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The stars align for a bull run in the sector

After years on the sidelines while investors piled into the next big thing in AI or crypto, biotech is back in focus. The question is whether this rally marks a real recovery or just another short-lived bounce.

Despite its sharp rebound, the sector remains about 40% below its pandemic peak, leaving it as one of the few areas of the market that still looks reasonably priced. The SPDR S&P Biotech ETF has gained 19% in the past three months, handily beating the S&P 500’s 4% rise. That kind of outperformance has been rare lately.

Even after the rally, valuations remain grounded—the group is trading slightly below its historic average for the ratio of enterprise value to sales. Whether the run continues will depend on several factors: continued funding, a predictable regulatory environment, positive trial results, and steady deal activity. For once, those forces seem to be aligning.

Asad Haider, head of U.S. healthcare equity research at Goldman Sachs, notes that biotech had moved in lockstep with the Russell 2000 small-cap index for much of the year amid bets on the trajectory of interest rates. But that correlation has started to fade in recent weeks, with biotech surging ahead. That suggests there is more behind the rally than just hopes for lower rates.

First, some of the fog around regulation and politics has gradually lifted. After President Trump was elected, Health Secretary Robert F. Kennedy Jr. vaccine skepticism and his shake-up of federal health agencies initially rattled biotech stocks. Since April, says Daniel Lyons, a portfolio manager at Janus Henderson, investors have taken comfort from a steady drumbeat of Food and Drug Administration approvals, such as the recent green light for Insmed’s INSM -1.26%decrease; red down pointing triangle treatment for chronic lung disease.

Meanwhile, confidence has also improved for Big Pharma. Haider notes that in the two trading days in the wake of Trump’s recent drug-pricing deal with Pfizer PFE -1.82%decrease; red down pointing triangle, large drugmakers logged their biggest collective gain in 25 years. That kind of rebound matters: When pharma companies’ stocks rise, so does their appetite for acquisitions, which is the lifeblood of biotech.

And deal activity has indeed accelerated. While there haven’t been any single transactions above $15 billion, global biotech M&A volume is on pace for its strongest year since 2019 at an annualized $179 billion, according to Stifel’s Tim Opler.

Recent examples include Pfizer’s purchase of Metsera and Novo Nordisk’s acquisition of Akero Therapeutics, both focused on the fast-growing cardiometabolic space. Proxy filings for the Metsera MTSR 0.51%increase; green up pointing triangle deal showed several suitors—evidence of just how hungry large drugmakers are for new pipelines as their big blockbusters lose patent protection.

Another tailwind is simple survivor bias. Most of the industry’s weakest players have finally been flushed out.

The ultralow-rate, mRNA-fueled bubble of 2020-2021 produced a wave of biotech IPOs—plenty of them questionable. In 2021 alone, 111 biotechs went public. Many had no viable products, but it took several years for them to close shop, merge or return capital.

Now, that shakeout seems largely complete. The number of listed biotechs trading below their cash balances has fallen from more than 200 in 2022-2023 to about 50 today, according to Stifel’s Opler.

There are other signs of discipline returning. Haider says layoffs across the sector in 2025 have already exceeded last year’s peak and are at the highest since Goldman started tracking the data. That is another sign, he says, “of the froth coming out the other side.”

The backdrop for science itself is also improving. Clinical results have been strong in areas investors had written off, such as gene editing and gene therapy, Lyons of Janus Henderson points out.

When uniQure QURE -3.29%decrease; red down pointing triangle announced a successful trial for the fatal neurological disorder known as Huntington’s disease, its stock shot up, lifting assets across the highly shorted sector. Those kinds of catalysts can create a virtuous cycle—squeezing short sellers and attracting fresh capital. Shares of uniQure, for instance, are up nearly 1,000% over the past 12 months.

Despite the surge in stock prices, brisk dealmaking and renewed access to capital, the initial-public-offering market remains subdued. Biotech companies are on pace to raise $2.6 billion from IPOs this year, compared with $27 billion in 2021, according to Stifel.

