The AI frenzy "sucks" global capital, has AI caused the dollar to "bottom out"?

The investment of hundreds of billions of dollars in AI infrastructure by American technology companies is reshaping global capital flows, and this corporate-level upheaval has evolved into a key support factor for the dollar. Although this dynamic has not yet fully entered the mainstream narrative of the foreign exchange market, its boosting effect on the dollar is quietly emerging.

American tech giants have significantly raised their expectations for AI-related capital expenditures. According to news from the Wind Trading Desk, Barclays stated in a research report on the 9th that the spending forecast for 2025 has risen from several hundred billion dollars over a year ago to about 500 billion dollars, with total investment over the next five years expected to exceed 3 trillion dollars, which by some estimates is equivalent to more than 10% of GDP. These investments are attracting capital globally through channels such as corporate bond issuance.

This trend has begun to manifest in macro data. In the first two quarters of 2025, the contribution of investment projects to U.S. GDP rose to an annualized 1 percentage point per quarter, the highest level since 2023. The dollar sentiment indicator has now turned positive, indicating that market perceptions of the dollar are improving.

Barclays believes that these developments reinforce its previous judgment—that the dollar may have already bottomed out. Although the narrative in the foreign exchange market still focuses on data gaps and government shutdown risks, the growth resilience brought by the AI investment boom, the reassessment of interest rate expectations, and global capital inflows are forming a "silent support" for the dollar.

AI Investment Scale Exceeds Expectations, Supporting Dollar Bottoming

Expectations for AI capital expenditures by American technology companies have been significantly raised in recent months. Over a year ago, the market expected AI-related spending in 2025 to be only several hundred billion dollars. Now this figure has climbed to about 500 billion dollars, with total investment over the next five years expected to exceed 3 trillion dollars. By some estimates, this is equivalent to more than 10% of U.S. GDP.

This investment boom has begun to have a substantial impact on the macroeconomy. In the first two quarters of 2025, the contribution of investment to U.S. GDP rose to an annualized 1 percentage point per quarter, the first time reaching this level since 2023.

The economic output resilience brought by AI investment is reshaping market expectations. Barclays pointed out that although the base effect may mean that the pull of investment on growth will weaken at some point next year, AI investment is still in an acceleration phase. This growth acceleration is accompanied by the excellent performance of U.S. assets, providing support for the dollar.

In addition, the multiplier effect of investment spending may push interest rate expectations to continue facing reality checks. The previously expected significant slowdown in economic growth may be difficult to achieve, which means the probability of a deep interest rate cut cycle by the Federal Reserve is reduced. This part of output resilience has also driven the repricing of policy rate expectations, helping the dollar stabilize after its decline. Barclays' dollar sentiment index has now turned positive.

Corporate Bond Issuance Siphoning Global Capital

One underestimated impact of the AI investment boom on the dollar is its capital absorption effect globally. **Through large-scale corporate bond issuance, the U.S. is absorbing resources and capital from around the world Whether through direct participation in capital increases or through reverse Yankee bond issuance, the advantages created by this investment boom are directing resources towards the dollar. This capital flow constitutes a "silent" but substantial support for the dollar.

Barclays emphasizes that the macro field sometimes views corporate-level developments as occurring in a parallel universe. While the narrative in the foreign exchange market remains focused on data gaps and government shutdown risks, the "elephant in the room" is actually the massive AI investments by tech companies and the global capital flows they trigger.

Risks Facing the Expectation of a Dollar Bottom

These developments reinforce Barclays' view presented in the September outlook and global outlook report—that the dollar may have already bottomed out. In fact, the current trading level of the dollar is even stronger than the institution's previous expectations that exceeded market consensus. Barclays stated that, in hindsight, it should maintain its initial mid-term forecast of 1.13 for the euro against the dollar.

However, this judgment still faces key risks. Barclays points out that the main risks include interference with the independence of the Federal Reserve, although the risks stemming from the Cook judicial ruling have decreased for now. Additionally, the potential deterioration of the corporate bond market, particularly the widening credit spreads in certain sectors of U.S. tech credit, also constitutes a risk factor worth noting.

Despite these risks, the growth resilience driven by the AI investment boom, the reassessment of interest rate expectations, and the influx of global capital are providing multiple supports for the dollar. This "silent dollar rise" may mark an important turning point in the dollar's trajectory