FFM Fund Newsletter - Oct 2025

October 2025

Dear Friends, Dear Investors,

As we already highlighted last month, Artificial Intelligence is now capturing all the attention, and it has become increasingly difficult to ignore. At this stage, the only reasonable stance is to observe the movement with discipline, while acknowledging that staying on the sidelines of such a powerful trend would likely be a missed opportunity.

In this context, one particular fact stands out: in the second quarter of 2025, AI-related investments contributed more to US GDP growth than household consumption. A first, and a remarkable one, considering that consumption accounts for around 70% of the US economy. Most analysts have, naturally, applauded this technological performance. Yet what it indirectly reveals is just as significant, if not more: the weakness of domestic demand. American households appear strapped for cash. BNPL (Buy Now, Pay Later) usage has surged, even for basic purchases such as groceries.

At the same time, the effects of AI are beginning to appear in the labour market. In some cases, it is now easier to replace a recent graduate with a powerful algorithm. While still marginal, this phenomenon could become systemic over the coming years, particularly in the services sector.

On the political front, while the debate around tariffs has temporarily quieted down, its consequences are already being felt: hiring has slowed, uncertainty is rising, and a single presidential tweet was enough to shake markets once again. As we have stated repeatedly, the US is unlikely to enter a recession over the next six months, thanks in part to massive AI-related investments. But from the perspective of the American consumer, the situation may already feel like a recession, and companies tied to domestic consumption are likely to suffer as a result.

In Europe, markets broadly rose in September, following the lead of US indices, buoyed by the continued enthusiasm around AI. In France, the political crisis has so far had only a limited impact on the CAC 40, which remains supported by its large industrial and tech constituents. This is largely due to the fact that most French-listed companies generate the majority of their revenues outside of France, with a global exposure often exceeding that of their US or Asian peers. This continues to support our confidence in a number of high-quality European corporates.

In this paradoxical environment, defined by tech euphoria on one side and economic tensions on the other, we remain committed to our long-term approach: managing portfolios with discipline by identifying the most resilient, profitable and well-governed businesses. At a time when AI excites and consumption worries, our role is to keep a cool head, avoiding both euphoric excesses and silent blind spots, while staying focused on the economic reality of the companies we invest in.

Best regards,

Your CaridaB Group Team