That restraint might actually be healthy. “The last thing I’d want to see as a public investor is too many IPOs happening too quickly,” says Jared Holz, a healthcare strategist at Mizuho. “Slow and steady, with only quality coming in, is a good thing.”

No one can time biotech’s daily fluctuations. But for the first time in a while, both the science and the sentiment are pointing the same way, and if the market keeps chasing affordable risk, the sector’s rebound may still have legs.

Three economists Joel Mokyr, Philippe Aghion and Peter Howitt win award

The 2025 Nobel Prize for Economics has been awarded to Joel Mokyr, Philippe Aghion and Peter Howitt for their work explaining how innovation can drive sustained economic growth.

Mokyr, a professor at Northwestern University in the US, was recognised for his work identifying the pre-requisites for sustained economic growth: scientific knowledge of why things work, and society being open to change.

Aghion, professor at the College de France and the London School of Economics, and Peter Howitt at Brown university in the US, were joint winners for developing their theory of “sustained growth through creative destruction”, the Nobel committee said.

The sector is still well off its peak and far behind its Chinese rivals

Mirador Therapeutics has raised $400mn in one of the largest biotech deals this year, increasing hopes of boosting investor confidence in the sector after a woeful first half of 2025.

San Diego-based Mirador raised about $400mn over the summer, according to two investors familiar with the terms.

Launched in 2024, the company is developing autoimmune and anti-inflammatory treatments. It does not have a therapy in clinical trials yet, but still raised an initial $413mn fundraising in 2024. A spokesman for the company declined to comment. 

With the US Federal Reserve cutting interest rates and investors’ fears easing over the impact of President Donald Trump’s tariffs, the US biotech market is looking healthy after a brutal first half.

In the three months ending September 30, small biotech companies had their best stock market performance since 2023, according to the S&P biotechnology index. The index is up 17 per cent this year, but still down from recent highs in 2021.

Still, only five US biotechs have listed through October 9, the lowest number in the same period for at least 10 years, according to Renaissance Capital.

“Hope is building that the macro factors could finally be turning in biotech’s favour,” TD Cowen wrote in an October 1 report. Mirador’s roughly $400mn deal would be the fourth-largest private biotech fundraising so far this year, according to HSBC.

But the US bounceback pales in comparison to China’s biotech sector. The Hang Seng Biotech index, where many Chinese biotech companies are listed, has doubled this year. China’s accelerating biotech scene has rattled US competitors and prompted some American companies to delay disclosing fundraisings to avoid attracting attention, according to biotech investors.

“There is no doubt China’s ascent has increased the competitive intensity” for the US biotech sector, said Alexis Borisy, a serial biotech entrepreneur and co-founder of Curie. Bio. The biotech secrecy had been “increasing in intensity this year”, he said.

For biotech companies with a new drug in the works, “traditionally this would have been talked about at scientific conferences, then there would be a paper on it”, Borisy said. “[Now] none of that. Complete silence as long as possible.”

Traditionally, biotech companies need to be public about their work because “you have to sell your story. If you have to be more stealthy, more secretive, those two things cut against each other,” he said.

For years, Chinese companies have been rapidly replicating drugs that are being developed abroad.

But now the Chinese market has been energised by global pharmaceutical companies pouring in a record amount of cash. In the first half of the year, China biotech companies comprised 18 per cent of licensing deals globally for multinational companies, its largest-ever share, according to Jefferies.

In September, Novartis signed a $5.2bn licensing deal with Shanghai-based Argo Biopharmaceutical. 

Chinese biotechs were often getting drugs tested in clinical stages and getting useful data faster than US rivals, said Jonathan Norris, a managing director at HSBC.

For some US biotech companies raising cash from venture capital firms, “nobody is hearing about them because they are nervous”, he said. “Why give anybody any information about what these folks are doing?”

“There are a number of people I have talked to about what they are starting and they are not listed on PitchBook, and they don’t have a website,” Norris said. PitchBook provides data about private companies.

