Bank of America believes that AI is rapidly evolving from a technological concept to a key macroeconomic variable.

On November 5th, a research report by Bank of America (BoA) stated that understanding how AI affects the global reserve currency, the US dollar, has become a necessary course for future asset allocation. The impact of AI on the US dollar is not simpl

Short term (capital expenditure phase): The US dollar receives support. Huge capital investments driven by AI are boosting US GDP, providing reason for the Federal Reserve to maintain a hawkish stance, and indirectly benefiting the US dollar.nnMedium

Short term (capital expenditure phase): The US dollar receives support. Huge capital investments driven by AI are boosting US GDP, providing reason for the Federal Reserve to maintain a hawkish stance, indirectly benefiting the US dollar.nnMedium ter

Stage One: Capital Expenditure Boom Indirectly Supports the US Dollar

A common misconception is that the US leadership in AI and the surge in related stocks will automatically translate into a strong US dollar.

The report indicates that despite a surge in AI concept stocks in the second and third quarters of 2025, the US dollar index basically maintained a range-bound trend without benefiting from it.

Historically, the 60-day rolling beta coefficient of the US dollar index and the technology stocks (represented by the NASDAQ index) has been flat or even negative for a long time. When technology stocks rise, the US dollar usually tends to weaken. A

The main reason is that the short-term fluctuations of AI stock prices do not dominate the trend of the US dollar.

Although the stock prices of tech companies diverge from the US dollar's trend, the capital expenditure caused by AI has undeniably supported the US dollar.

The report, citing the analysis of its economists, points out that AI investment alone could contribute 1.2 percentage points and 1.3 percentage points to the GDP growth of the United States in the first and second quarters of 2025 respectively.

This contribution mainly comes from software and hardware investments. The transmission path is clear: the capital expenditure on AI boosts GDP, which in turn generates a wealth effect, supporting consumption expenditure to some extent. Subsequently,

Bank of America believes that as long as the AI investment cycle continues, it will be a fundamental factor supporting the resilience of the US dollar.

Stage 2: Labor Market Risks and Short-term Pressure on the US Dollar

As AI transitions from investment concept to mass application, its first impact will be on the labor market, which poses a clear short-term risk to the US dollar.

The report observed that the U.S. labor market has shown characteristics of low hiring and low firing, reflecting that in front of the wave of automation, companies are cautious about adding entry-level jobs.

Data shows that the unemployment rate for the 20-24 age group is disproportionately increasing, significantly exceeding the core working population aged 25-54. Meanwhile, layoffs at major companies like Amazon, UPS, IBM, and Target are also indicatin

The report indicates that any data confirming an increase in layoffs driven by AI will significantly increase the downside risk of the US dollar, as it will directly affect the Fed's easing path and the end point of interest rate cuts.

Phase Three: Long-term Showdown - Productivity Revolution vs. Deflation Pressure

After the labor market pain period, the long-term impact of AI on the US dollar will depend on two competing forces: deflationary effects and productivity improvements, according to Bank of America analysis.n

The long-term fate of the US dollar will depend on whether AI is an 'efficiency killer' or a 'growth engine'.

History Mirror: Why the Dot-Com Bubble in 2000 is an Imperfect Analog

When it comes to the tech boom, people naturally think of the dot-com bubble in 2000. The report suggests that this is a 'relevant but imperfect analogy'.

The key difference lies in:

In summary, the report emphasizes that the impact of AI on the US dollar is a dynamic and evolving process. Investors should not simply equate AI with a strong or weak US dollar, but should build a multi-stage analytical framework to closely monitor

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