USD faces pressure as tech sector valuation concerns mount for 2026

USD strength remains vulnerable as growing concerns over Big Tech valuations and the potential for an AI bubble burst in 2026 weigh on market sentiment. While the tech-heavy US equity markets managed to finish 2025 relatively unscathed, analysts warn that stretched valuations in the technology sector could trigger risk-off flows that would impact the dollar's safe-haven appeal. The mounting debate around sustainable AI monetization and profitability raises questions about continued capital inflows into US markets. Technical traders note USD index hovering near 104.50, with potential downside pressure if tech sector correction materializes. A significant tech sector reset could prompt capital reallocation away from US assets, benefiting currencies like JPY and CHF on safe-haven flows, while potentially supporting EUR and GBP as alternatives. Forex traders should monitor tech earnings and valuation metrics as leading indicators for potential USD weakness in 2026.