AI Capex Boom Sends Dollar Higher by Session Close

Tech giants committed $48 billion to AI infrastructure in the final weeks of the quarter. That figure alone caught several desks by surprise when it crossed the wires just after 3pm New York time.

Multiplier Effects Hit Growth Forecasts First

These outlays do not stay contained inside data-center walls. Each dollar spent on chips and power draws in construction crews, engineering talent and local suppliers at roughly three times the usual rate. Economists at two major banks revised their 2025 US GDP calls higher within hours of the print.

The adjustment matters because it lands against an already tight labor market. Higher growth without matching productivity gains yet points to sticky wage pressure. That narrative fed straight into fed-funds futures, which now price only one cut by June instead of two.

Historical Parallels With the Late-1990s Cycle

Traders have seen something similar before. Back in 1998-99, heavy corporate tech spend lifted productivity numbers with a lag of four to six quarters. The dollar gained 12 percent on a trade-weighted basis during that stretch even as the Fed stayed on hold. Today’s setup looks tighter on policy, yet the capital-flow channel is the same.

One difference stands out: foreign buyers of US Treasuries are thinner now. That leaves more of the bid for the dollar to come from equity and direct-investment inflows tied to the AI build-out itself.

Reaction Across Major Pairs by the Close

EUR/USD slipped to 1.0825 in the final hour, off 70 pips from the European open. USD/JPY tested 154.80 before stalling as the usual carry-trade unwind took a pause. The Australian dollar, sensitive to global risk sentiment, gave back most of its earlier gain once the US data crossed.

Options desks reported heavier buying of dollar calls against both the euro and yen into the weekend. Implied volatility on one-week USD/JPY rose two ticks, the first meaningful lift in ten sessions.

Questions That Remain After the Bell

Will the multiplier stay this large once the initial build phase ends? That is the open thread for anyone modeling the second half of 2025. If productivity numbers fail to follow the capex wave, the growth story loses its edge and rate differentials could narrow again.

Meanwhile the Bank of Japan’s next policy meeting sits just ten days away. A surprise hike there would test whether the dollar’s bid is durable or simply borrowed time. Watch your position sizing into that event, especially if you are running leveraged yen shorts.