Markets no longer operate in a geopolitical vacuum.
Trade tensions, technology rivalry, supply-chain security, and national defense priorities have become central forces shaping capital allocation. In the latest episode of Lead-Lag Live, host Melanie Schaffer sat down with Aram Babikian, Head of Xtrackers Wealth at DWS, to explore how geopolitics and national security are changing the way investors should think about technology exposure.
The conversation highlights a critical shift underway in markets: the future of technology investing is increasingly tied to national security priorities rather than globalization alone.
From Globalization to Geostrategic Risk
For decades, globalization rewarded companies that built expansive international supply chains and tapped global consumer markets. That framework is now under pressure.
The relationship between the United States and China has evolved from cooperation to strategic competition, particularly in advanced technologies. What once appeared to be efficient global integration now carries hidden risks tied to revenue concentration, supply-chain dependence, and political alignment.
Babikian offered a compelling analogy. Globalization built a bridge between the U.S. and China. As the two sides move further apart, the middle of that bridge begins to collapse. That collapse represents collateral damage for investors holding companies deeply entangled with geopolitical adversaries.
This shift forces investors to ask new questions. It is no longer enough to know what a company produces. Investors must also understand where it operates, how its supply chains are structured, and how exposed it may be to geopolitical fracture lines.
What Are “Critical Technologies” and Why They Matter
At the center of this new framework is the concept of critical technologies.
In response to rising strategic competition, the U.S. Department of Defense identified a set of technologies considered essential to future economic strength and national security. These areas include artificial intelligence, advanced computing, quantum science, cybersecurity, advanced materials, energy resilience, space systems, and human-machine interfaces.
These technologies are no longer niche themes. They are becoming the backbone of long-term government investment, defense planning, and industrial policy. As a result, they are also attracting sustained private capital alongside public funding.
For investors, the implication is significant. Capital flows are increasingly guided by national security priorities rather than short-term growth narratives alone.
Why This Approach Differs From Traditional Tech Exposure
A key insight from the discussion is how this approach differs from conventional technology-heavy strategies.
Many widely held technology companies dominate major indices, yet some are excluded from national-security-focused portfolios due to elevated geopolitical entanglement. Factors such as revenue dependence on China, supply-chain concentration, foreign ownership structures, and strategic alliances can create risks that traditional financial metrics often overlook.
By contrast, companies included under a national security lens must meet two criteria. They must align with critical technologies deemed essential to U.S. and allied interests, and they must demonstrate a favorable geostrategic risk profile. That profile evaluates exposure to adversarial nations versus alignment with allied intelligence and defense networks.
This explains why some familiar mega-cap names are absent while others remain core holdings despite overlap with broader technology benchmarks.
De-Risking for Geopolitics Without Abandoning Innovation
Importantly, this framework is not about avoiding innovation or growth. It is about reframing risk.
The goal is to participate in the technologies shaping the future while reducing exposure to geopolitical vulnerabilities that could disrupt revenue streams, supply chains, or long-term valuations. In this sense, national-security-aligned technology investing blends offense and defense.
Government spending, defense modernization, and strategic technology development create durable sources of demand. Filtering out companies with high geopolitical vulnerability seeks to mitigate downside risk as global tensions continue to rise.
In an environment where geopolitical volatility is difficult to quantify yet increasingly impactful, this approach offers a different way to think about portfolio construction.
A New Lens for the Next Market Cycle
One of the most forward-looking ideas from the conversation is that national-security-focused technology exposure may represent the next evolution of core technology allocations.
Traditional benchmarks emerged during an era defined by globalization, consumer internet growth, and supply-chain efficiency. The next era appears shaped by strategic competition, technological sovereignty, and defense-driven innovation.
For investors and advisors, the takeaway is not to trade headlines, but to recognize that geopolitics has become a structural driver of markets. Ignoring it may carry more risk than acknowledging it.
That shift may ultimately redefine what “core” technology exposure looks like in portfolios in the years ahead.
DISCLAIMER – PLEASE READ: This is a sponsored episode for which Lead-Lag Publishing, LLC has been paid a fee. Lead-Lag Publishing, LLC does not guarantee the accuracy or completeness of the information provided in the episode or make any representation as to its quality. All statements and expressions provided in this episode are the sole opinion of Xtrackers By DWS and Lead-Lag Publishing, LLC expressly disclaims any responsibility for action taken in connection with the information provided in the discussion. The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions.
