Nomura Flags Dollar Weakness if AI Momentum Slows – US Asset Exposure Hits Record 80%

In a freshly released special report, Nomura says the United States may have a hidden vulnerability: the sheer scale of foreign investors’ exposure to US assets. Right now, the ratio of US net international investment position (NIIP) liabilities to the combined NIIP assets of all net‑creditor nations sits at roughly 80 percent – a figure the firm describes as a “vivid measure” of how much the rest of the world’s savings have been funneled into dollar‑denominated investments.

The number isn’t just abstract math. It translates into about $21.3 trillion of foreign‑held US liabilities. And that pile is beginning to feel the weight. Nomura points out that after more than twenty years of surplus, the United States has seen net primary income swing into deficit over the past two years – a shift that could become a bigger drag on the dollar if the AI‑fuelled market rally loses steam.

Remember the old market mantra, “TINA” – there’s no alternative to US assets? Nomura thinks it’s time to question that wisdom. The AI boom, while spectacular, has masked a rising US risk premium. If the sector hits a snag – say a regulatory shock or a slowdown in AI‑related earnings – the very investors who helped drive the surge could start pulling back, and the dollar might feel the pinch.

According to the brokerage’s own simulations, US portfolio assets would need to tumble by more than 30 percent – roughly a “GFC‑scale” repatriation – to fully offset the growing liabilities. That’s a massive move, but even a modest retreat could start eroding the dollar’s value because the liability side is now so massive that a small percentage decline in assets would outweigh any gains on the asset side.

Nomura also flags that the United States’ fiscal health isn’t getting any easier. It projects the fiscal deficit to climb to 6.4 % of GDP this year, while the current‑account gap widens to about 3.4 % of GDP. Such “twin deficits” are not sustainable forever, the analysts note, and they could add another layer of stress to the currency if external financing dries up.

Beyond the balance sheet, there are softer signs of waning confidence. The share of UN votes that align with the US has slipped, and the growth in US‑held foreign portfolios among allies outpaced that of adversarial nations (264 % vs. 64 % since 2012). In Nomura’s view, these trends hint at an erosion of trust that could hasten a shift away from dollar‑centric investments.

All told, the message is clear: the AI rally has been a double‑edged sword. It has pumped fresh capital into US equities, but it’s also hidden a burgeoning risk premium. If that AI momentum cools, the dollar could find itself more exposed than many investors realise today.