AI as a turning point for the economy and markets: Germany between the need to catch up and new opportunities
Artificial intelligence is increasingly becoming a key driver of growth, competitiveness and capital markets. Germany is at a structural turning point: while its industrial base remains stable, the transition to the age of agentic AI will determine how Germany compares to its international peers in the future.
AI transformation: Germany risks falling behind
Robin Winkler, Chief German Economist at Deutsche Bank Research, says Germany is facing a decisive crossroads: in his view, the transition from generative to agentic AI will determine whether Germany catches up with its global competitors as a business location, or falls further behind.
“The next phase of technological transformation will be key in determining Germany’s future competitiveness,” Winkler said at a media briefing in Frankfurt. While the country’s industrial base has proven innovative and has offset location disadvantages such as high energy and labour costs through high-quality research and development, Germany still has considerable catching up to do when it comes to digitalisation. No other OECD country invests less in software than Germany. Without significant acceleration, Germany risks losing ground internationally.
At the same time, in many areas of the German economy, digital processes remain limited in scope – and this is precisely where opportunity lies. The use of AI could unlock particularly large productivity gains here — significantly greater than in economies that are already highly digitalised. The ageing German society makes these productivity gains especially important. Given the chronic shortage of skilled workers, it is unlikely that the use of AI will lead to higher structural unemployment.
For Winkler, the conclusion is clear: artificial intelligence is not an optional topic for the future, but a key lever for growth, competitiveness and structural renewal. What matters now is to drive the transformation forward consistently — through investment, clear framework conditions and the rapid broad-based application of new technologies across the economy.
AI remains a growth driver — markets in a challenging environment
For Christian Nolting, Global Chief Investment Officer of the Private Bank, AI will be the dominant structural theme in the coming years — embedded in a more complex market environment.
“Artificial intelligence is and will remain the structural growth driver for the economy and capital markets — and we are only just beginning,” Nolting said. With the transition to AI agents, momentum is now noticeably accelerating. Within a year, global token consumption for AI applications has increased almost twentyfold, underscoring the exponentially rising demand for computing power.
At the same time, capital markets are proving resilient. Despite geopolitical tensions and energy price shocks, key equity markets have posted significant gains this year, supported in part by IT and AI, while credit markets have also quickly stabilised again after short-term dislocations.
Markets have revised global earnings estimates for 2026 (MSCI AC World) upwards by around USD 370 billion since the start of the year — mainly driven by the technology and energy sectors. “Unlike during the dotcom bubble in the early 2000s, corporate earnings are proving very robust. Setbacks in equity markets cannot be ruled out, but they could offer attractive buying opportunities,” Nolting said.
The focus is also shifting noticeably in monetary policy: “With the end of the global rate-cutting cycle, fundamentals are moving back into the spotlight.” Against this backdrop, the ECB is likely to raise its key interest rates once more by 0.25 percentage points, while rate cuts in the US are not expected before 2027 at the earliest.
According to Nolting, this has a clear implication for investors: “Selection is becoming more important than market breadth. Opportunities need to be used more selectively.”
Capital markets 2026/27: a broader investment universe and new drivers
Ulrich Stephan, Chief Investment Strategist for Germany at the Private Bank, expects investment opportunities to broaden structurally in the coming years: “The AI boom is entering its next phase — and it will become significantly more impactful: from generative AI to agentic AI to physical AI.”
Alongside large tech stocks, companies along the entire AI value chain are increasingly moving into focus. This value chain consists of five layers: energy, chips, infrastructure (AI factories), models, and applications. We are already seeing shortages of key components: prices for semiconductors — especially from Korea — have recently risen significantly as demand exceeds available production capacity.
At the same time, investment momentum is reaching new dimensions: major US technology companies are likely to increase their investments to around USD 725 billion by 2026 and expand them to almost USD 1 trillion by 2028.
“AI is turning an asset-light model into a capital-intensive business — and that is precisely what is changing the valuation framework,” Stephan said. As a result, key metrics are coming under pressure: the free cash flow of the large hyperscalers is currently estimated at only around USD 35 billion.
