by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens with a discussion of the recent chipmaker market rally. We then assess the dollar’s reserve‑currency status in light of its increased usage following the conflict in Iran. Next, we examine the US bailout of Spirit Airlines, Washington’s growing reliance on dollar swap lines to avert forced asset sales abroad, and SoftBank’s expanding investment in AI. As always, we include an overview of recent domestic and international economic data.

 AI Leads Market: Chipmakers continue to outperform the broader market, driven by sustained demand for AI-related technologies. The semiconductor sector has now recorded its longest consecutive winning streak in history, reaching 16 straight days of gains. This rally has been fueled by investors increasingly looking past the conflict in Iran and refocusing on core market themes, with growing confidence that the worst of the geopolitical disruption has passed. This run highlights the market’s heavy reliance on AI-related companies to maintain positive momentum.

• Much of this strong performance is being driven by the AI boom, which has fueled a surge in demand for memory chips that continues to outpace supply. This imbalance reflects a broader acceleration in capital spending, as major technology companies invest heavily in cloud infrastructure to support AI model training. Industry leaders — including Texas Instruments, Nvidia, Broadcom, and Micron — have reported robust earnings, underscoring their critical role in supplying chips to data centers.
• The strength has also extended overseas, with several countries benefiting from increased exports as they expand their AI infrastructure. Southeast Asian economies, in particular, have seen gains, supported by strong performances from key players such as TSMC and SK Hynix — the latter reporting the fastest earnings growth in its history. Meanwhile, Chinese chipmakers SMIC and Hua Hong posted record results, and European semiconductor equipment leader ASML also delivered a strong quarter.
• However, despite the strong earnings, much of this performance predates the recent disruption to global supply chains stemming from the conflict in Iran. The closure of the Strait of Hormuz has made key inputs more difficult to secure for chipmakers seeking to expand production to meet rising demand. While attention has largely focused on oil markets, constrained helium flows also pose a significant risk to semiconductor supply chains.
• While US companies may be relatively insulated due to domestic helium production, international firms are more exposed to supply disruptions. This is particularly true for Asian economies, which rely heavily on Qatar for helium supply. QatarEnergy, a major global provider, sustained damage during the Iranian drone attacks, further constraining availability. Transportation also presents challenges, as helium can warm and boil off during extended transit, limiting the effectiveness of rerouting supply.
• The recent winning streak for chipmakers is an encouraging signal for market fundamentals, but it also suggests that investors may already be looking past the war in Iran, potentially prematurely. While both sides currently appear reluctant to return to full-scale fighting, the conflict’s supply-chain risks have yet to fully filter through to markets. Against this backdrop, we think adding selectively to value exposures remains sensible for investors prioritizing capital preservation.

Dollar’s Global Role: Since the conflict in Iran began, the dollar’s usage has risen to historic levels, according to SWIFT data. The international clearing network reports that the dollar accounted for 51.1% of global transactions — the highest share since SWIFT revised its data methodology. At face value, this suggests the dollar’s dominance remains largely intact as it shows that countries are still relying on the greenback to make international transactions. However, we believe underlying shifts may be occurring.

• The dollar remained the dominant reserve currency in 2025, but its long‑term role is being widely debated as policy uncertainty, rising fiscal deficits, and shifting trade and tariff strategies are leading investors to reassess their exposure to dollar‑denominated assets. At the same time, political and economic pressures have raised questions about the Federal Reserve’s ability to maintain a sufficiently hawkish stance to contain inflation risk, reinforcing concerns about the dollar’s future appeal.
• Keep in mind, changes in reserve‑currency status typically unfold over decades and in distinct phases rather than overnight. After World War I, it was increasingly clear that sterling was losing ground as the leading reserve currency, as Britain’s heavy war debts and reduced ability to supply global liquidity constrained its role. Yet, it took the post–World War II Bretton Woods order and episodes such as the Suez Crisis to solidify the dollar’s position at the core of the system and relegate sterling to a secondary status.
• The recent increase in dollar usage reinforces the depth of its reserve currency status. Despite growing headwinds, many countries have raised the share of their transactions conducted in dollars — a clear sign that the greenback remains one of the world’s most trusted currencies. While the dollar’s elevated usage during the Iran conflict might be viewed as cementing its reserve status, it more likely reflects that no credible rival has yet emerged, leaving the dollar as the default reserve currency for now.
• That said, we expect the erosion of the dollar’s reserve currency status to be a long, gradual process, likely marked by periodic setbacks. This means that many countries will probably continue holding dollars as they wait for an alternative currency to emerge. In the meantime, the lack of a viable competitor will likely lead central banks to prioritize gold purchases as their primary means of diversifying away from currency holdings.

Trump Airways? The Trump administration is in advanced talks to take over struggling airline Spirit. The deal would include the federal government paying $500 million for a stake in the company. Spirit has struggled to remain profitable since the COVID-19 pandemic, and ongoing geopolitical tensions have made matters worse due to rising jet fuel prices. The move is another reminder of the government’s growing role in the economy.

US Swap Lines: US Treasury Secretary Scott Bessent has indicated that a growing number of Gulf countries are seeking dollar swap lines to help maintain dollar liquidity. The access would allow those countries to secure dollars without resorting to panic selling of dollar-denominated assets. More broadly, this would mark yet another instance in which the current administration has considered or deployed measures affecting currency markets, alongside earlier discussions around Japan’s FX challenges and the establishment of a swap line with Argentina.

Softbank Loan: The multinational conglomerate is seeking a two-year, $10 billion margin loan backed by its stake in OpenAI. The facility reportedly includes an option to extend for an additional year, giving the company more flexibility in managing its leverage profile. The move underscores how aggressively SoftBank is leaning into the AI boom, using its OpenAI holdings to lower borrowing costs and monetize a highly valued, still-private and not-yet-profitable AI model provider.

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