The Federal Reserve Board data showed on Thursday that foreign investments have the highest allocation of U.S. stocks in history. The data revealed that foreign holdings of U.S. financial assets account for more than 60%.
The increase in foreign investments comes as U.S. President Donald Trump initiated a global trade war last spring, which brought concerns that foreign buyers would boycott American stocks. The opposite happened, and now foreign buyers of U.S. stocks account for more than half of U.S. stock investments.
Foreign U.S. stock investments overlook U.S. trade policies
Data showed that demand for U.S. stocks by foreign investors has remained resilient despite foreigners scaling back on travel to the U.S. and some purchases of U.S.-made products. Part of the increase stems from the rise in firms investing in artificial intelligence ventures, which have swelled the share price of Nvidia, Microsoft, and Alphabet, among others.
Sam Stovall, chief investment strategist at CFRA, said the increase in foreign stock purchases came as a surprise, though not because of political calculations. He questioned why foreign investors would flood the U.S. since the weakening dollar would be a hindrance to returns.
Stovall argued that foreign investors are directing funds selectively into the AI sector, with a particular focus on large tech companies that hold a significant weighting in the U.S. market. He also reasoned that it could be because the tech sector has soared to new all-time highs this year. Stovall noted that since U.S. stocks bottomed on April 8, they have surged higher, driven by the Fed’s first interest rate cut of the year.
“While tariffs have led many foreign consumers to boycott U.S. products, U.S. equities remained in high demand.”
-Rob Anderson, Sector Strategist at Ned Davis Research.
The White House stated that major investments were made possible by Trump’s leadership and acknowledged that the U.S. has also experienced a surge in private and foreign investment. The Trump administration added that increased investments in the U.S. stock market are fueling job growth, innovation, and opportunity across the U.S.
Elyas Galou, Director of Global Investment Strategy at Bank of America, confirmed that international investors are still buying U.S. equities at a very strong pace. The MSCI World Index is currently trading at $4,318 at the time of publication, up more than 15.5% in the past year.
Galou cited EPFR data showing that foreign investors increased their U.S. equity investments since March, in the wake of optimism surrounding Trump’s inauguration in April.
Major U.S. tech stocks surge in price
U.S. Treasury Secretary Scott Bessent said on Thursday that China is leveraging its dominance in the rare earth industry to drive down prices, which forces foreign competitors out. He stated in an exclusive CNBC interview that the U.S. had a nonmarket economy.
Bessent hinted that the Trump administration will introduce industrial policy to establish price floors in various industries. Such limits, which are typically set above the market rate, demonstrate the lowest prices suppliers can charge for goods and services.
Despite the stringent measures on prices, U.S. equities hit fresh highs on Wednesday. At the time of publication, the S&P 500 is nearing 6,700, the Nasdaq Composite is up 0.5% at 22,852, while the Russell 2000 is at 2,514. The U.S. Federal Reserve’s Beige Book revealed that earnings reports indicate the economy hasn’t yet stalled, despite companies reporting higher costs due to U.S. trade policies.
Stocks have also surged, including Nvidia shares rising by 1.2%, while Broadcom’s stock jumped 2% after Taiwan Semiconductor hiked its 2025 revenue guidance to mid-30% growth from roughly 30%. The semiconductor firm also reiterated its plan to commit up to $42 billion to capital expenditures by the end of 2025.
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