For equity markets, this points to a clear regime shift: “Earnings growth is becoming the decisive driver — not valuation expansion.” The basis for this is in place: earnings expectations have risen in almost all regions, particularly in technology-intensive markets, while valuation levels remain below previous peaks.
The balance is also shifting in fixed income markets: “Income is back — quality is being rewarded again.” Credit spreads are in some cases already back below the levels seen before the latest geopolitical dislocations, while fundamentals remain stable and carry returns attractive.
A structural bottleneck is emerging in infrastructure: global computing capacity is expected to nearly double by 2030, while the share of data centres in electricity consumption — for example in the US — could rise from around 4 percent today to as much as 7.8 percent. “Energy is becoming the limiting factor of the AI economy,” Stephan said.
Clear implications for investors
Against this backdrop, an active, broadly diversified approach is becoming increasingly important.
“Successful investing in the AI age means identifying trends earlier than the market, while at the same time managing risks in a disciplined way,” Stephan concluded. “Anyone who focuses only on the big names will miss the true potential of the AI revolution.”
About Deutsche Bank
Deutsche Bank provides retail and private banking, corporate and transaction banking, lending, asset and wealth management products and services as well as focused investment banking to private individuals, small and medium-sized companies, corporations, governments and institutional investors. Deutsche Bank is the leading bank in Germany with strong European roots and a global network.
Forward-looking statements
This release contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about our beliefs and expectations and the assumptions underlying them. These statements are based on plans, estimates and projections as they are currently available to the management of Deutsche Bank. Forward-looking statements therefore speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.
By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors could therefore cause actual results to differ materially from those contained in any forward-looking statement.
Such factors include the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which we derive a substantial portion of our revenues and in which we hold a substantial portion of our assets, the development of asset prices and market volatility, potential defaults of borrowers or trading counterparties, the implementation of our strategic initiatives, the reliability of our risk management policies, procedures and methods, and other risks referenced in our filings with the U.S. Securities and Exchange Commission.
Such factors are described in detail in the most recent SEC Form 20-F under the heading “Risk Factors”. Copies of this document are readily available upon request or on the investor website.
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Artificial intelligence is increasingly becoming a key driver of growth, competitiveness and capital markets. Germany is at a structural turning point: while its industrial base remains stable, the transition to the age of agentic AI will determine how Germany compares to its international peers in the future.
AI transformation: Germany risks falling behind
Robin Winkler, Chief German Economist at Deutsche Bank Research, says Germany is facing a decisive crossroads: in his view, the transition from generative to agentic AI will determine whether Germany catches up with its global competitors as a business location, or falls further behind.
“The next phase of technological transformation will be key in determining Germany’s future competitiveness,” Winkler said at a media briefing in Frankfurt. While the country’s industrial base has proven innovative and has offset location disadvantages such as high energy and labour costs through high-quality research and development, Germany still has considerable catching up to do when it comes to digitalisation. No other OECD country invests less in software than Germany. Without significant acceleration, Germany risks losing ground internationally.
At the same time, in many areas of the German economy, digital processes remain limited in scope – and this is precisely where opportunity lies. The use of AI could unlock particularly large productivity gains here — significantly greater than in economies that are already highly digitalised. The ageing German society makes these productivity gains especially important. Given the chronic shortage of skilled workers, it is unlikely that the use of AI will lead to higher structural unemployment.
For Winkler, the conclusion is clear: artificial intelligence is not an optional topic for the future, but a key lever for growth, competitiveness and structural renewal. What matters now is to drive the transformation forward consistently — through investment, clear framework conditions and the rapid broad-based application of new technologies across the economy.
AI remains a growth driver — markets in a challenging environment
For Christian Nolting, Global Chief Investment Officer of the Private Bank, AI will be the dominant structural theme in the coming years — embedded in a more complex market environment.
“Artificial intelligence is and will remain the structural growth driver for the economy and capital markets — and we are only just beginning,” Nolting said. With the transition to AI agents, momentum is now noticeably accelerating. Within a year, global token consumption for AI applications has increased almost twentyfold, underscoring the exponentially rising demand for computing power.
