This is not investment advice

April’s financial markets resembled a roller-coaster with an unpredictable operator—rapidly plunging, then soaring, before ultimately closing the month more or less where they started (S&P500 down 0.76% and Nasdaq-100 up 1.52% for the month, driven by strong performance from Microsoft, Broadcom and Tesla). Trump’s “Economic Liberation Day” tariff announcement on April 2nd sent the Nasdaq 100 tumbling 11% in just 48 hours, only to recover after his 90-day implementation pause a week later. Behind these dramatic swings, fundamental questions loom large: Will Trump’s tariff brinkmanship reshape global supply chains? Is the anticipated exit window for venture-backed companies closing before it truly opened? And can Europe’s AI ecosystem find opportunity amid this chaos? The answers may define investment strategies for the remainder of 2025.

In this month’s analysis, I examine the tactical gambit behind Trump’s tariff announcements, why the exit renaissance has stalled yet again, and where European AI innovation continues to thrive despite—or perhaps because of—this uncertain landscape.

Stock Market and Economic Indicators

Markets Whipsawed by Tariff Theatrics

The S&P 500 and Nasdaq 100 end April essentially flat, obscuring extraordinary volatility throughout the month. Trump’s April 2nd “Liberation Day” pronouncement—introducing a 10% universal tariff and higher country-specific penalties—initially sent markets spiralling. The S&P 500 dropped 8%, while the tech-heavy Nasdaq plummeted 11% within 48 hours as investors processed the implications of 25% tariffs on automotive imports, 125% on Chinese goods, and various penalties on virtually all US trading partners.

The subsequent 90-day implementation pause announced on April 9th triggered an equally dramatic recovery—though notably, no reprieve was granted for Chinese imports. This rollercoaster mirrors the broader uncertainty permeating business planning, with the International Monetary Fund already downgrading its 2025 global growth forecast from 3.3% to 2.8%, citing trade policy uncertainty as a primary factor.

Inflation and Interest Rate Outlook Shifts

US inflation held steady at 2.4% in March, but economists are now revising projections upward, with April’s figure (due May 13th) forecast to hit 2.7%. This uptick suggests that anticipated trade and supply chain disruptions are already beginning to feed through to consumer prices. Analysts at Goldman Sachs suggest tariffs could add 0.5 percentage points to core inflation by year-end if fully implemented—potentially derailing the Federal Reserve’s rate-cutting plans.

The bond market has already rendered its verdict, with 10-year Treasury yields initially spiking to 4.5% from 3.94% following Trump’s tariff announcement, before settling back to 4.18% by month-end. This remarkable volatility reflects how dramatically tariff uncertainty has shifted the economic landscape since the Fed began its cutting cycle last September.

The European Central Bank, maintaining its more dovish stance, implemented another 25 basis point cut on April 14th. This policy divergence has actually weakened the dollar against the euro, with the EUR/USD exchange rate rising to 1.13, creating an additional headwind for European exporters. For global corporations, this environment creates a planning nightmare as short-term opportunism trumps strategic planning.

IPO and M&A Activity: Exit Window Slams Shut

Many venture investors had entered 2025 with high hopes for a liquidity renaissance. After years of anaemic exit markets, Google’s $32 billion acquisition of Israeli cybersecurity firm Wiz on March 18th (their largest acquisition ever) seemed to herald a new era. The transaction demonstrated massive appetite for category-defining assets – even at premium valuations.

CoreWeave’s IPO on March 28th further bolstered optimism. While priced at $40 per share—below the initially targeted $47-$55 range—the company successfully raised $1.5 billion, and the market’s reception appeared stable.

However, Trump’s “Liberation Day” pronouncement just five days later abruptly reversed this positive momentum. Klarna’s long-anticipated IPO, expected to value the Swedish fintech at $14-20 billion, was postponed indefinitely. The Swedish buy-now-pay-later giant had been preparing for months, having secured profitability in 2023 and grown its user base to over 150 million globally.

The venture industry is understandably disappointed that distributions have been further postponed just as the exit window appeared to be reopening. If there’s a silver lining, it may be the Trump administration’s generally more business-friendly approach to antitrust enforcement. The appointment of figures like Gail Slater suggests a departure from the aggressive stance that characterised the Biden-era Federal Trade Commission under Lina Khan. This could eventually unleash a wave of strategic acquisitions, particularly if public markets remain volatile.

Cerebras’s public offering remains stalled by a Committee on Foreign Investment in the United States (CFIUS) review of G42’s $335 million stake. The one exception to the broader pause is Figma, which confidentially filed for an IPO in April despite the turbulence. After Adobe’s $20 billion acquisition was blocked by regulators in 2023, Figma’s filing signals confidence in their business fundamentals, though the actual offering will likely wait until market conditions improve.

