European cooperation. At the same time, business performance continues to depend significantly on political decisions, government procurement programs, and regulatory frameworks.

In addition to defense, energy supply is also coming into sharper focus. Europe is increasingly investing in power grids, energy efficiency and the expansion of renewable energy to strengthen the security of supply in the long term.

One potential beneficiary of this trend is Siemens Energy. The company could benefit from investments in power grids and energy infrastructure. In addition to rising electricity demand driven by digitalization and artificial intelligence, the energy transition is also creating a high demand for investment. The expansion of renewable energy requires more robust power grids and modern grid technology to ensure long-term security of supply. As a result, Siemens Energy plays a key role in achieving two central European goals: decarbonization and strengthening energy autonomy.

Opportunities arise from long-term investment programs and the company’s significant role in the energy transition. Risks include regulatory changes, project delays and rising financing costs.

Europe is also striving for greater independence in the technology sector. The semiconductor industry, in particular, plays a key role in the continent’s economic competitiveness.

ASML plays a central role in this regard. The Dutch company is a global leader in lithography systems for modern chip production and is considered an indispensable part of the global semiconductor supply chain.

The greatest opportunities lie in rising investments in research, production, and digitalization. At the same time, however, the industry remains vulnerable to geopolitical tensions and economic fluctuations.

Investors who are tracking developments in these sectors can consider various investment instruments. An interesting investment opportunity for investors with moderately positive market expectations could be a Multi-Callable Barrier Reverse Convertible on Rheinmetall, Siemens Energy, and ASML.

With such a product, investors can receive a fixed coupon regardless of whether the underlying securities rise moderately, trade sideways, or decline slightly during the term. The key factors here are the performance of the underlying stocks and whether the respective barrier is maintained.

Barrier Reverse Convertibles can be attractive in a market environment where investors expect limited price appreciation and, at the same time, wish to generate ongoing income in the form of a coupon that is independent of the performance of the underlying assets.

However, this comes with significant risks. For a “worst-of” product, the repayment amount is determined by the performance of the underlying asset with the weakest performance. If the barrier is touched or breached downward during the term, and the relevant underlying asset is trading below its strike price at the time of the final valuation, this may result in a loss of the principal invested.

Europe’s pursuit of strategic autonomy is likely to significantly shape political decisions and investments in the coming years. Companies in the defense, energy infrastructure, and technology sectors could be among the main beneficiaries and offer investors attractive opportunities to profit from this long-term trend.