Investment Banking 101: how geopolitics and AI are driving markets and investment

Geopolitics previously used to be a side consideration. It would be one of the factors going into the deal-making process, but now it's taken front and center of everything that's happening. If you take a step back, look at all these crazy headlines, you would have expected volatility, whether it's rates, equity or FX, to be a lot higher. It's not perplexingly. One of the most important parts of an investment bank's job is helping clients to navigate change. And right now, a pace of change is extraordinary. Geopolitical tensions of redrawing supply chains and investment flows. Artificial intelligence is driving a wave of spending on everything from chips to data centres. Together, these trends are shaping industries creating opportunities and changing the way that companies make decisions. In the third and final episode of our Investment Banking 101 series, we'll explore two of the biggest forces transforming the investment banking landscape right now, Geopolitics and AI. We'll look at how they're influencing deals, markets and investment flows and we'll discuss what they mean for the people working in the industry. I'm Vicki Garry, your host of today's episode of This Is Deutsche Bank, the podcast for the news and trends shaping the world of banking and finance. Let's get started. Joining us today are Ozen Tarmann and Bhavna Sahe, who both work closely with clients navigating these changes every day. Ozen, Bhavna, welcome to the podcast. Thank you so much. Perhaps I could just ask you to introduce yourselves and explain a little bit more about what you do. Sure, I'm Ozen Tarmann. I'm the vice chair of Global Macro for us. I'm a part of Institutional Client Group. My day-to-day job is to basically head Global Macro sales, talk to our top 25-30 Institutional Investors, HFUNs, Real Money, and Soron Well Funds to talk to them about geopolitical trends, AI, key political economy movements, day-to-day, month-to-month, for year-to-year, what they should do according to those events with their rates, credit effects and emerging markets positions. Day-to-day job is sales, but I work very closely with trading and research as well, and I'm a former researcher and trader myself, so that helps. And also work very closely with our corporate clients and dear partners like Bhavna for almost two decades. Great, Bhavna. Yeah, nice to thank you for having me here. Bhavna Sahe, I head up our FX sales team for the UK and Ireland region, focusing on corporates, FinTech, and other non-bank financial institutions. I sit in a part of the bank called RMSC or Risk Management Solutions, and what we do is we speak to these large corporations to try and hedge out market risks from their business, whether that's FX, inflation, commodity, interest rate risk. So essentially if you're a car maker, why don't you focus on making your cars, and you come to us to help you take out market risk from your balance sheet and your PNL? So complementing OZANs, I cover the corporates and between institutional corporates, you complete the circular risk and make a market function. Now, every day brings a fresh wave of headlines, elections, conflicts, trade disputes, even a new tweet by politician. For someone working in investment banking, how do you keep up with that constant flow of information? And perhaps more importantly, how do you separate the noise from developments that genuinely matter for markets and clients? Very good question. It's both art and science. It's the day-to-day bread and butter of what I do. You need to, especially in this day and age, when it's so 24/7/365, you need to find out your key internal partners, external media, whether it's in social media, official public media, to find out who's usually right with these, what you call noise, right with the news, also figure out in a nice way who the reverse signals, reverse parameters, reverse indicators are without necessarily telling them because they both have value. So, art and science is to, in a way, is to use both of them. Some of it comes with experience, some of it comes with trial and error, some of it comes with learning. One more thing I should add, in all our carries in all our years, it all had become almost more democratic. What do I mean by that? These days, these news are literally open to the most famous founder, to the retail, to the young future star, listening to us in college now. They all make the most of the same news. There is no more, or one earlier lunch, one night ago, key macro event, etc., etc. We all find out at the same time, we try to make the right market decisions with that, and I enjoy that. I find that very equal, very democratic. Yeah, yeah. And we said we wanted to look at two key trends or developments, shaping what we do in investment banking. One that has really come to the fore in the last few years is geopolitics. If we'd recorded this podcast 10 years ago, we might have spent most of our time talking about interest rates, economic growth, and company earnings. Today, investment bankers are also playing close attention to wars, trade dispute sanctions, national security concerns. Can you give us a broad picture of how that affects your work? Yeah, maybe I can go first. So what we cover is large multinational corporates. What that means is they could be based here in the UK, but have supply chains across the world, have distribution models across the world, have manufacturing across the world. So what happens in one part of the world is no longer localized. And