Abstract Numerous recent studies have argued that moisture limitation is leading to growth declines and mortality of black spruce (Picea mariana) and white spruce (Picea glauca) in the North American boreal forest. A parallel line of research suggests that increasingly common severe wildfires are altering successional pathways and leading to long‐term replacement of spruce forests with those dominated by paper birch (Betula papyrifera, Betula neoalaskana) and trembling aspen (Populus tremuloides). When both conifers and deciduous trees establish after fire, this biome shift hypothesis implicitly assumes that deciduous species will outcompete the conifers, owing to their more rapid vertical growth and because they might be less sensitive to warm and dry conditions. We established a research site in a white spruce‐paper birch forest on an east‐facing slope in interior Alaska and tested the hypothesis that Alaska paper birch are better adapted to warm and dry conditions than white spruce. Over 6 years (2013–2018), we made hourly measurements of microclimate and xylem sap flux of both species. We also collected increment cores and conducted climate‐growth analyses for both species. During our 6‐year study, growing seasons with low volumetric soil water content (SWC) were those that followed shallow winter snowpacks and had limited summer rainfall, not necessarily those with warm air temperature. Both species were sensitive to moisture limitation. The tree‐ring data revealed significant positive effects of cumulative water year precipitation on radial growth, with a steeper slope for paper birch than for white spruce. Radial growth of both species was also positively related to mean water year air temperature. Sap flux density declined progressively for white spruce over the range of observed SWC and abruptly for paper birch when SWC fell below ~15%. Synthesis. Our results show that, while paper birch might be less sensitive to mild drought than white spruce, it may be more sensitive to severe drought, raising questions about the ability of paper birch to outcompete co‐occurring white spruce in a drier climate.