But it was unfair to blame secrecy on Chinese innovation, said Echo Hindle-Yang, founder of MSQ Ventures, a New York-based advisory firm specialising in international biotech transactions.

“No matter where their [biotech] assets are from most companies, early- stage companies try to keep secret as long as they can. It doesn’t matter if they are in Shanghai or Boston,” Hindle-Yang said.

“I don’t agree with the statement that it is because of the Chinese that they keep the asset secret.”

No company has capitalized on the AI revolution more dramatically than Nvidia. Its revenue, profitability, and cash reserves have skyrocketed since the introduction of ChatGPT over two years ago — and the many competitive generative AI services that have launched since. Its stock price has soared, making it a $4.5 trillion market cap company.

The world’s leading high-performance GPU maker has used its ballooning fortunes to significantly increase investments in startups, particularly in AI.

Nvidia has participated in 50 venture capital deals so far in 2025, already surpassing the 48 deals the company completed in all of 2024, according to PitchBook data. Note that these investments exclude those made by its formal corporate VC fund, NVentures, which also significantly increased its investment pace over that period. (PitchBook says NVentures engaged in 21 deals this year, compared to just one in 2022.)

Nvidia has stated that the goal of its corporate investing is to expand the AI ecosystem by backing startups it considers to be “game changers and market makers.”

Below is a list of startups that raised rounds exceeding $100 million since 2023 where Nvidia is a named participant, organized from the highest to lowest amount raised in the round.

This list shows just how far and wide Nvidia has spread its tentacles in the tech industry, beyond supplying its products.

OpenAI: Nvidia backed the ChatGPT maker for the first time in October 2024, reportedly writing a $100 million check as part of a colossal $6.6 billion round that valued the company at $157 billion. The chipmaker’s investment was dwarfed by OpenAI’s other backers, notably Thrive, which according to the New York Times invested $1.3 billion. While PitchBook data indicates Nvidia did not participate in OpenAI’s $40 billion funding round that closed in March, the chipmaker announced in September that it would invest up to $100 billion in the company over time, structured as a strategic partnership to deploy massive AI infrastructure.

xAI: In 2024, OpenAI tried to persuade its investors not to invest in any of its rivals. But Nvidia participated in the $6 billion round of Elon Musk’s xAI last December anyway. Nvidia will also invest up to $2 billion in the equity portion of xAI’s planned $20 billion funding round, Bloomberg reported, a deal structured to help xAI purchase more Nvidia gear.

Mistral AI: Nvidia invested in Mistral for the third time when the French-based large language model developer raised €1.7 billion (about $2 billion) Series C at a €11.7billion ($13.5 billion) post-money valuation in September.

Reflection AI: In October, Nvidia led a $2 billion funding round for Reflection AI, a one-year-old startup, valuing the company at $8 billion. Reflection AI is positioning itself as a US-based competitor to Chinese DeepSeek, whose open-source large language model offers a less-expensive alternative to closed-source models from companies such as OpenAI and Anthropic.

Thinking Machines Lab: Nvidia was among a long list of investors who backed former OpenAI Chief Technology Officer Mira Murati’s Thinking Machines Lab’s $2 billion seed round. The funding, which was formally announced in July, valued the new AI startup at $12 billion.

Inflection: One of Nvidia’s first significant AI investments also had one of the more unusual (but increasingly common) outcomes. In June 2023, Nvidia was one of several lead investors in Inflection’s $1.3 billion round, a company co-founded by Mustafa Suleyman, the famed founder of DeepMind. Less than a year later, Microsoft hired Inflection’s founders, paying $620 million for a non-exclusive technology license, leaving the company with a significantly diminished workforce and a less defined future.

Nscale: After the startup’s $1.1 billion round in September, Nvidia participated in Nscale’s $433 million SAFE funding in October. That’s a deal that secures future equity for investors. Nscale, which formed in 2023 after spinning out of Australian cryptocurrency mining company Akorn Energy, is building data centers in the UK and Norway for OpenAI’s Stargate project.

