The Unseen Engine: How Corporate Demand is Sustaining USD Strength in a Deteriorating Economic Outlook

The U.S. economy is in a familiar bind: lagging indicators point to a slowdown, with Deloitte forecasting business investment to grow by a mere 0.7% in 2025, down sharply from 3.7% in 2024 [4]. Yet, buried beneath the noise of inflationary pressures and trade policy uncertainty, a counterintuitive force is at work. Corporate demand—particularly in AI, defense, and infrastructure—is not just stabilizing the dollar but actively reshaping its dynamics. This is not a story of macroeconomic salvation but of asymmetry: a narrow, high-conviction engine powering the USD while the broader economy stutters.

Consider the data. In Q2 2025, corporate capital expenditures in AI-focused sectors surged as firms raced to automate workflows and protect profit margins [5]. Saudi Arabia’s $600 billion pledge to invest in U.S. energy, defense, and infrastructure—announced in July 2025—has created a tailwind for sectors where U.S. exceptionalism still holds sway [5]. These flows are not speculative; they are strategic. Foreign investors are betting on the U.S. as a hub for AI infrastructure, cybersecurity, and advanced manufacturing, even as broader FDI into the country dipped to $52.8 billion in Q1 2025, the lowest since late 2022 [4]. The divergence is stark: while the U.S. trade deficit and fiscal deficits weigh on the dollar, corporate-driven capital inflows are creating a gravitational pull.

The Federal Reserve, meanwhile, is caught in a paradox. Its cautious approach to rate cuts—evident in Powell’s Jackson Hole 2025 speech—reflects a recognition that AI-driven supply chain efficiencies are mitigating inflationary pressures [3]. Yet, the Fed’s focus on lagging data (like core CPI at 3.1%) overlooks the forward-looking nature of corporate behavior. For instance, the Trump Administration’s AI Action Plan, which fast-tracks permits for data centers and energy infrastructure, is already attracting FDI by reducing regulatory friction [4]. This policy-driven acceleration is not just boosting productivity; it is reinforcing the dollar’s role as a reserve currency, as global investors lock in exposure to U.S. assets that underpin AI and defense ecosystems [1].

The implications for investors are clear. Tactical entry points exist in sectors where corporate demand is outpacing macroeconomic doldrums. Data centers, for example, accounted for 25% of private infrastructure capital raised in Q2 2025, driven by AI’s insatiable appetite for computing power [1]. Similarly, defense contractors are benefiting from a “supercycle” of global rearmament, with FDI inflows into aerospace and semiconductors surging despite broader trade tensions [3]. These sectors are not immune to the Fed’s eventual easing, but their resilience suggests that the dollar’s strength will persist longer than consensus models predict.

The Fed’s next rate decision will hinge on whether it acknowledges this corporate-driven asymmetry. If it clings to lagging indicators, it risks underestimating the dollar’s staying power. If it adapts, it may signal a pivot toward policies that amplify the productivity gains of AI and infrastructure investment—thereby reinforcing the very forces that are propping up the USD. For now, the unseen engine continues to run: corporate demand, not GDP, is the true barometer of dollar strength in 2025.

Source:
[1] Infrastructure Quarterly: Q2 2025 [https://www.cbreim.com/insights/articles/infrastructure-quarterly-q2-2025]
[2] Q2 2025 Market Review and Investing Insights [https://www.mossadams.com/articles/2025/07/2025-q2-market-review]
[3] Navigating the Crossroads of Fed Policy and AI-Driven... [https://www.ainvest.com/news/navigating-crossroads-fed-policy-ai-driven-supply-chains-strategic-investment-insights-2025-2508/]
[4] United States Economic Forecast Q2 2025 [https://www.deloitte.com/us/en/insights/topics/economy/us-economic-forecast/united-states-outlook-analysis.html]