If you want to understand the current trends in global capital flows and the new pressure points that are emerging, you might want to take a look at Loudoun County, Virginia ( Loudoun County ). Twenty years ago, this place was at the center of a real estate boom triggered by global savings surpluses, but that excitement ended in a fiasco. Recently, another wave of overseas funds has flowed in, driving a surge in the construction of data center parks, and the power demand of these parks is comparable to that of small cities.

Loudoun County, and indeed the global economy, is facing a similar situation. Investors and economists can't help but wonder whether the prosperity of artificial intelligence ( AI ) is being financed in an equally unstable manner, just like during the subprime mortgage crisis of 2007-08, and what will be the outcome if the promised profits fail to materialize.

Loudun County is vigorously developing data centers to make up for the financial gap caused by a sharp decline in property tax revenues in the past. Globally, people compare the subprime mortgage crisis with today's AI investment boom because both are driven by serious imbalances.

The huge fiscal deficit and debt of up to $40 trillion in the United States are causing panic in the bond market. On top of this, there is a new development that could be even more serious: the booming growth of AI has created a massive demand for high-end chips, which has led to the formation of new pools of savings funds in chip-producing regions such as South Korea. These funds are flowing into American technology companies to finance the construction of their $9 trillion AI.

It is precisely this circular flow of capital that drives up the yields on U.S. Treasury bonds and other sovereign bonds, thereby increasing the cost of debt service. On a global scale, it spreads the risk of the bursting of the AI bubble from Silicon Valley to investors in Asia and other regions. And all of this occurs in a world where competition among superpowers is intensifying and alliances are strained, making cooperation even more unlikely in the event of a crisis.

The head of the Economic Policy Research Center based in Paris, Beatrice Weder, di, Mauro, said, "The environment we are in now is not stable." Last year, she received a call from the Elysee Palace in France, requesting her to submit a report on global imbalances for reference at this summer's G7 (G7) leaders' meeting.

She believes that the increasingly pronounced asymmetry is the result of a collision between disruptive technological revolutions, geopolitical uncertainties, and a new wave of protectionism. She also argues that risks are accumulating continuously. On one hand, this is because risk exposures have spread to investors around the world; on the other hand, it is because the few technology-driven economies that are currently benefiting from the prosperity of AI are too dependent on AI. To that end, she compares this situation to the "Dutch Disease," which typically occurs in countries that become excessively reliant on resources, leading to economic distortions.

If the predictions of the International Monetary Fund ( IMF ) are validated, the cumulative increase in excess savings in the global economy since 2023 will reach $1.95 trillion by the end of 2026, which is one-third higher than the $1.5 trillion increase over the three years prior to the outbreak of the 2008 crisis. At the beginning of the 21st century, such excess savings often flowed from foreign central banks into U.S. Treasury bonds and other U.S. securities, helping to maintain low borrowing costs for the United States. Today, however, the situation is quite different.

Today, the scale of governments around the world purchasing U.S. Treasury bonds is shrinking, due to two main reasons: concerns about the United States' continuously expanding debt and geopolitical tensions. Instead, these savings tend to be held by private individuals who then invest in a handful of other tradable assets, such as corporate stocks and bonds. A significant portion of this investment is driving the AI craze. From the beginning of 2024 to the end of July, foreign investors made net purchases of approximately $1.5 trillion in the U.S. stock market alone.

Analysis by institutions of data from the US Treasury Department shows that in 2025, approximately 20% of US stocks held by foreign investors were invested in industries related to AI, up from around 10% in 2019. Since then, as valuations soared, this proportion has continued to grow. However, even assuming this proportion remains at 20%, as of the end of June, foreign investors still held an exposure of about $4.9 trillion in stocks of companies listed in the United States that are in the core industries of the AI boom. This is roughly equivalent to Germany's annual GDP.

Similar to the liquidity of securities investment portfolios, greenfield foreign direct investment in long-term projects such as factories and power plants is also increasingly concentrating on AI-related projects and other strategic industries. In addition, data from the United Nations shows that due to the pivotal role played by the United States in the field of AI, the growth rate of foreign direct investment in developed countries far exceeds that of developing economies.

All of this means that, even though the world, affected by wars and trade wars, is facing a slowdown in investment, current investment decisions are becoming increasingly closely related to the AI industry. However, this industry is facing many significant issues: for example, how AI will change the world, how it will respond to political backlash at the local and national levels, and the various financing structures that support its development. This is causing concern among economists in the IMF field. Earlier this year, they warned in a report that the rapid proliferation of AI could trigger another surge in U.S. corporate investment, thereby further expanding the U.S. current account deficit.

IMF, the First Vice President, said during a speech in Washington in September regarding the AI craze, "From the perspective of IMF, this has a huge impact on global capital flows." He pointed out some potential effects, including market performance and the widening growth gap between the United States and other countries.

