ROI-Global 'FOMO' keeps fueling Wall Street’s AI exceptionalism: McGeever

To be sure, a heavy rotation within the U.S. tech and AI universe is underway. Investors are punishing the hyperscalers that are spending vast sums on AI infrastructure and capex, while rewarding the semiconductor companies receiving much of that flow. The S&P 500 software and services index .SPLRCIS is down 17% year to date, while the Philadelphia Semiconductor Index .SOX is up a whopping 75%. Zoom out though, and it's a familiar picture: global investors' appetite for U.S. equities, especially tech, remains undiminished. May was a strong month for Wall Street, with the S&P 500 .SPX up 5% and the S&P 500 tech sector .SPLRCT rising an impressive 16%, so perhaps solid participation from abroad isn't all that surprising. But the strength of that buying is, especially when compared with the foreign selling in other countries at the vanguard of the global AI revolution, notably South Korea and Taiwan. Non-residents are dumping these countries' stocks while continuing to pour huge amounts into the U.S. Investors' "fear of missing out," or FOMO, appears to be alive and well, as far as U.S. equities are concerned. Doubts around Wall Street's AI-fueled boom may be swirling, but foreign investors' insatiable appetite for U.S. stocks suggests there's life in the "U.S. exceptionalism" narrative yet. Official U.S. Treasury International Capital (TIC) figures – the gold standard for measuring U.S. securities flows – this week showed historic demand for U.S. equities in May from the foreign private sector. Foreign private sector investors' net purchases of U.S. stocks in May totaled $120.8 billion, up from $85.6 billion the month before, according to the latest TIC report. That was the second-highest inflow on record after November 2024. “It’s still really, really hard to see evidence that the rest of the world is shunning U.S. assets,” said Kit Juckes, head of FX strategy at Societe Generale in London. Comparing the TIC data with foreign flows for South Korea and Taiwan – two other AI heavyweights – is revealing. Of course, like-for-like comparisons between countries are difficult because of methodology, collection and calculation differences. But one can get a good sense of foreign demand for emerging market assets using the Institute of International Finance's (IIF) best-in-class emerging market portfolio flows data. IIF figures show non-resident investors pulled $27.9 billion out of South Korean stocks in May. That net outflow increased in June to $30.5 billion, the biggest outflow in more than 25 years. Meanwhile, non-residents pulled a net $18.3 billion out of Taiwanese stocks in June, the second-biggest monthly outflow on record. The largest was a $28.7 billion outflow in March. So far this year, foreigners' net sales of South Korean stocks have reached nearly $100 billion, while non-residents have sold a net $20 billion of Taiwanese stocks, IIF figures show. South Korean and Taiwanese equity indices are seen as barometers for market sentiment on the global AI story because they are heavily concentrated in tech and a handful of megacap companies, namely SK Hynix 000660.KS, Samsung 005930.KS and TSMC 2330.TW. Both markets have soared this year, but have also recorded massive selloffs, with realized volatility reaching historic levels. Does that mean investors are growing skittish about the AI story itself? Perhaps, but this volatility may, in part, reflect the growing presence of highly leveraged domestic retail investors in these markets. Regardless, such ructions are unlikely to help attract foreign capital back in, unless we see a significant, sustainable correction. That suggests investors wanting to get in on the AI frenzy may still flock to Wall Street. There is one significant caveat to all this. The TIC data has a heavy lag, and the U.S. tech sector – including both hyperscalers and chip companies – did experience some tremors in June, so we will still need to wait and see if that affected foreign demand. For now, however, the latest data shows two things: the world still doesn't want to miss out on the AI rally; and Wall Street, not Asian markets, is the more attractive and stable destination for global investors.

ROI-Global 'FOMO' keeps fueling Wall Street’s AI exceptionalism: McGeever

Tech rotation continues inside the U.S.

Foreign buying keeps U.S. AI story alive

Foreign flows show flight to Wall Street

Wall Street remains the favored destination

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