According to a Reuters report on June 5, Saudi Arabia has joined the multilateral central bank digital currency bridge (mBridge) cross-border pilot project led by the Bank for International Settlements and China. According to Reuters, this could be another step towards reducing dollar settlements in global oil trade.
At present, Russian oil has completely left the dollar system, and in oil transactions, Saudi Arabia and other Middle Eastern oil producers and China will plan to settle in yuan and make digital payments.
At the same time, with the accession of Iran, Saudi Arabia, Egypt, Ethiopia and the United Arab Emirates, the new BRICS countries account for 43.1% of global oil production and 44% of global oil reserves.
The BRICS plan will strengthen local currency settlement and RMB settlement, and given the huge economic size and trade volume of the BRICS countries, there will be more oil transactions away from the dollar in the future, and the foundation of the "petrodollar" is beginning to be shaken.
As the United States has surpassed Saudi Arabia to become the world's largest oil producer, the demand for imported crude oil has declined significantly, and the United States' dependence on the petrodollar is also decreasing. At the same time, the U.S. has found a new anchor – U.S. technology stocks.
In recent years, Wall Street has begun to create technology bubbles, and in just a few years, it has launched seven or eight technological revolutions such as the metaverse, chatGPT, room temperature superconductivity, Sora, etc., pushing the stock prices of large American technology companies such as Meta, Microsoft, and Nvidia to the peak. The total market value of the U.S. stock market has soared by nearly 4% in four years, adding $13 trillion to its market value.
The big U.S. technology companies, known as the "Big Seven," have been the main drivers of the rally in U.S. stocks in recent years, and the combined market capitalization of these seven companies now exceeds $14 trillion, more than the total market value of stocks in all other countries in the world, including China.
Among them, the three companies with the highest stock market capitalization in the United States - Microsoft, Apple and Nvidia - have the latest stock market capitalization of $3.33 trillion, $3.32 trillion and $3.22 trillion, respectively.
In recent years, the United States has speculated on technology stocks, attracting a large amount of international capital, and American technology stocks have become the new anchor of the dollar. In 2023 alone, the U.S. recorded a net inflow of $864.5 billion in international capital (excluding cross-border direct investment). Among them, the net inflow of private foreign capital was US$678.5 billion, the 10th consecutive year of continuous net inflow; The net inflow of official foreign capital was US$186 billion, an increase of 6.17 times, marking the fourth consecutive year of net inflow.
The U.S. currently has $8.57 trillion of foreign capital invested in "other investments" such as trade credit, loans, money and deposits.
In terms of foreign direct investment, according to the statistics of relevant institutions, the United States is the country that attracts the most foreign direct investment in the world, and the share of cumulative foreign direct investment (FDI) in the world from 1990 to 2022 is as high as 23.7%, ranking first in the world. China's share is 8.6%.
The United States has become the world's largest net debtor, and its investment in overseas regions is much lower than the assets invested in the United States by overseas countries, and the net assets of the United States abroad are negative $18 trillion.
At the same time, however, U.S. equity market valuations have reached all-time highs, more than double those of China, and the deviation from global equity markets has reached extreme levels. As of February 29, 2024, the total market capitalization of the U.S. stock market is $52.6 trillion, accounting for 48.1% of the world's total, while the U.S. GDP accounts for only about 26% of the world's total.
In the case of Nvidia, the market value of Nvidia shares has surpassed that of the German stock market, while Nvidia's annual sales revenue is only $60.9 billion, while Germany's GDP in 2023 is $4.45 trillion.
However, in addition to Nvidia and other AI companies that "sell shovels" can really make money, a series of technological concepts such as AR/VR, metaverse and hyperloop that have been hyped in the United States in recent years cannot be implemented. At present, the artificial intelligence industry in the United States is still in a state of large investment and low output, and the business model and market prospects are not clear.
The current artificial intelligence bubble in the United States is similar to the Internet bubble, and Nvidia may become the next Cisco, and Nvidia will not only face a surge in the number of competitors in the future, but also face a series of challenges such as key customers developing their own chips, and the industrial environment is worse than that of Cisco.
Although, with the development of the artificial intelligence industry, the demand for computing power and chips will continue to grow rapidly in the future. But the same is true of the Internet, where after the bubble burst, although Internet traffic continued to grow dramatically for many years, Cisco never returned to its peak.
For now, the key anchors for the dollar are oil, US Treasuries and technology. The U.S. tech bubble has reached an extreme level, and its bursting in the future will be inevitable. With the bursting of the U.S. tech bubble, the U.S. debt risk continues to rise, and the petrodollar gradually comes to an end. In the future, the cornerstone of the dollar's hegemony will become increasingly unstable.