what we've seen as a result is that there's a much more focus from corporates on risk. And risk, which is historically be a treasury topic, a passive topic, has now turned into a C-suite topic where clients want to be a lot more on top of things, whether that's funding early, looking at hedging early, looking at commodity price risk, looking at inflation and energy price. And this is when the relationship from a bank previously just being a product provider or a price provider to actually being a strategic partner in helping them make sense of all these changes going on in the world becomes super useful. And a global house bank like ourselves, which has all these different tools, whether it's advisory, whether it's financing, whether it's risk management, all of this becomes super critical for our clients. And this is where we're spending a lot of our time on. So we've talked about capital market steels in another episode in this series, things like mergers and acquisitions. What impact are geopolitical developments having on deals like this? I think geopolitics previously used to be a side consideration. In 2026, we've definitely seen a pickup in M&E activity, but I think at least three or four main ways in which geopolitics take center stage. The first one would be higher scrutiny on deals. So anyone looking at a cross-border deals is now being a lot more attention to clearances of the various foreign direct investment scrutiny on tariffs and the implications of that on the cash flow of the business, etc. So that would be one point. Another point would be that the focus is not more on just getting scale, but actually also being used as a tool for resilience, securing supply chains, making sure that they're not overly dependent as they have been in the past on certain countries, certain sectors, and themselves being a part of their ecosystem. Another one would be friend-shoring, which we're hearing a lot about, which is making deals in countries where you can see a long-term, tenable relationship, so friendly jurisdictions, and protecting yourself against some of the kind of adverse effects that corporates have faced. And fourthly, but last and not the least, most relevant for us is all the volatility, which is introduced by the geopolitics, whether that's funding, how to get the right funding makes, hedging interest rates, volatilities, and commodity and deal price-making. I think these are all the factors which have now taken front and center of any kind of deal-making in 2026. Her last point is especially interesting, because if you take a step back, look at all these crazy headlines, you would have expected volatility, whether it's rates, equity, or effects, to be a lot higher. That confuses internally our partners, some of our key clients. One main reason we see for that, from like our heads-of-fx strategy, George Sarvalo's France is here and beyond, is global growth. As long as global growth somehow holds up, central banks are more able to control, suppress, effects, and raise volatility, despite all the crazy headlines that are going around us. But that doesn't mean in a single level, whether it's rates, certain countries, effects, or single equity. There, you may have huge crazy vaults that they're going on, partially affecting the mergers and acquisitions as well. So the singular price action can be very, very different to what's happening on the broad index level. We record this on July 30th, the day after a key Kevin Worsh Fed decision, but also while the sad tragic war in Malice continues, while the war in Ukraine continues. And exactly, as Balmer said, those wars have huge effects on spine change, oil prices this year, in the coming year on how corporates will try to hedge to give some concrete examples to what you're exploring, for example. Many people, when Iran War first began and got much more serious, thought that paper oil, WTI and brand would trade all the way up where physical oil trading to trade. So 150's, 200's, that would have enormously bad implications for global markets. It would make rates go a lot higher, etc. etc. They didn't for all kinds of reasons. Institutional clients had a big saying this as well. So we make an explanation on why that price action took place the way it did and from that hopefully Balna and Hercur Corporate Clients also take notes and to work more and more together. Yeah, it's certainly a world full of uncertainty. Something markets are very sensitive to. How does it affect fixed income markets when events around the world suddenly change investors' expectations? A whole new factor that is getting more and more important. It was never easy. Even for rates, affect central banks, guessing the right central bank action, especially these days when giving forward guidance becomes more and more out of fashion. It was never easy, but geopolitics is a whole different game, a whole different animal that clients have to come to terms with. You asked a very right question. What is noise? What is signal? How do clients trust that they're after the clients and institutions and people who are giving them the right signal? That's in geopolitics becomes a very key factor. We get the headlines. You always get the headline effect. When an Iran war happens, Ukraine, Kiev gets bombed. But how much is it priced in? How much it is not? Will it affect central bank behavior? Will it affect get central banks to hike? How much will it affect oil prices? These are all how much it is in the price? How much it is not? That's where geopolitics and what I and Bavna and our desks