Why the Dollar’s Fall Matters to Tech Investors
Foreign buyers have turned away from U.S. assets since Trump’s tariff announcement.
The impact of the falling dollar is rumbling through tech companies’ earnings and threatens to reduce investments in the industry for both established players and startups.
Since President Donald Trump’s tariffs announcements a month ago, the dollar has fallen to its lowest level since 2022. The move was so big that companies including Meta Platforms, Microsoft and others highlighted the impact—in both the first quarter and the rest of the year—on their earnings calls.
Depending on where they sell, what they buy and the currency their customers use to pay, the short-term impact could be positive or negative. For many companies, it’s a wash. Longer term, if the dollar stays down or falls further, U.S. companies could find it harder or more costly to raise money from foreign investors.
For Microsoft and Meta, the stronger dollar in the first quarter hurt revenues a bit. The dollar’s decline this month is expected to reverse that and slightly boost revenue this quarter because sales in now-stronger foreign currencies are worth more in dollars. U.S. companies that buy a lot from abroad will see costs rise, while foreign companies whose products are priced in dollars will take a hit.
“Currency matters to company fundamentals,” said Sean Sun, a portfolio manager at Thornburg Investment Management. Many semiconductor companies, regardless of where they’re headquartered, make most of their revenue in dollars because they sell heavily to U.S. customers, he said.
Dutch chip equipment maker ASM International last week cut its guidance for this year’s revenue, citing recent volatility in the value of the dollar. ASM expects 80% of its sales to be in dollars this year, but it reports earnings in euros.
The falling dollar, along with a rout in U.S. equities and declining prices for U.S. government bonds, set off alarm bells among investors after Trump’s April 2 tariff announcement. These movements were unusual because normally when bond prices fall, which boosts yields, investors buy dollars to invest in Treasury bonds to get that higher yield. In this case, investors were just selling U.S. assets, worried that Trump’s policies would make the U.S. a riskier place to invest.
“The dollar is being punished right now, and it is absolutely clear that it is reflecting that fund flows are going out of the U.S., because of the uncertainty in the U.S. markets and because of the perceived opportunities abroad,” said Marc Malek, chief investment officer at wealth management firm Siebert Financial.
The DXY index, which measures the value of the U.S. dollar relative to six other major global currencies, was over 104 on April 1, right before Liberation Day. Since then, it has dipped as low as 98, though it has recovered a tiny bit since. Those might seem like small fluctuations, but in currency markets that typically trade within a tight range, they’re substantial moves.
There are warning signs that foreign investors are cutting back on their U.S. exposure. Over the last few months, investors outside the U.S. have nearly halted their inflows in exchange-traded funds that invest in U.S. stocks, according to data from Nikolaos Panigirtzoglou, JPMorgan Chase’s global markets strategist. In the month of January, they poured nearly $16 billion into such funds; in April, their flows had fallen to less than one-fourth that level. Investors outside the U.S. have also been selling U.S. bond funds, he said.
If the buyer’s strike by foreign investors continues, that could drive down markets. Foreign investors’ share of the total U.S. stock market capitalization rose from 18% in 2009 to 27% in 2023, according to data from the Securities Industry and Financial Markets Association, a trade group.
Panigirtzoglou argues that even if U.S.-based investors continue to buy U.S. stocks, we could still see a downward spiral in which a flight of foreign capital from the U.S. stock market pushes the dollar even lower.
Some foreign investors seem to be souring on buying private assets in the U.S., too. Canada Pension Plan Investment Board, Canada’s largest pension plan with over $500 billion in assets, has historically invested heavily in U.S. infrastructure and private equity. However, recent media reports suggest that the fund is shying away from U.S. commitments amid the uncertainty stoked by President Trump’s trade policies and his political threats, as are several other large funds in Canada and Denmark.
Siebert Financial’s Malek, who invests in U.S. growth companies, typically doesn’t worry much about how currency moves might impact tech companies that sell their wares outside the U.S. Historically, he says, a weaker dollar has benefited his holdings. “But obviously, this time, it’s different,” he said.