AI and Technology Developments: European Innovators Make Their Mark

Against this uncertain macroeconomic backdrop, April brought several landmark developments in artificial intelligence—with European players making their mark on the global stage.

Isomorphic Labs’ $600 Million Breakthrough

Isomorphic Labs, the London-based AI drug discovery company spun out of Google’s DeepMind in 2021, secured a massive $600 million funding round led by Thrive Capital. The company, leveraging breakthroughs from AlphaFold 3’s protein structure predictions, has established partnerships with pharmaceutical giants Eli Lilly and Novartis potentially worth up to $3 billion.

CEO Demis Hassabis articulated an audacious vision: “to solve all disease with AI.” While that might sound hyperbolic, Isomorphic’s core technology—using AI to predict how drug candidates will interact with biological targets—addresses a fundamental inefficiency in pharmaceutical development where 90% of candidates fail before reaching market. Early results suggest their approach could improve success rates by 30-40%, potentially transforming the economics of drug discovery.

This represents another significant success for the UK’s robust pharmaceutical and biotech ecosystem, home to global giants like GlaxoSmithKline and AstraZeneca. Isomorphic exemplifies how the convergence of the UK’s traditional pharma strength with its world-class AI research can create powerful new innovation hubs. As we’ve long argued, Europe’s depth of technical talent positions it perfectly for the next wave of AI applications across industries.

Wayve-Nissan Partnership: A European Approach to Autonomous Driving

Equally significant was Wayve’s partnership with Nissan, announced mid-April. The UK-based autonomous driving startup will integrate its self-learning AI software into Nissan’s next-generation ProPILOT driver-assist system, launching in 2027. This deal exemplifies a distinctly European approach to AI commercialisation—collaborating with established industry players rather than pursuing the capital-intensive direct-to-consumer strategy favoured by American counterparts.

Unlike Tesla or Waymo, which operate their own vehicles to generate training data, Wayve’s partnership gives them access to millions of miles of real-world driving without the enormous capital requirements of maintaining a proprietary fleet. For European AI startups, this success highlights a viable path forward despite capital disadvantages relative to American competitors.

OpenAI’s o3 Release: Advancing AI Reasoning

April also saw OpenAI launch its o3 model, designed to excel in tasks requiring deep reasoning, such as mathematics, coding, and scientific analysis. The model incorporates a “deliberative alignment” approach, allowing it to simulate a chain of thought and allocate additional computation time to complex problems.

While o3 achieved an impressive 87.5% score on the ARC-AGI benchmark in high-compute mode, it has faced some criticism regarding hallucination rates. Nevertheless, the model represents another significant step forward in AI capabilities, particularly in complex reasoning tasks.

This release comes as OpenAI finalises terms with SoftBank for their long-anticipated funding round, reportedly valued at $40 billion with an initial $10 billion tranche to be delivered immediately. This investment will fund both hardware expansion and talent acquisition as the company continues its aggressive growth strategy.

Looking Ahead: Navigating Q2 2025

As we navigate through Q2, several critical developments warrant close monitoring:

Trump’s Tariff End Game

May 3rd brings the implementation of 25% tariffs on auto parts, potentially revealing whether the administration intends to follow through on its broader trade agenda or pursue a more negotiated approach. Treasury Secretary Scott Bessent’s recent comments that current tariff levels on Chinese goods are “unsustainable” suggest potential moderation, but the administration’s pattern of contradictory messaging makes predictions challenging.

The EU’s potential response—targeting US tech services like AWS—could further complicate the landscape for technology companies. European policymakers are carefully calibrating their response to avoid escalation while protecting key industries.

OpenAI’s Strategic Evolution

With its SoftBank financing approaching closure, OpenAI’s strategic priorities for the remainder of 2025 will indicate the industry’s direction. CEO Sam Altman has indicated that GPT-5’s release has been delayed, with a potential launch expected around July or later. This delay is attributed to efforts to enhance the model’s capabilities and manage capacity challenges. Instead, OpenAI has focused on releasing specialised models like o3 and o4-mini.

Despite recent turbulence, we remain fundamentally optimistic about the technology landscape. The current efficiency revolution expands rather than diminishes AI’s transformative potential by democratising capabilities previously limited to the best-funded players. Lower training and inference costs enable broader implementation across industries, potentially accelerating adoption well beyond the current 6% of companies utilising significant AI capabilities.

For European startups, the current environment offers distinctive advantages. Early stage valuations remain 40-50% below US comparables despite equivalent technical talent, for example in hubs like London, Cambridge, and Oxford. And while US-China decoupling creates supply chain challenges, it also opens opportunities for European alternatives as companies seek to diversify geopolitical risk.

The market may tremble at tariff headlines, but the technological revolution marches inexorably forward. As we navigate through this uncertainty, we’ll be focusing on companies creating tangible value through specialised implementation in high-impact domains—precisely where European technical talent excels.