do merge. That's where we make use of geopolitics for our clients. I heard this interesting line somewhere that the markets are a reflection of what happens in the future based on what's happening in geopolitics right now. The three main transmission mechanisms would be growth, inflation, central bank rates, which are all interrelated in some way. As you can see for both our clients, these three factors are the transmission mechanism for what happens in the globe in geopolitics, to what our clients have to bear with the investment decisions, hedging decisions, M&A and all these other things. We grew up in a world of globalization, Bavna and IU. Now it's becoming at least for the moment a very deglobalized world. Like Bavna said, the tariffs and beyond walls are being built around countries. They have to do more French-oring. They have to react to that. That affects geopolitics, that affects countries, choices, that affects investors where they do merge in acquisitions, where they age, where they don't age. So we all have to adapt to that as well and get our clients to adapt to all that as well. Yes. At the heart of all this, are your clients? How does a more uncertain geopolitical environment affect their behaviour? How do you support them in navigating a world that feels less and less predictable? For a fast money and real money corporate clients, it can be a bit different. Bavna is the expert for corporate clients. For my fast money and real money clients, fast money is. I am generalizing, but for reason, fast money is reaction, first reaction, reflex is always to go after the volatility. This is the same for central bank decisions, inflation, it's the same for geopolitics as well. The moment of war breaks out, where would it create more volatility, where can they monetise it right away? Real money clients, so-called funds can be a bit more calm. They are more after this 60/40 approach, 60 equities, 40 bonds, lower volatility, taking a step back, weekly, monthly investment meetings, taking decisions a bit more in a more calm way, and somehow they emerge. Even like another current team, digitalisation, hedge ratios, something that Deutsche Bank is really leading with, from tariffs to current wars. We believe that dollar can still be the key effects currency around the world, but institutions' behaviours will change, they will change their hedge ratios, maybe they will hold a bit more of those euro and China effects currencies, and those kind of decisions, how much when clients turn to us to make the right decisions at the right time, whether daily or monthly. And from a corporate perspective, covering treasuries for a long while now, I think what the treasury goal was always optimisation, and I would say the new word for planning is resilience, and what does that mean? Diversifying supply chains, funding earlier enough to make sure that in this crazy world that we live in, they're not tapped out, hedging, increasing hedge ratios, as Ozone alluded to also on the real money side, so these are all the things in which we see our clients react. Corporates are even slower than past money in the central banks, but I think resilience is key and all our conversations with our clients are around planning. Corporates come slow, but that's the big river that affects everything, so that's why my institutional investors also, in a course of way, obviously, they are there keen about corporate flows, they're keen about what balanced clients are doing. Corporates end up setting the more medium term, they may come slow, but they set out the medium trends more in a more concrete way. Let's dive into artificial intelligence. It's gone from being a specialist topic to one of the biggest investment themes in the world, it dominates headlines, drives corporate strategies, and attracts an enormous amount of capital. How has AI become such a significant area for deal-making and investment? Maybe let me start with the teens, like you said, at the centre now, even more so than geopolitics, maybe. These change, by the way, so geopolitics, AI, and as always, central bank inflation. So the pendulum keeps swinging, but AI is at the centre of it in 26, in 25. At the beginning of the year, we almost feared or thought all of this would be quite deflationary. Strenier research, some other big papers that made their way around in February, right before Iran War, so two to three days before, this was the talk of town, that I'm wearing blue today, but 50 percent of white coloured jobs would be gone in 12 to 18 months time. That would lead central banks to almost reduce rates in a very, very significant way. Maybe fate fund futures would move down to 2 percent. They're nowhere near that at the moment, etc. Then Iran War happened, even more focused back into take. Lord behold, AI, especially at the beginning of the summer, cool aid, nothing could be cooler, a sample would be taken to 9,000 with it, AI inflationary, AI productive, at the beginning it would all produce jobs, maybe produce even more jobs. Now, we're somehow finding a bit of a balance. We're starting to question a bit again, I don't want to call it a bubble, but yeah, is it bubble? Will there be winners and losers? Are some of the companies spending copies way too early, way too much? Will they come to regret it? So, there is more dispersion now. So, inflationary, inflationary dispersion, trying to find winners within the AI space. And on the corporate side as well, it is a big story and the three main reasons. So, one is obviously a lot more US centric at some other parts of the