- Stellantis fell 25.2% in a single day – the steepest drop in its history.
- Kongsberg surged 15.6% after a surprise Q4 profit beat and a €165 million weapons contract.
- The STOXX 600 clawed back to end the week up 1%, despite a tech‑media sell‑off.
- EV development cuts cost Stellantis €22 billion, reshaping the European auto outlook.
- AI‑driven hardware demand lifts memory makers while pressuring software firms.
You missed the warning sign when Stellantis sank 25%, and your portfolio paid the price.
Stellantis’s 25% Crash: What Triggered the Record Drop?
On Friday the Franco‑Italian giant posted a staggering €22.2 billion charge tied to a pull‑back of its electric‑vehicle (EV) rollout. The write‑down reflects slower‑than‑expected EV adoption in Europe, higher battery costs, and a strategic shift to trim projects that were off‑track. The market reacted brutally – the stock tumbled 25.2%, dragging the broader auto index down 3%. For investors, the key question is whether the charge is a one‑off accounting event or a symptom of a deeper earnings gap. Stellantis still owns a robust portfolio of internal‑combustion models, but its EV ambition now looks more cautious, potentially widening the gap with rivals that are charging ahead on electrification.
Kongsberg’s 15% Surge: Why Defence Is the Unexpected Hero
Norway’s defence specialist Kongsberg jumped 15.6% after delivering a Q4 operating profit that beat consensus by a healthy margin. The company also secured a €165 million contract for remote weapon stations from Germany and Sweden – a clear signal that European defence spending is accelerating. Defence stocks, in general, outperformed the market, lifting the sector index by 1.6%. The upside comes from heightened geopolitical tension in Eastern Europe and a renewed push for sovereign‑type procurement. For risk‑averse investors, Kongsberg’s earnings resilience and order backlog provide a rare defensive play in an otherwise volatile week.
STOXX 600 Weekly Performance: The Bigger European Landscape
The pan‑European STOXX 600 closed the week at 617.12 points, up roughly 1% after rebounding from Friday’s early dip. The bounce was powered by the defence rally and a modest recovery in banks (+1.4%). Yet the technology and media segments remain the week’s laggards, posting the biggest weekly drop in 11 weeks as AI‑related software stocks wrestle with a “software‑hardware dislocation”. The European Central Bank’s recent rate decision added a layer of nuance: while policy remains accommodative, investors are wary of the inflation‑adjusted cost of capital for capital‑intensive sectors like automotive and aerospace.
Sector Ripple Effects: Auto vs Defence vs Tech
Auto: Stellantis’s shockwave is reverberating across peers. Tata Motors, for instance, has signaled a steadier EV rollout, while German giants Volkswagen and BMW are still investing heavily in battery plants. The contrast could widen valuation spreads, rewarding those that demonstrate disciplined cash‑flow management. Defence: Kongsberg’s rally mirrors a broader European trend. Companies such as BAE Systems and Rheinmetall have also reported order inflows, suggesting a sector‑wide tailwind that may outlast short‑term market swings. Tech: AI hype is a double‑edged sword. U.S. titans Amazon and Alphabet are accelerating AI‑related capex, spurring demand for memory chips. Conversely, pure‑play software firms face margin pressure as customers shift spend toward AI‑enabled hardware. The net effect is a portfolio rotation from growth‑centric tech toward “hard‑asset” plays that combine cash flow stability with secular tailwinds.
Historical Parallel: Past Auto Slumps and Recovery Paths
Investors can draw lessons from the 2008 financial crisis, when major automakers slashed capital spending and saw shares plunge 20‑30%. Those that emerged stronger—Ford and Toyota—did so by preserving liquidity, pruning under‑performing models, and re‑focusing on core brands. A more recent analogue is the 2020 pandemic shock. While EV‑focused firms like Tesla surged, legacy OEMs that quickly pivoted to digital retail and cost‑saving measures recovered faster than those stuck in legacy production lines. Stellantis’s current predicament shares these hallmarks: a hefty charge, a strategic pause on EV spend, and a need for disciplined balance‑sheet management. How the company executes the next 12‑18 months will likely determine whether today’s carnage becomes tomorrow’s bargain.
Investor Playbook: Bull and Bear Cases
Bull Case
- Share price has over‑reacted to a non‑recurring €22 billion charge; earnings recovery could be smoother than the market expects.
- Stellantis retains a diversified brand portfolio and a strong cash position to fund a more measured EV transition.
- Defence exposure via Kongsberg offers a hedge against automotive cyclicality and could boost overall European industrial sentiment.
- Valuation gaps with peers (e.g., Tata Motors, VW) present attractive entry points for long‑term investors.
Bear Case
- The EV write‑down signals deeper structural challenges; competitive pressure from pure‑EV players may erode market share.
- Higher financing costs from lingering ECB tightening could strain capital‑intensive projects.
- Continued weakness in tech and media could bleed investor sentiment, keeping the broader STOXX 600 volatile.
- If defence spending plateaus, Kongsberg’s momentum may fade, removing a key defensive catalyst.
Bottom line: The week’s drama underscores the importance of sector‑level diversification and a keen eye on cash‑flow discipline. Whether you view Stellantis’s plunge as a buying opportunity or a red flag depends on your risk tolerance, time horizon, and confidence in the company’s ability to re‑calibrate its EV strategy while leaning on its legacy strengths.