CICC: How to hedge against AI risks?
The Zhitong Finance App learned that CICC released a research report saying that although the AI revolution is still in its early stages, the market has begun to worry about the slowing growth of leading manufacturers and whether future returns can cover current large-scale investments. The bank is still optimistic about the return prospects of AI assets. It is recommended to deal with recent market fluctuations through asset allocation and “buy insurance” for AI assets. In addition to defensive assets such as cash, bonds, and high-dividend stocks, dollar depreciation transactions can also help hedge against AI asset risks, increase the allocation of gold, or be an effective strategy for this transaction. Furthermore. The allocation cost ratio of US bonds may also gradually improve, so it is recommended to keep a close eye on it.
CICC's main views are as follows:
From AI trading to “AI dollar”, the US dollar has become the “dividing line” of global stock market differentiation
In the context of the restructuring of the international monetary order, the bank believes that “de-dollarization” is still the general trend, and the US dollar is under long-term depreciation pressure. However, since 2026, the trend of the US dollar has been strong in stages. Apart from the inflationary pressure caused by the geographical conflict, the AI market may provide key support. On the one hand, cross-border transactions in the AI industry chain such as advanced chips, cloud services, and computing power are mostly settled in US dollars. Industrial expansion may gradually increase demand for US dollars, forming the so-called “AI dollar” effect. On the other hand, AI investment enhances the growth momentum of relevant economies, especially the US. It is estimated that nearly 30% of the real GDP increase in 2026 will come from AI. The resilience of economic growth created conditions for the Federal Reserve to raise interest rates, and rising interest rates on US bonds pushed up the dollar. However, for economies that benefit less from AI, the tightening of external financing conditions and pressure on capital outflows brought about by the strengthening of the US dollar will instead slow down economic and market performance.
Under the influence of the above mechanism, the US dollar became the dividing line of global stock market differentiation in the AI revolution: since 2026, the US, Japanese, and South Korean stock markets, which are deeply involved in the AI industry chain, are positively correlated with the US dollar, while the Indian stock market and Hang Seng Index, which have relatively limited AI benefits, are negatively correlated with the US dollar.
Chart 1: Since 2026, the Nikkei 225 Index has been positively correlated with the US dollar
Chart 2: Since 2026, Korea's KOSPI Index has been positively correlated with the US dollar
Chart 3: Since 2026, the Hang Seng Index has been negatively correlated with the US dollar
Chart 4: Since 2026, the Indian stock market has been negatively correlated with the US dollar
Chart 5: Correlation between the US dollar index and major asset trends since 2026: the US dollar has become the “dividing line” of global stock market differentiation
AI transactions are becoming more volatile. In addition to allocating additional defensive assets, dollar depreciation transactions can also be used as a hedging option
Although the AI revolution is still in its early stages, the market has begun to worry about the growth of leading players slowing down and whether future returns can cover current large-scale investments. The market predicts that the year-on-year capital expenditure growth rate of the seven AI giants in the US will drop from about 90% in 2026 to 36% in 2027, and uncertainty about return on investment will also exacerbate AI asset fluctuations.
Chart 6: The market expects AI capital expenditure to continue to grow in 2027, but the growth rate is clearly slowing down
In this context, it is reasonable to increase defensive assets such as cash, medium bonds, and high-dividend stocks. In addition to this, according to the previous analysis, the cooling of AI transactions may weaken America's relative growth advantage and demand for the US dollar, and dollar depreciation transactions are also expected to hedge against the adjustment pressure on AI assets.
Another advantage of dollar depreciation transactions is that the profit scenario is not limited to the weakening of the AI market: if the situation between the US and Iran eases and oil prices fall significantly, or if US inflation improves markedly, causing the Federal Reserve to cut interest rates, AI assets benefit from improved liquidity, and dollar depreciation transactions benefit from this. AI stocks may also rise at the same time. Therefore, compared to simply reducing AI asset holdings, the US dollar depreciation transaction can not only preserve AI's rising income exposure, but also provide portfolio protection under various scenarios.
The main risk of this hedging logic is the dollar liquidity crisis. If drastic adjustments in the AI market trigger a concentrated sell-off of global assets and investors scramble to cash in US dollars, the US dollar may strengthen and fluctuate in reverse with stocks, and the hedging ability will fail. However, the current AI market adjustment is mainly reflected in the decline in risk appetite and asset reallocation caused by concerns about return on investment. It has not evolved into a disorderly liquidity shock, and the US dollar is more likely to be positively correlated with technology stocks. The US dollar index also fell from a high on October 14 during the recent US technology stock adjustment period, which is in line with this judgment.
The above analysis mainly focuses on the short-term relationship between the exchange rate and the stock market; over time, even if the AI revolution succeeds, the rise in stocks will not necessarily be accompanied by an appreciation of the US dollar. The reason is that the “inverse Barcelona effect” puts pressure on the actual exchange rate to depreciate.
Gold is an effective tool for arranging dollar depreciation transactions. It is recommended to increase allocations
The most direct way to plan a depreciation transaction of the US dollar is to short the US dollar, but foreign exchange transactions face many restrictions, and additional gold allocations or more convenient strategic expressions. From a theoretical point of view, gold, as an alternative asset to the US dollar system, has a negative correlation with the US dollar, but since the price of gold is simultaneously affected by multiple factors such as interest rates, inflation, and safe-haven demand, this relationship has not always been stable throughout history. However, in 2026, the negative correlation between gold and the US dollar increased markedly, and the correlation rose to -81.2%. The US dollar and gold are two sides of the same coin, making additional gold allocations an effective tool for trading the depreciation of the dollar.
Chart 7: Gold's correlation with the US dollar is unstable until 2026
Chart 8: Since 2026, the negative correlation between gold and the US dollar has increased markedly, with a correlation coefficient of -81.2%
In contrast, the impact of oil prices and US bond interest rates on gold is more reflected in phased disturbances: the sharp rise and fall in oil prices during the year did not continue to dominate the gold price trend, and the rise in US bond yields did not always suppress gold performance.
Chart 9: The decline in oil prices in May-June did not benefit gold; the sharp rise in oil prices in August did not suppress gold
Chart 10: Interest rates on US bonds accelerated after July, but this did not prevent gold from rising in August
In addition to gold, US bonds are also a potential option for arranging dollar depreciation transactions, but the winning rate may be lower than gold: if the depreciation of the US dollar results from falling inflation and interest rate cuts by the Federal Reserve, both gold and US bonds may benefit; if the depreciation of the US dollar results from rising US debt risk or fluctuating dollar credit, gold may benefit from demand for alternative assets, but US bonds may fall due to rising maturity premiums.
Historical review also supports this judgment. The bank resumed the entire 91 dollar decline range that has continued for at least 14 days since 2000. Gold rose 84 times, with a win rate of 92.3%, and the median yield in the range was 5.46%; the 2-year and 10-year US Treasury yields declined by 68.1% and 64.8%, respectively.
Chart 11: During the period of decline in the US dollar index since 2000, the winning rate of gold was higher than that of other major asset classes
In summary, in addition to allocating high dividends, cash, and Chinese bonds, the bank proposes to increase the allocation of gold, arrange for dollar depreciation transactions, and hedge against AI asset risks. The allocation cost ratio of US bonds may also gradually improve, so it is recommended to keep a close eye on it.