AI Scare Raises Questions About the US Dollar

Key Takeaways

• Technology shares and the US dollar fell together, which is not the usual pattern.
• Dollar support may partly rest on overseas money chasing US AI exposure.
• Holding US shares and US cash may be less diversification than it looks.

An AI scare on 8 October 2026 produced an unusual market reaction. Technology shares fell, but the US dollar weakened alongside them. The currency that often attracts investors during a sell-off was caught in the selling. It raises a question worth watching: how much of the dollar's support depends on confidence in American AI?

InvestingLive's Adam Button highlighted the reaction to a report suggesting OpenAI's revenue was below expectations. The Financial Times reported on 8 October 2026 that OpenAI had told investors its annualised revenue was approaching US$50 billion at the end of September, against the US$70 billion figure that had circulated in late September (Financial Times via The Straits Times, 9 October 2026). He noted that the comparison excluded partner revenue, making the apparent shortfall misleading. Nevertheless, chipmakers and electricity providers came under pressure, with Intel down 5% and Micron down 4%, while the dollar fell across currencies (InvestingLive, 9 October 2026).

Button's argument is that investment in US artificial intelligence has helped support the dollar. Overseas investors seeking exposure to the sector channel money into American assets. If enthusiasm fades, that support could weaken. A reversal in the AI trade could therefore affect both US shares and the currency in which they are priced.

One brief reaction does not establish how the dollar will behave in a full market crisis. A global scramble for dollar funding could still lift it, even if the trouble begins in the US. The risk for investors is assuming that holding American shares and American cash always provides two independent sources of protection.

For gold, the difference matters a lot. Physical bullion carries no corporate earnings risk and is no government's liability. That could make it attractive if confidence in both US assets and the dollar deteriorates. Gold can still fall when investors need cash to cover losses elsewhere, as it did during periods of forced selling in 2008, when it fell between 15% and 25% in US dollar terms twice that year yet still finished up 4.3%, and between 9 and 18 March 2020, when it fell 12% (World Gold Council, March 2020; Bank of England's Jon Cunliffe via BIS, February 2022).

Bitcoin requires a different assessment. Its limited supply does not make it immune to a technology sell-off. Research has found stronger connections between crypto and traditional markets during periods of stress, with IMF analysis estimating spillovers from Bitcoin volatility to the S&P 500 and MSCI emerging markets indices rose about 12 to 16 percentage points after the onset of the COVID-19 pandemic (IMF Global Financial Stability Note 2022/001). An AI correction could initially weigh on Bitcoin as investors reduce risk. A later improvement in liquidity could support a recovery, but that would be a separate development rather than an automatic consequence of a weaker dollar.

Australian investors also need to watch the exchange rate. A higher gold price in US dollars does not translate directly into the same gain in Australian dollars. If the Australian dollar strengthens against the US currency, it reduces the local return. If it weakens, it adds to it.

The useful lesson from last week is to question what a portfolio's protection actually depends on. An AI setback could reach beyond technology shares. If it also weakens demand for the dollar, investors relying on US cash as their main refuge may find their diversification provides less protection than expected. For Australians holding metal through Ainslie Bullion or digital assets through Ainslie Crypto, that question sits behind both positions.

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This article is general information only and does not constitute financial advice. Past performance is not indicative of future results. Always conduct your own research or consult a licensed financial adviser before making investment decisions.