Wayve: In May 2024, Nvidia participated in a $1.05 billion round for the U.K.-based startup, which is developing a self-learning system for autonomous driving. Nvidia is expected to invest an dditional $500 million in Wayve, the startup told TechCrunch in September. Wayve is testing its vehicles in the U.K. and the San Francisco Bay Area.

Figure AI: In September, Nvidia participated in the Figure AI’s Series C funding round of over $1 billion, which valued the humanoid robotics startup at $39 billion. The chipmaker first invested in Figure in February 2024 when the company raised a $675 million Series B round at a $2.6 billion valuation.

Scale AI: In May 2024, Nvidia joined Accel and other tech giants Amazon and Meta to invest $1 billion in Scale AI, which provides data-labeling services to companies for training AI models. The round valued the San Francisco-based company at nearly $14 billion. In June, Meta invested $14.3 billion for a 49% stake of Scale, and hired away the company’s co-founder and CEO Alexandr Wang, as well as several other key Scale employees.

Commonwealth Fusion: The chipmaker participated in the nuclear fusion-energy startup’s $863 million funding round in August 2025. The deal, which also included investors like Google and Breakthrough Energy Ventures, valued the company at $3 billion.

Crusoe: A startup building data centers reportedly to be leased to Oracle, Microsoft, and OpenAI raised $686 million in November 2024, according to an SEC filing. The investment was led by Founders Fund, and the long list of other investors included Nvidia.

Cohere: The chipmaker has invested in enterprise large language model provider Cohere across multiple funding rounds, including the $500 million Series D, which closed in August, valuing Cohere at $6.8 billion. Nvidia first backed the Toronto-based startup in 2023.

Perplexity: Nvidia first invested in Perplexity in November 2023 and has participated in most of the subsequent funding rounds of the AI search engine startup, including the $500 million round closed in December 2024. The chipmaker participated in the company’s July funding round, which valued Perplexity at $18 billion. However, Nvidia did not join the startup’s subsequent $200 million fundraise in September, which boosted the company’s valuation to $20 billion, according to PitchBook data.

Poolside: In October 2024, the AI coding assistant startup Poolside announced it raised $500 million led by Bain Capital Ventures. Nvidia participated in the round, which valued the AI startup at $3 billion.

Lambda: AI cloud provider Lambda, which provides services for model training, raised a $480 million Series D at a reported $2.5 billion valuation in February. The round was co-led by SGW and Andra Capital Lambda, and joined by Nvidia, ARK Invest, and others. A significant part of Lambda’s business involves renting servers powered by Nvidia’s GPUs.

CoreWeave: Although CoreWeave is no longer a startup, but a public company, Nvidia invested in GPU-cloud provider when it was still one, back in April 2023. That’s when CoreWeave raised $221 million in funding. Nvidia remains a significant shareholder.

Together AI: In February, Nvidia participated in the $305 million Series B of this company, which offers cloud-based infrastructure for building AI models. The round valued Together AI at $3.3 billion and was co-led by Prosperity7, a Saudi Arabian venture firm, and General Catalyst. Nvidia backed the company for the first time in 2023.

Firmus Technologies: In September, Firmus Technologies, the Singapore-based data center company, received A$330 million (approximately $215 million USD) in funding at a A$1.85 billion ($1.2 billion USD) valuation from investors, including Nvidia. Firmus is developing an energy-efficient ‘AI factory’ in Tasmania, an island state of Australia. The startup originally provided cooling technologies for Bitcoin mining.

Sakana AI: In September 2024, Nvidia invested in the Japan-based startup, which trains low-cost generative AI models using small datasets. The startup raised a massive Series A round of about $214 million at a valuation of $1.5 billion.

Nuro: In August, Nvidia participated in the $203 million funding round for the self-driving startup focused on delivery. The deal valued Nuro at $6 billion, a significant 30% drop from its peak at $8.6 billion valuation in 2021.

Imbue: The AI research lab that claims to be developing AI systems that can reason and code raised a $200 million round in September 2023 from investors, including Nvidia, Astera Institute, and former Cruise CEO Kyle Vogt.

