US Policy Overhaul Rattles Defence and Housing Stocks as AI Competition Intensifies

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US Policy Shifts Impact Global Markets

The US administration has initiated several significant policy changes that are creating ripples across the defence, housing, energy, and food sectors. These executive actions signal a move towards a more state-directed industrial policy, affecting how companies allocate capital and operate, though the persistent interventions are raising concerns about market certainty.

Venezuelan Oil Seizure

The US government has confirmed its intention to control Venezuelan oil sales indefinitely. As part of this plan, 30 to 50 million barrels of crude oil, valued at approximately $2.8 billion, will be transferred to the US. Sources indicate these shipments are set to continue for the foreseeable future, and the White House has also stated it reserves the right to use military force to protect US oil workers in Venezuela. All revenue from these sales will be directed into US Treasury accounts, with Venezuela reportedly using the income to purchase American products.

The development has had a mixed impact. Shares in Chevron, the primary US operator in the region, initially rose 10%. However, global oil futures slipped, with US crude prices falling about 2.4% to roughly $56 a barrel on concerns of a potential supply glut. Gulf Coast refineries operated by Phillips 66 and Valero, which are designed for heavy Venezuelan crude, stand to benefit. Redeveloping the country's oil infrastructure remains a significant hurdle, likely costing tens of billions of dollars and requiring long-term assurances to attract private investment. The White House is scheduled to meet with executives from Chevron, ConocoPhillips, and Exxon Mobil to discuss potential investments, although the administration has reportedly deprioritised the immediate repayment of debts owed by Venezuela to these companies.

Greenland Acquisition Explored

White House officials have confirmed they are actively exploring pathways to acquire Greenland from Denmark, stating that military action remains a possibility. The interest stems from Greenland's strategic location for deterring Russian and Chinese activity, as well as its reserves of rare earth elements. The US Secretary of State is scheduled to meet with Danish officials to discuss the matter. In response to the rhetoric, Denmark's Defence Minister announced plans to spend the equivalent of $13.8 billion to rearm Greenland.

However, some experts believe the benefits may be exaggerated. The US already possesses strategic monitoring capabilities through its Pituffik Space Base and existing treaties. Furthermore, Greenland's rare earth deposits are considered lower-grade than those mined elsewhere, and no company has successfully opened a mine in the region. The territory also banned new oil drilling in 2021, complicating access to its estimated 13 billion barrels of oil. The Danish Prime Minister has warned that any military move against a NATO ally would signify the end of the alliance.

Defence Contractor Reforms

New executive orders have been signed to regulate the defence industry. Companies that fail to meet production targets or prioritise government contracts will be blocked from paying dividends or conducting share buybacks, with missile-system maker RTX being specifically mentioned as slow to produce products. The top four Pentagon contractors spent approximately $89 billion on shareholder returns between 2021 and 2024.

This announcement initially caused a drop in the share prices of major defence firms like Lockheed Martin and RTX. A subsequent statement about a potential 50% increase in the defence budget to $1.5 trillion by 2027 caused these stocks to recover some of their losses. The persistent government intervention, however, has drawn comparisons to China's corporate crackdowns, raising concerns it could erode long-term investor certainty.

Proposed Ban on Institutional Homebuyers

The administration also announced a policy push to ban large institutional investors from purchasing single-family homes, aiming to improve housing affordability. The news caused a decline in the shares of firms like Blackstone and Invitation Homes.

However, the ultimate impact of such a ban is being questioned. Institutional investors accounted for only 6.8% of home sales in the third quarter, down from 11.3% in late 2021, and have been net sellers for the past year. Blackstone noted that its ownership of single-family homes represents just 0.5% of the firm's total assets under management. Given that most rental homes are owned by smaller landlords, analysts suggest the initiative may not significantly move the needle on affordability.

New Nutrition Guidelines

New federal nutrition guidelines have also been unveiled, which favour protein, full-fat dairy, and vegetables while cautioning against processed foods. The announcement led to a slide in the share prices of processed food companies and related exchange-traded funds (ETFs).

Tech Sector Faces AI Shake-Up

Competition within the artificial intelligence sector is intensifying across multiple fronts, from autonomous systems and robotics to dating apps. Recent announcements from major technology firms are challenging the perceived market dominance of early leaders and creating new areas of disruption.

Tesla's Dominance Challenged

Tesla's leadership in physical AI is facing significant pressure from rivals. The company's shares fell 4.1% following a series of competitor announcements. Key developments include:

• Nvidia: Unveiled Alpamayo, an open-source reasoning AI for autonomous vehicles, which Mercedes-Benz plans to launch in 2026.
• Mobileye: Announced a $900 million acquisition ($612 million in cash and 26.2 million shares) of humanoid robot startup Mentee Robotics. The move is seen as a strategic pivot as Mobileye's shares have fallen 33.5% over the past six months amid fierce competition from Nvidia and Qualcomm in the autonomous driving hardware market.
• Hyundai: Revealed plans to mass-produce 30,000 Atlas humanoid robots annually by 2028, in partnership with Google's DeepMind.
• Ford: The American carmaker plans to enter the 'eyes-off' autonomous driving market, announcing it will roll out the technology in a $30,000 all-electric vehicle starting in 2028.

These moves threaten the high valuation of Tesla, which is predicated on near-total dominance in future markets. If competitors succeed, it may become difficult for the market to sustain Tesla's high price-to-earnings multiple.

