Ballooning global imbalances risk amplifying messy AI unwind
SPY•A widening US trade deficit and record Asian surpluses tied to AI goods are fueling large foreign flows into US stocks and corporate bonds. The article warns that a disorderly reversal could trigger global market volatility.
1. Trade gaps widen
The US trade deficit widened to $105.6 billion in August, a 17-month high, as imports rose 4.3% to a record $420.8 billion. A Minneapolis Fed paper estimated that about 70% of US firms’ AI-related capital spending goes to imported goods, with many shipments coming from Asian economies.
2. Capital flows shift
China’s exports rose 22% this year, while South Korea’s exports jumped 83.5% in September from a year earlier as semiconductor shipments more than tripled. Taiwan recorded a $23.6 billion trade surplus in September. Foreign investors’ net purchases of US securities reached a monthly record $279.2 billion in August, including $131.9 billion in stocks; foreign private-sector purchases of US stocks over the 12 months through August totaled $844 billion.
3. Unwind risks
The article says Asian surpluses, once typically reinvested in US Treasuries, are now flowing into US stocks and corporate debt. The Philadelphia chip index fell 11.5% last week, and some bonds issued to finance data centers have traded below 80 cents on the dollar. IMF chief Kristalina Georgieva warned that a severe correction could spread losses through the leveraged AI ecosystem and across borders.