world, where it's a massive capex spend, obviously building out the whole infrastructure, whether it's chip or computing power or data center, so that massive capex spend, which is very real in the economy, and you can see that, all the pressures on the inflation side, the others are which are how corporates would take up AI. And that is about acquiring strategic capabilities to be able to, it's almost like a race of seeing from a competitive landscape. Do you have what it takes to succeed in the AI generation? And the third is obviously the big promise of productivity boost, which there's a lot of pressure on boards, et cetera, to try and see that if you're paying all these tokens and all this spend, then where are you actually getting efficiency from? And is that reliable and consistent in the long run? So, I think it's not just an institutional story anymore. For the corporates, it's very much relevant and live, bigger in some parts of the world than the others, but it's something which is definitely it's the year for. Yes, and actually when we read about AI investments, certain regions appear repeatedly. Are there any particular geographies that you would suggest are really leading the race in AI today? If you looked at it last year, maybe it was just a Silicon Valley story and there's good reason for that. The US is a clear leader in this space for all kinds of reason. It has some of the biggest AI startups. It has the large hyperscalers, which provide the infrastructure. It has the venture capitalists and the funds to be able to support the sector from an early nascent stage. So that's the US story. But since then, like China has taken on a very different role. It's almost from a state-sponsored way of encouraging the enablement of AI and being the manufacturing hub of the world. It's using AI and a lot of it that industrialization. And that's a very different story. Europe, on the other hand, is a little bit looking at different things. It's exploring the regulations. It's looking at the infrastructure bill. It's looking at data sensor and capacity and power and water and what it would take for the AI revolution to be embraced by Europe. And of course, we have pockets like Taiwan and Korea, which again, for chips, semiconductor, AMSML in Europe, which is very important. So again, their pockets, US is the leader, but there's lots happening in other parts of the world as well. Let me add something to this. China, for example, China, we had two key moments in 25 and 26. 2025, deep seek, February 2025. Big bomb, people worse that weekend, I remember very vividly, again, top back going back to headlines, signal to know. People were much more obsessed with the latest present Trump tariff, whether he would do 25% or 45% in Canada, whereas deep seek, which came on a Saturday. To me, it was a big deal. Will they do it? Do everything that Max 7 does with much less cost, more efficiently. So we opened with a big shock in NASA, beyond that very Monday, Tuesday. But again, back to Boundersworld, Ozanzworld. Monday, Tuesday, to taking a longer term horizon, we come down because America really welcomed the challenge that NVIDIA's off-the-world could work together with these deep seeks of the world. And the index is recovered. Fast forward to this year, just a few weeks ago, Kimi 3, another model, again, China, doing things faster, this time taking on anthropic and open AI. That damage may be a bit more lasting. Why? Because there's a lot more leverage in the system now, almost 15 months, 18 months have passed. There's a lot more leverage having been put into the Nasdaq trade, having been put onto AI trade, already some people believe that China may end up winning this race. So that again shows you the importance of signal and noise. Are Europe? Again, Bounder was very right, I mean, it's very in to say, or left behind, I find that a bit, you know, Deutsche Bank hat, but a bit too superficial. Even the decisions that Europe make can play a big role. Bounder pissed on something very regulation, something that is very lively being discussed as well last week, because of the rhetoric coming from the US as well. There are a lot of superlatives when it comes to AI, trillion dollar opportunities, massive valuations, hyperscalers, and warnings of an AI bubble, take us behind those headlines a bit. What are you actually seeing day to day in the market? How do investors distinguish between businesses that are genuinely creating value from AI? And those that are just simply benefiting from the hype? So the AI, the way we're seeing it this year, it wouldn't be too much of a stretch to say after the industrial revolution, this is the time for the AI revolution, which is trying to fundamentally change the way we do work. Previously, it was mechanical work, now it's mental work. So clearly, this is the kind of tune of the moment, and what we see clients do as a result of this is obviously stuff we've spoken about, the massive CAPX build. So till about five, six years back, we heard of US companies having record cash, which reserves that they had. And now a lot of that is being spent in the build out for these hyperscalers, for these data centers, etc. Which what does that mean for the markets, massive bond issuances, the kind of bond issuances that we've seen in this year from some of the large names are sort of unparalleled. We're looking at some of these large IPOs, which are going to come to the market. We saw SpaceX, which was again, an AI story. And then we're obviously looking keenly at the two big US AI names, who would be