US stock markets have underperformed compared to international markets in 2025, marked by a 17.4% increase in the S&P 500, significantly trailing the 29% growth of the MSCI All Country World ex-US index. Several factors contributed to this trend, including concerns over high valuations, a breakthrough in artificial intelligence from China, and the economic policies of former President Donald Trump.
Despite a rebound led by the AI sector following earlier sell-offs due to tariffs, uncertainty around high US tech valuations is prompting investors to reevaluate their portfolios. Matthew Beesley, CEO of Jupiter Asset Management, noted that US equities appear pricier compared to many global alternatives, suggesting a strategic pivot away from American stocks.
Emerging markets, particularly in Asia, have shown significant gains, with the MSCI China index increasing by 29% and South Korea’s Kospi soaring over 75%. Investment strategies are shifting, as many investors reconsider geographical allocations in response to recent economic developments. Notable mentions include Chinese start-up DeepSeek’s advancements in AI, which led to a notable 17% drop for US chipmaker Nvidia, raising questions about the necessity for extensive AI infrastructure investments.
European markets are also gaining traction, driven by expectations of economic recovery fueled by Germany’s fiscal stimulus strategy. The DAX has outperformed the S&P 500, while indices in Spain and Greece have seen significant increases of 48% and 44%, respectively. Experts now highlight a growing need to diversify investments beyond the US, reflecting a shift in the investment landscape.
Key Points:
- Why this story matters: It highlights a significant shift in global investment dynamics, with international markets outperforming US stocks.
- Key takeaway: Investors are reassessing their portfolios, focusing on regions beyond the US as a result of high valuations and emerging competition in sectors like AI.
- Opposing viewpoint: Some investors may still believe that US tech stocks will recover due to their historical performance and market dominance.
