David Woo: The AI bubble poses a greater threat to the dollar than Iran

Formerly of Bank of America, Woo suggests the dollar’s current strength is artificially propped up by global demand for American AI technology. He contends that if this market bubble bursts, the greenback will lose its primary support system. The strategist identifies a two-pronged threat to the sector: tightening government regulation on frontier models and the emergence of lower-cost competition from China. He notes that capital expenditure among the five largest hyperscalers declined in the first quarter, a signal he believes could undermine market valuations later this year.

Gold, which recently rallied as oil prices retreated, serves as a litmus test for his thesis. Woo interprets the metal’s spring correction as a forced liquidation by Gulf oil producers needing liquidity, rather than a genuine shift in sentiment. With federal debt now approaching 39 trillion dollars and interest payments ballooning, Woo anticipates that the next major economic rupture will be geopolitical. He maintains that if the AI trade unravels, the resulting recession could force interest rates back to zero and potentially push gold toward 10,000 dollars an ounce.