looking to come to the market. So there's definitely a lot of activity in Europe, in our own home market. We see a lot of the infrastructure build as we spoke about earlier. So these superlatives are being translated into tangible investments in the economy with the promise of something which is enduring. I think it'll be fair to say that these are all things which are very much happening presently. Exactly. A few things to complement. First of all, this race between winners and losers, like I said, it's too early to determine whether this is a bubble or not, but certainly in the top of client's minds, it has happened between October to January of last year. The team is coming back again, exact like Boundless says, "All this copy-expanding race is going. Hyper-skaters. Is it really justified? Data centers will market continue to swallow all these bond issues." My gut feel is we're not, you know, let's use football or cricket analogy. I'm not even sure we're in the eight baseball, sorry, eight for ninth inning in the baseball game. World Cup. I'm not sure we're in the 75/80 minute yet. There is more. We need first more tillions of debt to create, and then we can question the bubble or not. But certainly, as I speak, people are questioning whether AI is a bubble, then on to winners like Google a year ago, some company that we were very close with, a lot of people thought that they were left behind in all this race, and then all of a sudden, up until recently, it has been the champion of the Mac 7 race. Only six, nine months ago on the Mac 7, Apple was criticized a lot for not as much spend on AI, copy-expanding, it was low, all of a sudden that became a fashionable thing. There are no earnings today. So far, all of a sudden, they became the champion of the asset class, and they passed in the media as the world's biggest company. So even these trends keep changing, and final point, global. Again, I said we were going back to globalization, etc., but this is a trading floor, globalization still rules. What happens in Korea and cost-be-markets, beyond the flu, Baonoli, Shakespeare, FX, my USD swap trader, FX, my Euro Dollar trader because it affects the dollar, Korea price, obviously, big leverage in that system. At the end of the day, it's all one big semi-conductors, one big hyper-scaler state, what SK high next does, what Samsung does, what NVIDIA does. I think that's the question, isn't it? Is it the industrial revolution of the.com bubble? Exactly. Which way is that? And which year? Which innings? Yes, it's some people say, OK, it starts systemic, we're not at 2007-2008, insha'Allah, but what if we're at 2000, right, before 2001? So these are all key questions to be answered. And nobody has the, you know, we'll live and see. No, not one to solve here. AI's is incredibly complex stuff. How much technical expertise does an investment banker actually need to advise clients operating in sectors like semi-conductors, AI, infrastructure, or advanced technology? I want to encourage you, I mean, obviously, first of all, don't be donky-shot, you know, don't go against the windmills, here and there, and first of all, they understand it much better than older people like me, but, you know, we're hiring more quarters, we're learning to live more and more with the, with the, you know, co-pilot and chat GBT's all over world, and they're helping us, in this day, what we do, for example, fixed income trade ideas, to scrutinize those trade ideas, exactly on a big macro round table, internal external, what people are saying, what are the key treats and teams from there? What can be risks to what they're saying? Then you can always question AI and push it together to come up with better risk on risk of trades, but, you know, it's a nice, I mean, it shows from the way I'm speaking, right? It's a nice addition to my own life, something that I didn't have two years ago. I don't think any robot can ever run a macro round table, virtual or not, as good as I do, but certainly it would help me and my team get better results from it, so all the young people listening to us, your future seats are still safe, you can do a lot more with those seats, thanks to AI. Yeah, exactly, I would say, the CFO, the treasure of a company we're speaking to, does not expect us to be an engineer, to help them devise the latest GPU or anything. What they do want us to be is subject matter expert in the sector, showing them how they compare to their peers, what are the supply chains, what are the competitive comparables in the market and things like that, and this is almost like a whole new sector and ecosystem which has been created, so our young, you know, juniors joining us should be as ready to learn about it at the same time as we're learning about it, because it's an entirely new sector and, you know, bankers would emerge learning together with people who've been here for 20, 30 years, so I think it's an exciting time. And that actually leads nicely to our final question. Giving everything that we've discussed, geopolitical uncertainty, rapid technology change, and increasingly specialized industries, what skills do you think future investment bankers will need? Look, views and curiosity, what do I mean by that? If you're going to work in a tomato factory, try to understand your tomato as well, what do I mean by that? This is a world of political economy, global markets, so even though, of course, we depend on our numbers AI or not. Bu konuda çok güzel. Bu konuda çok çok lezzetli olacak. Bu konuda çok lezzetli olacak. Bu konuda çok lezzetli olacak.