Alphabet Surpasses Apple

In a notable shift among Big Tech companies, Alphabet's market capitalisation rose to $3.89 trillion, surpassing Apple's $3.85 trillion for the first time since 2019. Alphabet's shares have performed strongly, partly due to the rapid deployment of its new AI models, which has attracted both users and investor confidence. In contrast, Apple has experienced delays in launching its updated AI assistant, contributing to a perception that it is falling behind in the AI race.

Dating Apps Disrupted by AI Companions

The traditional online dating industry is facing a new challenge from AI. Companies like Match Group and Bumble are experiencing shrinking user numbers as millions of people turn to AI companion apps. These AI-driven chatbots, such as Replika which surpassed 10 million users in 2024, offer a form of synthetic intimacy that is proving to be a powerful competitor.

In early 2025, Tinder's active users fell 10% to 51 million, while Bumble's dropped 5% to 20.8 million. In response, both companies are investing heavily in their own AI matchmaking features and are pivoting towards Asian markets where online dating is growing. However, the rise of AI companions that are designed to flatter and agree with users presents a fundamental challenge to an industry built on human connection.

Crypto and Digital Assets

The digital asset space is witnessing a significant shift towards institutional adoption and real-world utility, even as prices remain volatile. Major financial players are entering the market, and underlying network activity is reaching new highs.

Institutional Adoption Accelerates

Morgan Stanley has filed with the US Securities and Exchange Commission (SEC) for a spot Bitcoin ETF and a Solana trust. This marks a strategic move from distributing third-party crypto products to creating in-house vehicles, signalling accelerating institutional demand. The market for spot Bitcoin ETFs has expanded rapidly, now holding $123 billion in total net assets with over $1.1 billion in net inflows year-to-date. Similarly, Solana trusts have surpassed $1 billion in assets.

Ethereum Network Activity Surges

The Ethereum network's 7-day average of daily transactions reached a record 2.023 million in early January. This growth is primarily attributed to the accelerating adoption of real-world asset (RWA) tokenisation. Despite this milestone in network usage, Ethereum's price has not risen in tandem, with analysts suggesting that short-term macroeconomic uncertainty is currently outweighing on-chain fundamentals.

Stablecoin Market Dynamics

Within the stablecoin sector, Circle's USDC has shown significant growth, with its market capitalisation rising 73% to $75.12 billion in 2025. This outpaced the 36% growth of its main rival, Tether's USDT, which reached $186.6 billion. The trend is being driven by institutional demand for regulated digital dollars, with USDC's adherence to US and European regulatory frameworks making it a preferred choice for companies like Visa, Mastercard, and BlackRock.

Other Key Developments

• Tokenised Treasuries: The market cap of tokenised US T-Bill funds has reached $7.5 billion, a 50-fold increase since 2024, as they become a core part of decentralised finance (DeFi) infrastructure.
• Grayscale ETH Staking: The Grayscale Ethereum Staking ETF (ETHE) made its first distribution of staking rewards to shareholders, a first for a spot crypto ETF in the US.
• MSCI Index Inclusion: Index provider MSCI has decided not to exclude companies holding Bitcoin and other cryptocurrencies on their balance sheets, allowing firms like MicroStrategy to remain in major investment benchmarks.

Corporate and Economic Highlights

Restaurant Sector Shows Signs of Recovery

Restaurant chains may be poised for a recovery in 2026 after a difficult 2025. Analysts at UBS expect relief, particularly for fast-casual and sit-down chains that cater to higher-income diners. A recent tax-cutting bill is thought to have boosted spending power for wealthier consumers. Same-store sales are expected to return to low single-digit growth. UBS upgraded Brinker International, owner of Chili's, to a buy, while Chipotle Mexican Grill is also regaining momentum. A note of caution remains for chains reliant on lower-income consumers, who are under pressure from tighter public assistance rules.

Key Corporate Developments

• JPMorgan Acquires Apple Card: JPMorgan Chase has acquired the Apple Card programme from Goldman Sachs, taking on approximately $20 billion in balances. Goldman Sachs sold the portfolio at a discount of over $1 billion to exit its consumer banking venture.
• Warner Rejects Paramount Bid: Warner Bros. Discovery rejected a revised $108 billion takeover offer from Paramount, reportedly favouring a potential merger with Netflix.
• Pharmaceutical M&A: Drugmakers are increasing merger and acquisition activity as major blockbuster drugs face patent expirations by 2032, threatening over $170 billion in annual sales.
• Joby Expands Manufacturing: Air taxi developer Joby acquired a 700,000-square-foot facility in Ohio, more than doubling its manufacturing space as it pushes for FAA certification.
• Constellation Brands Beats Estimates: The alcohol distributor's earnings topped expectations, offering hope for the sector. However, the company also lowered its fiscal 2026 earnings forecast, following steep revisions last year.

Economic Indicators

• Copper Prices Surge: London Metal Exchange copper prices have risen above $13,000 per metric ton due to outages at Chilean mines and aggressive stockpiling by the US. Surging demand from AI and defence industries could lead to a structural supply shortage.
• Labour Market Slowing: The latest ADP report showed that private payrolls grew by 41,000 in December, below the 48,000 forecast, suggesting a continued cooling of the US labour market.
• Gasoline Prices Fall: US gasoline prices are forecast to average $2.97 per gallon in 2026, the lowest level since 2020, due to strong refinery output and soft seasonal demand.
• Minimum Wage Increases: On 1 January, 22 states and 66 cities and counties increased their minimum wage rates, with most reaching $15 per hour or higher.
• Online Holiday Spending Growth Slows: US online spending rose 6.8% to a record $257.8 billion over the holiday period, but the rate of growth slowed compared to the previous year.

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NOTE: This content is for informational and educational purposes only and does not constitute financial advice. Always do your own research. Not financial advice (NFA).