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In Chartbook 481, Adam Tooze argues that the dollar’s role is increasingly tied to foreign investment in U.S. financial assets, especially equities, rather than mainly to demand for Treasury reserves. He asks whether this “profit dollar” can retain its safe-haven status if the AI-led investment trade falters; the report describes that risk but does not resolve it.
Economist Adam Tooze argues in Chartbook 481 that the dollar’s international role is increasingly supported by foreign investment in U.S. financial assets, particularly equities, rather than chiefly by accumulation of U.S. Treasury reserves. He calls this evolving model the “profit dollar” and asks whether it can keep its traditional safe-haven appeal if enthusiasm for artificial-intelligence stocks fades.
The report distinguishes this shift from de-dollarization. Drawing on work by Brad Setser, Tooze describes the current change as “de-reservification”: foreign claims on the United States continue to accumulate, but their form and holders are changing. State banks, pension funds and other quasi-sovereign investors remain part of the picture, while the value of foreign holdings has increasingly been driven by equities rather than Treasury bonds.
Tooze links the change to investors’ reduced willingness to add U.S. government debt and to the long-running outperformance of U.S. equity markets. Rising valuations can themselves increase the equity share of foreign portfolios, alongside fresh purchases. The report says the enthusiasm for AI-related companies has added momentum to that pattern.
Data cited from Treasury International Capital reporting show net foreign purchases of U.S. equities totaled $244 billion in April and May, with purchases over the prior 12 months reaching $904 billion. In an analysis cited by Tooze, MUFG’s Lee Hardman said private investors accounted for $781 billion of the 12-month total, compared with $123 billion from official investors. The figures indicate the scale and source of demand in that reported period; they do not establish how those flows will behave in a downturn.
The Dollar’s New Investment Backing
The distinction matters because a currency supported by investors seeking returns may react differently to a shock than one supported mainly by demand for reserves and safe government debt. Tooze’s argument is that the dollar has become more exposed to the fortunes of U.S. stocks, AI-linked firms and related assets. If investors pull back from those positions, selling could affect both asset prices and the currency.
The report does not say that this outcome is inevitable. Rather, it highlights a potential vulnerability: foreign investors may continue to hold U.S. equities while changing how much currency risk they accept. If they sell assets and reduce dollar exposure at the same time, losses could reinforce one another. That possibility matters to readers because it challenges the assumption that the dollar will always rise when markets are under stress.
The scale of foreign investment also connects the issue to the broader U.S. economy. Demand for American assets can support market valuations and the dollar, while the AI investment boom has been associated in market commentary with expectations for stronger growth, higher interest rates and yields. A reversal could change those expectations, though Chartbook 481 does not quantify the likely economic or market impact.
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From Treasury Reserves to Equities
In Tooze’s account, the reserve-currency model that took shape in the 2000s centered on foreign accumulation of U.S. sovereign debt alongside persistent U.S. budget and current-account deficits. Those deficits remain, he writes, but the composition of overseas exposure has shifted. He uses “portfolio currency” and “profit dollar” to describe a dollar increasingly tied to financial investment and returns.
The report connects the current debate to the market disruption known as “Liberation Day” in April 2025. It says shocks at the time included uncertainty around U.S. policy and DeepSeek’s modeling breakthrough, which unsettled investors in U.S. AI companies. A BIS report cited by Tooze said foreign investors’ currency hedging contributed to the sell-off as some sought to keep U.S. equity positions while limiting dollar exposure. This episode is offered as a warning about how stocks, the dollar and hedging decisions can interact—not proof that every future shock will follow the same pattern.
More recently, Reuters reporting cited in Chartbook described market anxiety after a sharp loss of confidence in AI stocks. Tooze uses that discussion to frame the question of whether foreign demand for U.S. assets is a stable foundation for the dollar or a crowded position that could unwind.
“The latest Treasury International Capital (TIC) data suggest that enthusiasm for AI continues to support the USD through robust capital inflows into US financial markets.”
— Lee Hardman, MUFG, as quoted in Chartbook 481
How Durable Is Safe-Haven Demand?
The central issue remains unresolved: the report does not establish how foreign investors would respond to a major reversal in AI valuations or whether the dollar would still gain during that shock. Recent inflows document demand in a particular period, not a guarantee that it will continue. Nor does the cited evidence show what share of foreign equity holdings is hedged against currency movements.
Tooze also notes that investors have not always sought safety in dollars during recent shocks. The report raises the possibility that selling U.S. assets and weakening the dollar could compound each other, but it does not claim that such a spiral is certain or provide a forecast for its likelihood or scale. The future balance between private investment, official holdings, Treasury demand and equity exposure is also unclear.
Signals to Watch in Capital Flows
The next useful evidence will come from subsequent Treasury International Capital data and market behavior during periods of stress. Those can show whether foreign purchases of U.S. equities persist, whether official and private investors change their relative contributions, and whether investors increase currency hedges while retaining their stock positions.
Investors and policymakers will also be watching whether AI-related market expectations continue to support U.S. valuations and interest-rate expectations. Chartbook 481 sets out the question rather than predicting the answer: the dollar’s resilience will depend partly on whether foreign capital treats U.S. assets as a lasting destination for returns, a safe haven, or both.
Key Questions
What does “profit dollar” mean?
It is Adam Tooze’s term for a dollar increasingly supported by foreign investment in U.S. financial assets and the returns investors expect, particularly from equities, rather than mainly by foreign holdings of Treasury reserves.
Does Tooze say the dollar is being replaced?
No. The report distinguishes “de-reservification” from de-dollarization: it describes a change in the composition and character of foreign claims on the United States, not the end of the dollar’s central role.
What do the cited equity-flow figures show?
The report cites $244 billion in net foreign purchases of U.S. equities in April and May and $904 billion over the preceding 12 months. Those are reported flows for the stated periods, not a forecast of future investment.
Why could the AI trade affect the dollar?
Market analysts cited by Tooze connect AI-related investment to foreign demand for U.S. shares and to expectations for U.S. growth and interest rates. If that trade weakens, investors could reduce U.S. asset exposure; whether that would also weaken the dollar is uncertain.
What remains unknown about the dollar’s safe-haven role?
The report does not determine whether the dollar would rise or fall if AI-related positions unwound. The outcome could depend on whether investors sell U.S. assets, hedge currency exposure, or seek safety elsewhere.
Source: adamtooze.substack.com
