Dollar Powered by the AI Trade

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Foreign demand for AI exposure is powering the U.S. Dollar, according to Apollo's Torsten Slok.

Overseas investors are buying American equities at a record pace, and the hunt for artificial intelligence exposure is doing much of the driving.

"Net foreign inflows into US equities have surged to a record high, driven in large part by overseas investors seeking AI exposure they cannot get in their home markets," says Torsten Slok, Chief Economist at Apollo.

Apollo's data show the twelve-month sum of net foreign inflows into US equities approaching $900BN, comfortably above anything recorded in three decades of data.

Above: Net foreign inflows into US equities, 12-month rolling sum. Source: Apollo.

Because those purchases require buying Dollars first, the flows form a powerful source of demand for the currency.

The observation dovetails with recent findings that the AI boom is offering the Dollar a structural bid, with equity performance acting as a signal for the international capital flows that ultimately shape exchange rate trends.

The scale of the phenomenon is without modern precedent: as we recently reported, the five largest U.S. hyperscalers are committed to roughly $600-700BN of capital expenditure in 2026, equivalent to around 1.6% of US GDP.

This Also Means AI is a Risk to the Dollar

Slok's point, however, is that a currency powered by a single trade inherits that trade's risks.

Most of the foreign money flowing into US equities is doing so without protection against currency moves.

"With most foreign equity investors not hedging their FX risk, the bottom line is that if AI disappoints, the resulting pullback in these inflows would be a significant downside risk to the US dollar," says Slok.

The absence of hedging is currently a support, as there are no offsetting Dollar sales to dilute the inflows.

But it also means there is no cushion: any souring of AI sentiment would see the equity outflow and the currency outflow arrive together.

For now, the momentum runs one way, and the Federal Reserve's rate path remains the dominant week-to-week driver of the Dollar.

Beneath that cyclical noise, though, the world's biggest currency is increasingly a bet on the world's biggest trade.