At the same time, capital markets are proving resilient. Despite geopolitical tensions and energy price shocks, key equity markets have posted significant gains this year, supported in part by IT and AI, while credit markets have also quickly stabilised again after short-term dislocations.
Markets have revised global earnings estimates for 2026 (MSCI AC World) upwards by around USD 370 billion since the start of the year — mainly driven by the technology and energy sectors. “Unlike during the dotcom bubble in the early 2000s, corporate earnings are proving very robust. Setbacks in equity markets cannot be ruled out, but they could offer attractive buying opportunities,” Nolting said.
The focus is also shifting noticeably in monetary policy: “With the end of the global rate-cutting cycle, fundamentals are moving back into the spotlight.” Against this backdrop, the ECB is likely to raise its key interest rates once more by 0.25 percentage points, while rate cuts in the US are not expected before 2027 at the earliest.
According to Nolting, this has a clear implication for investors: “Selection is becoming more important than market breadth. Opportunities need to be used more selectively.”
Capital markets 2026/27: a broader investment universe and new drivers
Ulrich Stephan, Chief Investment Strategist for Germany at the Private Bank, expects investment opportunities to broaden structurally in the coming years: “The AI boom is entering its next phase — and it will become significantly more impactful: from generative AI to agentic AI to physical AI.”
Alongside large tech stocks, companies along the entire AI value chain are increasingly moving into focus. This value chain consists of five layers: energy, chips, infrastructure (AI factories), models, and applications. We are already seeing shortages of key components: prices for semiconductors — especially from Korea — have recently risen significantly as demand exceeds available production capacity.
At the same time, investment momentum is reaching new dimensions: major US technology companies are likely to increase their investments to around USD 725 billion by 2026 and expand them to almost USD 1 trillion by 2028.
“AI is turning an asset-light model into a capital-intensive business — and that is precisely what is changing the valuation framework,” Stephan said. As a result, key metrics are coming under pressure: the free cash flow of the large hyperscalers is currently estimated at only around USD 35 billion.
For equity markets, this points to a clear regime shift: “Earnings growth is becoming the decisive driver — not valuation expansion.” The basis for this is in place: earnings expectations have risen in almost all regions, particularly in technology-intensive markets, while valuation levels remain below previous peaks.
The balance is also shifting in fixed income markets: “Income is back — quality is being rewarded again.” Credit spreads are in some cases already back below the levels seen before the latest geopolitical dislocations, while fundamentals remain stable and carry returns attractive.
A structural bottleneck is emerging in infrastructure: global computing capacity is expected to nearly double by 2030, while the share of data centres in electricity consumption — for example in the US — could rise from around 4 percent today to as much as 7.8 percent. “Energy is becoming the limiting factor of the AI economy,” Stephan said.
Clear implications for investors
Against this backdrop, an active, broadly diversified approach is becoming increasingly important.
“Successful investing in the AI age means identifying trends earlier than the market, while at the same time managing risks in a disciplined way,” Stephan concluded. “Anyone who focuses only on the big names will miss the true potential of the AI revolution.”
About Deutsche Bank
Deutsche Bank provides retail and private banking, corporate and transaction banking, lending, asset and wealth management products and services as well as focused investment banking to private individuals, small and medium-sized companies, corporations, governments and institutional investors. Deutsche Bank is the leading bank in Germany with strong European roots and a global network.
Forward-looking statements
This release contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about our beliefs and expectations and the assumptions underlying them. These statements are based on plans, estimates and projections as they are currently available to the management of Deutsche Bank. Forward-looking statements therefore speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.
By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors could therefore cause actual results to differ materially from those contained in any forward-looking statement.
Such factors include the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which we derive a substantial portion of our revenues and in which we hold a substantial portion of our assets, the development of asset prices and market volatility, potential defaults of borrowers or trading counterparties, the implementation of our strategic initiatives, the reliability of our risk management policies, procedures and methods, and other risks referenced in our filings with the U.S. Securities and Exchange Commission.
Such factors are described in detail in the most recent SEC Form 20-F under the heading “Risk Factors”. Copies of this document are readily available upon request or on the investor website.
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