Recently, a financial expert from UCLA’s Anderson School of Management published an article in the media stating that New Yorkers (referring to Wall Street financiers) keep creating one tech bubble after another (such as ChatGPT and Sora) because they are fundamentally seeking new anchors for the dollar.
Historically, the dollar’s anchors have been oil and national debt, supplemented by half of the tech sector. With the onset of the Russia-Ukraine war, Russian oil has completely exited the dollar system, and Middle Eastern countries are also drifting away from the U.S. They have started using the renminbi for oil transactions and digital payments, putting the foundation of the petrodollar in jeopardy.
Simultaneously, due to the surge in U.S. national debt, the significance of the dollar’s anchoring to national debt has gradually diminished. This means the dollar has lost two stable anchors, oil and national debt, leaving it with only half of the tech sector.
Additionally, the BRICS countries are gradually promoting “de-dollarization,” strengthening the use of local currencies in international trade and settlement, which poses an increasing threat to the dollar.
The supremacy of the dollar is a crucial cornerstone of America’s global dominance. It helps the U.S. harvest global wealth, making other countries effectively “pay” for U.S. military expenditures. The dollar’s supremacy is the most complex financial system in history, embodying a dual commodity pillar structure of “petrodollars” and “chip dollars.”
If the dollar’s status as the global reserve currency and its supremacy are weakened, it would severely impact America’s overall national strength.
Once the Federal Reserve announces interest rate cuts, a flood of injected dollars from financial institutions would flow into the market, driving up U.S. inflation. Therefore, Wall Street needs to strengthen the anchoring of the dollar to high tech, hoping to channel vast amounts of injected dollars into the Nasdaq to stabilize the dollar’s value.
Hence, Wall Street has continuously created tech bubbles, unusually launching seven or eight technological revolutions within three to four years, such as the metaverse, ChatGPT, room-temperature superconductors, and Sora. This has sent companies like Meta, Microsoft, and Nvidia to peak stock prices, causing the total market value of the U.S. stock market to surge by nearly 40% in the past four years, adding $13 trillion in market value.
As of February 29, 2024, the total market value of the U.S. stock market reached $52.6 trillion, while China, ranked second, only had $11.5 trillion. Japan and India, ranked third and fourth, had $6.5 trillion and $4.4 trillion, respectively.
Currently, the U.S. stock market’s total market value accounts for about 48.1% of the global total, while the U.S. GDP in 2022 accounted for only about 25% of the global total. Although many foreign companies are listed in the U.S., even considering this factor, the valuation of the U.S. stock market is still significantly higher than the global average.
Compared to the U.S., the “Big Seven” major U.S. tech companies have been the main driving force behind the recent surge in U.S. stocks. Currently, these seven companies have a total market value of $13.1 trillion, exceeding the total market value of all other countries’ stocks, including China.
Global Stock Market Valuations
It is undeniable that the overall technological innovation capability of the U.S. is globally leading. However, apart from technologies like artificial intelligence, many tech concepts proposed by the U.S. in recent years, such as AR/VR, the metaverse, and hyperloop, have failed to materialize and have even been terminated. For instance, Hyperloop One, responsible for the hyperloop project, is facing bankruptcy.
In the current artificial intelligence industry, the primary profit comes from companies like Nvidia that sell AI chips. The profit model for generative AI, which the U.S. is currently pushing, remains unclear. This means that among the many tech bubbles created by Wall Street in recent years, only a few companies like Nvidia can truly deliver results.
In contrast, the U.S. lacks competitiveness in the massive and clearly prospective industries like new energy and 5G equipment.
In recent years, the rise in U.S. stocks has mainly been driven by stock buybacks, increased market liquidity, and rising valuations, rather than performance growth. The valuation gap between global stocks and U.S. stocks has reached extreme levels.
In terms of artificial intelligence development, unlike the U.S., China’s AI industry focuses on AI+, leveraging its dominant position in global manufacturing. This provides a good opportunity and huge market space for the application of AI technology and products in transforming and upgrading traditional manufacturing.
Overall, the potential market space for AI+ is relatively larger because it addresses specific industry needs and has practical applications and commercialization possibilities. Although generative AI has great theoretical potential, it has not yet been realized, and its business model remains unclear.