Tiff Macklem says massive capital flows into American AI are stretching valuations and creating financial vulnerabilities that could ripple across borders.
When a central bank governor flies to Paris to warn about another country’s investment boom, it’s worth paying attention. Bank of Canada Governor Tiff Macklem did exactly that on June 23, delivering a speech to the Chambre de commerce France-Canada that painted a picture of global capital flows increasingly tilted toward the US, fueled in large part by the artificial intelligence gold rush.
His core argument: the money pouring into American AI is creating competitive headwinds for countries like Canada, stretching equity and credit valuations in ways that could eventually snap back, and deepening the US’s reliance on foreign capital to a degree that makes the entire global financial system more fragile.
The imbalance problem #
Macklem outlined a set of interlocking global imbalances that are funneling capital toward the US at an unusual pace. China’s heavy dependence on exports. Europe’s chronically sluggish investment climate. And the US acting as a magnet for foreign money, partly because its AI sector is generating returns that other economies simply can’t match right now.
The result is a US net international investment position, essentially the difference between what Americans own abroad and what foreigners own in America, that has swollen to a historically large negative balance. In plain English: the US owes the rest of the world more than ever, and a meaningful chunk of that gap has been driven by equity gains tied to AI investments.
Macklem argued that this dynamic creates real financial vulnerabilities. If those AI-inflated valuations correct, or if protectionist trade policies disrupt the capital flows that have been propping up the US market, the fallout wouldn’t stay contained within American borders.
Why AI makes this different #
Macklem acknowledged that AI investment has genuinely boosted US productivity and domestic demand. The specific concern is misallocation. When one sector attracts an outsized share of global capital, prices in that sector can detach from fundamentals. Equity valuations get stretched. Credit markets get generous.
Macklem’s remarks from 2024 through 2026 have consistently noted that AI could boost US productivity while simultaneously complicating the inflation picture and creating dependencies that other economies would struggle to manage. The Paris speech was the most explicit articulation yet of those risks.
What this means for investors #
Macklem didn’t mention cryptocurrencies or digital assets in his speech. Not once.
Macklem specifically noted that ongoing protectionist measures could strain relationships between economies and disrupt normal capital flows. For Canada, which has already navigated trade tensions with its southern neighbor in recent years, this creates an environment where businesses and investors may look for ways to reduce their exposure to policy-driven volatility.
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