Waabi: In June 2024, the autonomous trucking startup raised a $200 million Series B round co-led by existing investors Uber and Khosla Ventures. Other investors included Nvidia, Volvo Group Venture Capital, and Porsche Automobil Holding SE.

Ayar Labs: In December, Nvidia invested in the $155 million round of Ayar Labs, a company developing optical interconnects to improve AI compute and power efficiency. This was the third time Nvidia backed the startup.

Kore.ai: The startup developing enterprise-focused AI chatbots raised $150 million in December of 2023. In addition to Nvidia, investors participating in the funding included FTV Capital, Vistara Growth, and Sweetwater Private Equity.

Sandbox AQ: In April, Nvidia, alongside Google, BNP Paribas, and others, invested $150 million in Sandbox AQ, a startup developing large quantitative models (LQMs) for handling complex numerical analysis and statistical calculations. The investment increased Sandbox AQ’s Series E round to $450 million and the company’s valuation to $5.75 billion.

Hippocratic AI: This startup, which is developing large language models for healthcare, announced in January that it raised a $141 million Series B at a valuation of $1.64 billion led by Kleiner Perkins. Nvidia participated in the round, along with returning investors Andreessen Horowitz, General Catalyst, and others. The company claims that its AI solutions can handle non-diagnostic patient-facing tasks such as pre-operating procedures, remote patient monitoring, and appointment preparation.

Weka: In May 2024, Nvidia invested in a $140 million round for AI-native data management platform Weka. The round valued the Silicon Valley company at $1.6 billion.

Runway: In April, Nvidia participated in Runway’s $308 million round, which was led by General Atlantic and valued the startup developing generative AI models for media production at $3.55 billion, according to PitchBook data. The chipmaker has been an investor in since 2023.

Bright Machines: In June 2024, Nvidia participated in a $126 million Series C of Bright Machines, a smart robotics and AI-driven software startup.

Enfabrica: In September 2023, Nvidia invested in networking chips designer Enfabrica’s $125 million Series B. Although the startup raised another $115 million in November, Nvidia didn’t participate in the round.

Reka AI: In July, an AI research lab Reka, raised $110 million in a round that included Snowflake and Nvidia. The deal tripled the startup’s valuation to over $1 billion, according to Bloomberg.

This post was first published in January 2025.

Who owns OpenAI? Blockbuster deals complicate investor payouts

Microsoft, OpenAI’s staff and non-profit arm are due close to 90% of start-up. But Nvidia deal will dilute shareholders

OpenAI’s recent blockbuster deals have added a new layer to its complicated ownership structure, leading to more uncertainty over when and how its powerful shareholders will get an eventual payout.

The start-up became the world’s most valuable private company this month, surging to a $500bn valuation on the back of a major share sale, in between striking multibillion-dollar deals with chipmakers Nvidia and AMD.

Those deals will help the lossmaking group realise its ambition to deploy $1tn in computing power over the next few years.

But OpenAI’s boundless capital requirements meant its backers — including Microsoft, SoftBank and Josh Kushner’s Thrive Capital — would see their shareholding diluted through further fundraising, said people familiar with the company’s plans.

Executives at the company believe demand for its tools far outstrips what it can supply given current computing power restraints, and that the outlay will quickly be recouped.

ChatGPT, with 800mn regular users and growing fast, will propel OpenAI from a non-profit into the next multitrillion-dollar company, ensuring its backers will secure historic returns on investment, they argue.

“Most people would prefer to have a smaller piece of a bigger pie,” said a senior OpenAI executive.

Critical to OpenAI’s vision are negotiations with its biggest backer, Microsoft, over its plans to move to a more conventional for-profit corporate structure.

The conversion is an essential step before taking the company public, the most likely route to a big payday for its backers.

Investors are currently entitled to a share of profits. If the change is successful, they will instead receive equity in OpenAI’s for-profit subsidiary.