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An economist from Columbia Business School, Stijn Van Nieuwerburgh, calculated in a paper published in October that by 2032, the cumulative investment in AI related infrastructure will reach nearly $9 trillion. This will far exceed the railway construction boom of the 19th century and, in terms of its proportion to GDP, it will become the largest capital expenditure boom in U.S. history.

The debt incurred to raise funds for this purpose is continuously accumulating. Amazon, Microsoft, Alphabet Inc, Meta Platforms, and Oracle have collectively signed lease agreements, purchase commitments, and guarantees totaling nearly $3 trillion, yet these are not reflected in the company's balance sheet.

The Bloomberg Top 7 Tech Stocks Index, which includes Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla, has soared by more than 380% since the beginning of 2023. Meanwhile, the huge profits of large chip manufacturers such as TSMC and Samsung Electronics mean they possess substantial cash reserves. Samsung's free cash flow alone is nearly equivalent to a quarter of the value of South Korea's central bank's foreign exchange reserves.

As the direction of capital flows has changed, so have the main participants. In the past, a large portion of the savings from surplus countries were managed by central banks and invested in U.S. Treasury bonds; however, nowadays, these funds are controlled by hedge funds and pension funds seeking high risks and high returns. South Korean investors invested a net $17 billion in the U.S. stock market in 2023; in the 12 months up to July of this year, this figure soared to $69 billion.

"Asian capital is the propellant behind the AI craze in the United States," said Frederic Neumann, HSBC Holdings' chief Asian economist based in Hong Kong. All of this is "built on an already precarious imbalance between global demand and capital flows." He added, "Therefore, any setbacks in AI investment will bring painful adjustments to the United States, the dollar, Asia, and indeed the whole world."

Ingersoll Rand Global Market Strategist David Chao pointed out that the irony is that "the economies that provided funding for the AI craze may become the biggest victims once this craze subsides." However, he also believes that since AI investments are fundamentally more productive, the global financial system currently faces less risk exposure than before the 2008 financial crisis.

"This technology is real, and its widespread application is also a reality; moreover, many leading companies are making substantial profits from it," he said. "What worries me is that investors' expectations may soon become unmet."

Pierre - Olivier Gourin, who stepped down as the chief economist of IMF earlier this year, believes that the global economy is functioning normally in many aspects. He said, "If a technological revolution requires substantial capital investment," and if such investments are concentrated in a few countries, then it is "much more efficient for these countries to attract capital from all over the world to invest in this revolution than to rely on domestic savings."

But Gourinchas added that even a technological revolution cannot serve as a pass to ignore risks. Moreover, other impacts have already become apparent.

At the beginning of this century, a surge in net savings among energy-producing countries in Asia, the Middle East, and other regions helped to lower interest rates in the United States and other parts of the world by flowing into U.S. Treasury bonds and other securities. This time, however, both bond yields and interest rates are on the rise. As a result, the cost of servicing the massive debts of the United States and other wealthy countries is also increasing. This has exacerbated the deterioration of fiscal conditions and further fueled anxiety in the bond market.

A key difference today lies in the state of government balance sheets. Gourinchas points out that although the tech bubble may have pushed up interest rates at the end of the 1990s, “at that time, the government’s debt level was only one-third to half of what it is now relative to output.” Today, the impact of high interest rates is greater, and the high cost of debt service further compresses the government’s fiscal space to respond to crises.

Some people who have long been paying attention to global capital flows believe that all of this combined creates a more turbulent situation than we have seen before.

Gian Maria Milesi and Ferretti were part of a IMF team in the early 2000s, responsible for monitoring the accumulation of economic imbalances that led to the financial crisis of 2007-08. He believes that, in addition to the heavy debts of wealthy countries, the fundamental problem lies in the more significant role played by private investors. Multinational hedge funds and pension funds not only bet on AI, but often used US Treasury bonds they held as collateral. Some estimates this year show that hedge funds' holdings of US Treasury bonds account for 8% of the $32 trillion US Treasury bond market, a record high.

Federal Reserve economists pointed out in a report in September that the decline in the purchasing scale of foreign central banks and the enhanced role of hedge funds in the U.S. Treasury market are among the factors contributing to the rise in bond yields. The Fed economists wrote, "The decrease in the participation of foreign official investors, who are less price-sensitive, combined with the enhanced role of hedge funds and other private investors who are more price-sensitive, has fundamentally changed the market dynamics," and this shift could "amplify the impact on yields."

This is because central banks around the world have always been passive holders of U.S. Treasury bonds. However, Milesi-Ferretti indicates that if private investors need to make up for losses in other areas, they are more likely to sell off their U.S. Treasury bonds. In short, the risk today does not lie in the Chinese central bank or other central banks selling off their holdings of U.S. Treasury bonds, but rather in private investors possibly doing so.

"These people act very quickly," said Milesi-Ferretti. "In my opinion, all of this indicates that the risks we are facing now are greater than what people imagined three or four years ago."