The US stock market is propped up by a handful of giants whose market capitalisation runs into trillions of dollars. Apple, Microsoft, Nvidia, Amazon, and Alphabet together account for almost a third of the S&P 500 index. If one of these companies faces an existential crisis—not just a drop in stock prices, but a real threat of bankruptcy—it will cause a shock that will affect not only investors but also the dollar.

Unlike a bank collapse, the collapse of a tech giant will affect millions of people around the world, including those who have never had anything to do with Wall Street.

Why has the tech sector become a pillar of the dollar?

Over the past two decades, the US stock market has become the main magnet for global capital. Foreign investors have poured trillions of dollars into US stocks because they offered a combination of growth, innovation, and liquidity that no other market had.

This influx of capital created a structural demand for dollars. To buy US stocks, a foreign investor must first buy dollars. This demand supported the currency even during periods when the fundamentals of the US economy were weak.

If the largest tech company goes bankrupt, this mechanism will fail. Foreign investors will start selling US stocks and converting the proceeds into their own currencies. This will create pressure on the dollar that could be stronger than any economic crisis.

What will happen in the first few days?

The first reaction will be panic in the stock market. Equity companies will fall as investors start selling everything related to the sector. The S&P 500 and Nasdaq indices will lose a significant portion of their value.

The second reaction is a flight to safety. Investors will buy dollars and US bonds, which will initially strengthen the currency. This effect was observed in 2008 and 2020, when market panic forced investors to seek refuge in dollars.

The third reaction is intervention by the Federal Reserve. The central bank may lower rates or provide emergency liquidity to stabilise markets. This will support the economy but weaken the dollar in the medium term.

What will happen in the medium term?

Within a few weeks or months, the market will begin to realise the scale of the problem. If a tech giant's bankruptcy proves to be a systemic event, it will undermine confidence in US stocks as a reliable place to invest. """

""" Foreign investors will start to rethink their strategies, seeking alternatives in European, Asian, or emerging markets. This will weaken the dollar as capital inflows into the US decline.

Additionally, the collapse of a major company will disrupt supply chains and employment. Thousands of businesses that relied on it will suffer losses, slowing the economy and putting further pressure on the dollar.

Who will gain and who will lose?

The primary beneficiaries will be gold, Treasury bonds, and companies not tied to the technology sector. Gold will thrive as a non-stock market asset, while Treasury bonds will attract investors seeking safety.

American households with retirement savings invested in tech stocks will be the most vulnerable, as will foreign investors holding US equities. Companies dependent on the tech sector will also face significant losses.

The dollar’s ultimate impact hinges on the crisis’s scale and the authorities’ response. If the Fed can stabilize markets without massive injections, the dollar could strengthen. However, if trillions in government support are required, the currency will weaken.

What does this mean for the dollar?

The bankruptcy of a leading tech company will shock the US market but may not necessarily affect the dollar. In the short term, the dollar could even strengthen as a safe-haven asset. However, in the medium term, it will weaken as confidence in the US market erodes.

The most likely outcome is not a collapse but a gradual decline. The dollar will remain the primary currency, but its reliance on the tech sector will become more apparent and vulnerable. Investors will seek alternatives, reshaping the currency market’s power dynamics for years to come. """