Microsoft, an early backer that has provided more than $13bn in funding to date, would be the largest single shareholder with about 30 per cent, said people with knowledge of the ongoing negotiations.

Employees are expected to own close to 30 per cent, as would OpenAI’s non-profit parent group, which currently controls the overall group. At OpenAI’s valuation today, each of those stakes would be worth almost $150bn.

The non-profit will not have special shareholder rights in the new structure, according to a person with knowledge of the plans.

Instead, it will have the right to nominate directors for the for-profit subsidiary, a measure the company hopes will satisfy attorneys-general in California and Delaware who can stymie the conversion if they feel it undermines OpenAI’s charitable purpose.

Critics of the conversion say the measure is not sufficient to ensure the non-profit remains in control of the overall company.

The slice of remaining equity will be split between Japan’s SoftBank, which has committed to invest more than $30bn, venture capitalists including Khosla Ventures and Thrive Capital, and shareholders in Jony Ive’s hardware start-up io, which was acquired by OpenAI earlier this year.

OpenAI’s chief executive Sam Altman is also expected to receive a stake, though that would be negotiated only once the conversion has taken place, according to people with knowledge of the process. One of the people added there were no active conversations about Altman receiving equity.

Elon Musk, who gave OpenAI about $45mn after it was founded in 2015, would not receive equity as his contribution was a donation, they added. Musk is suing to block the conversion, arguing it betrays OpenAI’s founding mission.

The people added that the final figures were subject to a series of negotiations, between OpenAI and Microsoft, the attorneys-general and other investors.

Further complicating the picture are OpenAI’s recent deals with Nvidia. The chipmaker will invest as much as $100bn in $10bn increments over the coming years as OpenAI’s power demands increase, taking equity at the prevailing valuation.

Much of the capital required to fund OpenAI’s roughly $1tn data centre ambitions will be raised as debt, or be paid for out of future revenues, according to executives at the company.

Nonetheless, any post-conversion fundraising will dilute existing shareholders, who will also see the size of their stakes eroded as OpenAI hands out stock to new staff hires.

The company has about 3,000 employees, having roughly quadrupled in two years, and is in a heated competition for talent with rivals including Meta.

OpenAI’s scale and funding requirements are unique for a private company. The group has raised about $60bn to date and its valuation would put it among the 20 most valuable listed companies in the world. By comparison, Apple, Microsoft and Nvidia had only raised millions of dollars and went public before their valuations exceeded $2bn.

OpenAI, which will not be able to carry out an initial public offering until it has converted, has had no issue raising money from private sources, who are persuaded by the company’s rapid growth and the scale of the opportunity.

The company could stop burning cash on research and new data centres and aim to break even, said the senior OpenAI executive.

“However, if in five years [OpenAI is] still tripling business, we should absolutely not go for break even. We should go for more investment [because] the market cap should be so much bigger that the dilution shouldn’t matter.”

Ivanhoe founder Robert Friedland says trade and political disputes will have far-reaching consequences for supply chains

Billionaire mining entrepreneur Robert Friedland has warned that rising geopolitical tension is contributing to a “breakdown in the international order” with far-reaching consequences for global supply chains.

Friedland, founder of Toronto-listed Ivanhoe Mines, said trade tensions including worsening US-China relations were making it more difficult and expensive for miners to obtain the equipment they needed, contributing to project delays.

“We’re seeing a breakdown in the international order,” Friedland told the Financial Times at the start of LME week, an annual gathering of metals and mining industry executives and traders.

“These tensions are Balkanising the world economy, and we see it in the copper industry,” he said. “It doesn’t matter what you’re ordering, the lead times are extending,” while building new mines was “getting more and more expensive,” he said.

“We have very significant global tensions developing . . . Unlike anything I’ve seen,” said Friedland.

China last week unveiled new export restrictions on rare earth metals and magnets that are vital to sectors from carmaking to defence.

That prompted US President Donald Trump to say he would impose additional tariffs on Beijing, with China then threatening further countermeasures.

