Expectations of dollar tightening may have peaked: the peak of AI's boost to the US economy is passing, and a weak dollar will reopen room for China's non-AI assets.

Expectations of dollar tightening may have peaked: the peak of AI's boost to the US economy is passing, and a weak dollar will reopen room for China's non-AI assets. Sinolink released a research report stating that market expectations of dollar tightening have risen, premised on the US labor market and economic growth remaining at high levels. However, judging from the new leasing commitment indicators of large cloud vendors, which are leading indicators for the US economy and labor market, the boost from AI infrastructure to US employment and economic growth may both slow in the fourth quarter. Based on experience over the past year, a strong dollar has clearly suppressed the non-AI portion of Chinese assets. In the future, as the prosperity of emerging economies improves and the dollar's suppression is lifted, more opportunities will emerge in the non-AI areas of Chinese assets. Sinolink's main views are as follows: The peak of dollar tightening expectations This week, market expectations for Federal Reserve tightening strengthened for two reasons: first, remarks by Fed Governor Waller released a strong hawkish signal, explicitly stating that if US core CPI month-on-month growth is above 0.3%, a 50BP rate hike is an option worth considering; second, the subsequently released October US inflation data exceeded expectations, with core CPI month-on-month growth reaching 0.3%, and according to Bloomberg estimates, year-on-year growth also rose from 1.9% to 2.1%. Structurally, US inflation pressure may come more from the supply side: high oil prices pushed up energy and public transportation prices, and the shortage of electronic hardware transmitted upward to prices of entertainment goods such as audio-visual equipment. Under the combined effect of the above two factors, investors this week have begun pricing in a scenario of a 50BP Fed rate hike, while the market believes the Fed will raise rates three more times through 2027. It is worth noting that the rise in investors' tightening expectations is premised on the clear improvement in the US labor market and economic growth since the second half of 2025, driven by the rapid expansion of AI infrastructure; once this premise changes, the magnitude of Fed tightening may weaken. AI's boost to the US economy may slow US cloud vendors, considering company cash flow and liquidity indicators, are increasingly inclined during data center campus construction to achieve off-balance-sheet debt treatment by giving leasing commitments to data center developers. As of the third quarter of 2026, the unstarted leasing commitments of major cloud vendors approached US$1.3 trillion, about twice the scale of their outstanding corporate bonds. Changes in the new leasing commitment scale of large cloud vendors are an important leading indicator for observing AI's boost to the US economy: changes in the quarterly new leasing commitment scale of the five major cloud vendors lead changes in US construction and manufacturing nonfarm employment by one quarter, lead changes in the boost from information equipment investment to US GDP by one quarter, and lead US Census Bureau data center construction spending by three quarters. It is worth noting that the total new leasing commitments of the five major cloud vendors in 26Q3 fell back compared with 26Q2, and new leasing commitments in 26Q1, three quarters earlier, also slowed compared with 25Q4. This may mean that in the fourth quarter, the boost from AI infrastructure to US employment, information technology-related investment, and non-residential construction investment may all slow. After Jensen Huang stepped down as NVIDIA CEO this week, there may be a risk that NVIDIA's future support for new cloud vendors weakens, thereby dragging down the boost from AI infrastructure to the US economy and employment. This would confirm the slowing trend that began in the third quarter, and the peak of AI investment's boost to the US economy may have passed. The end of the strong dollar will breed hope The supporting role of AI investment in the US economy and employment may be weakening, the premise of dollar tightening expectations is changing, and a weakening dollar is the more likely scenario in the future. Based on experience over the past year, a strong dollar has clearly suppressed the non-AI portion of Chinese assets. Since 2026, there have been three periods of sustained dollar strengthening: the reversal period after concentrated trading of dollar credit concerns from January to March this year, the period from May to June when US-Iran relations shifted from intense conflict to negotiations, and the period from August to September when a sharp rise in US Treasury yields drove the dollar stronger. In these three periods, the non-AI sectors of A-shares and the Hang Seng Tech Index of Hong Kong stocks all saw clear pullbacks during the sustained rise of the dollar index. It is worth noting that after US Treasury yields peaked in early October, the Citi Emerging Markets Economic Surprise Index continued to recover. Although the whole market is still hesitating amid uncertainty over the outlook for AI-related industries, we believe investors should not ignore the other side of the matter: more opportunities will emerge: the cycle of US tech strong dollar suppressing non-US assets is showing cracks. Before dawn Current market expectations for dollar tightening may be above their peak. As AI's boost to the US economy weakens, the path toward a weaker dollar and lower capital costs will become clearer. In the future, as the prosperity of emerging economies improves and the dollar's suppression is lifted, more opportunities will emerge in the non-AI areas of Chinese assets. Investors should remain optimistic and believe that the darkest place is where the light is brightest. Specific allocation recommendations: First, dollar tightening expectations will gradually decline, and gold is expected to see opportunities; subsequently watch whether the intensity of US-Iran geopolitics rises again, though a medium-term bottom is being established. Second, for the energy chain (coal, oil, oil shipping), after the short-term stress test following price declines, it will continue to benefit from global restocking demand for energy; in fact, the energy chain itself is a resilient asset under capital cost fluctuations and geopolitical conflicts. Third, from an earnings perspective, recommend focusing on: continued high prosperity: medical services, shipping ports, and sub-sectors in nonferrous metals and chemicals; turnaround reversal strategy: sub-sectors of textiles and apparel, as well as papermaking, refining and trading, medical devices, express delivery, dairy products, etc. Risk warning Domestic economic recovery falls short of expectations; overseas economies decline sharply.