Swiss Franc to Strengthen if AI Bubble Bursts

Global markets are closely monitoring the rapid ascent of artificial intelligence (AI) driven technology stocks, and an analysis from Capital Economics suggests that the Swiss franc (CHF) could appreciate as a safe-haven asset if this 'AI bubble' were to burst. The analysis indicates that a selloff in AI stocks would bolster the Swiss franc, projecting a potential gain of approximately 3% against the euro (EUR) by the end of 2027.

According to Capital Economics' assessment, while the AI rally may continue throughout 2026, a downturn in technology-heavy equity markets is anticipated in 2027. The research firm forecasts the S&P 500 index to reach 8,250 by the end of 2026 but decline to 6,500 by the end of 2027. Such a scenario could prompt investors to shy away from risky assets and seek refuge in safe havens, thereby increasing demand for the Swiss franc, which is traditionally regarded as a secure investment vehicle.

Recently, the Swiss franc has shown a tendency to strengthen against the US dollar (USD). On August 19, 2026, the USD/CHF exchange rate fell to 0.7971, closing 1.87% lower than the previous session. The franc has gained 1.61% over the past month and 0.87% over the last 12 months. This strengthening occurred in parallel with a weakening of the US dollar amidst easing expectations of a Federal Reserve (Fed) interest rate hike. US retail sales dropping for the first time in nine months in July and moderate inflation figures have reduced the probability of a Fed rate hike in September to just 35%.

The uncertainties in the global economy and massive investments in AI technologies are creating both excitement and apprehension in the markets. Capital Economics notes that AI-related spending is providing a significant boost to economic growth, particularly in the US, but concerns exist regarding the sustainability of these expenditures. Should the AI bubble burst, two primary negative impacts on the US dollar could emerge: the potential for the Fed to cut interest rates by 2028 and a slowdown in capital inflows that have been supporting the US stock market boom.

Analysts and market expectations suggest that the Swiss franc will remain robust in such a scenario. The Swiss National Bank (SNB) maintained its policy rate at 0% in its latest meeting and is expected to hold this level through the end of 2027. Switzerland's economy recorded strong quarterly growth of 1.5% in the second quarter of 2026, and inflation slowed to 0.4% in July, its lowest in four months, solidifying the franc's fundamentals. These factors could enhance the Swiss franc's appeal if global risk appetite diminishes, supporting the predicted 3% appreciation against the euro.