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A broad range of countries and products, including copper and aluminium, are already subject to new US import tariffs.

The price of copper — which is widely used in industries from energy to technology — has risen sharply recently after a series of supply shocks.

US miner Freeport-McMoRan said in September it would be unable to fulfil customer contracts following a fatal mudslide at its huge Grasberg mine in Indonesia, while operations at Codelco’s El Teniente mine were partially suspended following a fatal tunnel collapse in July.

Prices had climbed close to a record high of more than $11,000 per tonne last week, though they fell again on Friday in response to the latest US-China trade spat.

Friedland said the world was in “the foothills of a major shortage of copper” that would hit before the end of this decade, while Máximo Pacheco, chair of Chile state-owned copper miner Codelco, told the FT the world was already in a supply “deficit.”

The industry was now most worried about “operational continuity” — the ability of copper miners to keep producing without disruptions — said Pacheco.

Codelco announced on Monday that it had taken a minority stake in I-Pulse, a technology company co-founded by Friedland.

I-Pulse is developing power technologies for a range of uses, including to reduce the energy required to crush and grind rocks.

The backers of I-Pulse and its subsidiaries include Bill Gates’ Breakthrough Energy Ventures and mining majors BHP and Rio Tinto.

“We need new technology in order to improve our competitiveness and our cost structure,” said Pacheco.

LONDON, Oct 13 (Reuters) - Some of the world's biggest carmakers are facing a pivotal trial at London's High Court on Monday, with lawyers representing 1.6 million claimants accusing them of cheating diesel emissions tests, a decade on from Volkswagen's 'dieselgate' scandal.

In one of the largest mass lawsuits in English legal history, owners of diesel vehicles made by Mercedes-Benz (MBGn.DE), opens new tab, Ford (F.N), opens new tab, Nissan (7201.T), opens new tab, Renault (RENA.PA), opens new tab and the Stellantis-owned (STLAM.MI), opens new tab brands Peugeot and Citroen allege the companies used unlawful 'defeat devices'.

These devices detected when vehicles were being tested and ensured emissions were kept within legal limits, but did not do so when the cars were on the road, the claimants' lawyers say.

The manufacturers, however, say the claims are fundamentally flawed and reject any similarity with the scandal that erupted in 2015, which cost Volkswagen (VOWG.DE), opens new tab billions of euros in fines and compensation.

Mercedes-Benz said its emission control systems were legally and technically justified.

'DEFEAT DEVICES' TRIAL BEGINS

The trial will focus on a small sample of diesel vehicles produced by the five manufacturers, who are being sued by nearly 850,000 claimants, to determine whether they employed prohibited defeat devices. Any damages the court might rule should be paid would be decided at a further trial next year.

The court's ruling will also be binding on hundreds of thousands of similar claims against other manufacturers including Stellantis-owned Vauxhall/Opel and BMW.

Martyn Day, one of the claimants' lawyers from the firm Leigh Day, said the allegations, if proven "would demonstrate one of the most egregious breaches of corporate trust in modern times".

When VW admitted using defeat devices in emissions tests, it led to the carmaker having to pay more than 32 billion euros ($37 billion) in vehicle refits, fines and legal costs, while former Chief Executive Martin Winterkorn faced criminal charges, though his trial was suspended on health grounds this month.

LITIGATION, FINES AROUND THE WORLD

It is not the first time London's High Court has been asked to decide on defeat devices, having ruled against VW in 2020. VW settled those claims without any admission of liability in 2022.

The current group of claims, against a total of 14 manufacturers, is far larger than the VW case, with the claimants' lawyers previously valuing the litigation as a whole at around 6 billion pounds ($7.97 billion).

Automakers are facing lawsuits around the world, including in the Netherlands where a court ruled in July that diesel cars sold by Stellantis brands Opel, Peugeot-Citroen and DS contained defeat devices, a ruling Stellantis said was wrong.

Manufacturers and suppliers have also paid fines and reached settlements in the United States and elsewhere to resolve investigations into diesel vehicle emissions.