A Nomura report has raised alarms over the US economy’s exposure to risks hidden by the recent surge in artificial intelligence-driven equities. The concentration of global savings in US dollar assets, combined with high valuations and competitive pressures on AI technology, suggests potential for a sharp market correction with broad global fallout.
- AI tech boom masks increasing US economic and market risks
- US portfolio liabilities have quadrupled since the global financial crisis
- A sharp US market correction could spur global capital outflows
What happened
Nomura’s recent report details how the AI-driven rally in US technology equities has concealed mounting risks in the US economy and capital markets. The bank highlights the significant accumulation of US portfolio liabilities, which reached $37.4 trillion in March 2026, up from $9.2 trillion before the global financial crisis. This rising exposure is disproportionately held in US dollar assets by global investors.
The report indicates that the US net international investment position liabilities rose to $21.9 trillion in 2025, equivalent to 71% of US GDP, with an 80% ratio to the combined assets of all net creditor nations. This imbalance has heightened vulnerabilities should a reversal in investor sentiment occur, especially in response to evolving risks around AI technology adoption and competition.
Why it matters
The growing concentration of global savings in US dollar assets and reliance on the mantra of ‘there is no alternative’ (TINA) to US investments may underestimate systemic risks. Nomura warns that despite AI-driven profit growth, valuations remain elevated, and uncertainties about AI's scalability and competition from cheaper Chinese large language models undermine market resilience.
Should confidence in the US tech rally falter, the resulting downturn could prompt significant capital outflows, amplifying financial instability. Such a movement would not be limited to equity markets but could cascade into the US dollar’s strength and global investment dynamics, revealing the hidden fragility behind the current market euphoria.
What to watch next
Investors and analysts should closely monitor developments in AI technology competition, particularly the performance and adoption of lower-cost Chinese large language models that pose a competitive threat to US counterparts. Additionally, market indicators of US equity valuations and foreign investor holdings will be critical to assessing risk exposure levels.
Attention should also be paid to signs of leverage-related stresses linked to the AI investment boom and any shifts in global capital flows out of US portfolio assets. Such trends could signal the beginning of a broader risk-off movement, potentially comparable to the capital repatriation scale experienced during the global financial crisis.