AI boom drives foreign capital to accelerate inflows into US stocks
AI summary card
AI boom drives foreign capital to accelerate inflows into US stocks
In the week ending May 29, foreign capital inflow into US equity funds reached $2.7 billion, with a cumulative inflow of $8.6 billion in May, the highest level since January 2026.
- From May 23 to May 29, foreign capital inflow into US equity funds reached $2.7 billion, faster than the previous week
- Total inflow into US equity funds in May reached $8.6 billion, the second highest since January 2026
- Meanwhile, inflow into emerging market ETFs slowed to $475 million during the same period
- Retail investors in South Korea have been net sellers of US assets for two consecutive months, the first time since June 2023
- Investors in Taiwan continue to net sell USD-denominated bond ETFs
Report interpretation
Overview
This report published by Nomura focuses on recent high-frequency investor fund flow data, revealing that international capital is accelerating its inflow into the US stock market under the impetus of the AI boom. Based on the latest weekly and monthly data up to the end of May 2026, the report analyzes changes in foreign investors' allocation of US stocks, bonds, and emerging market ETFs, as well as those from South Korea and Taiwan.
Core views
The core finding of the report is that foreign investors are showing significant interest in US equity funds. In the week from May 23 to May 29, capital inflow into US equity ETFs and mutual funds reached $2.7 billion, a clear acceleration compared to the previous week's $1.4 billion. For the entire month of May, total inflow reached $8.6 billion, the second-highest level since January 2026 at $9.5 billion. By contrast, inflow into US bond funds was more modest, with only $120 million in the week and $688 million cumulatively in May, which, although higher than April's $103 million, pales in comparison to the enthusiasm for equity assets. At the same time, inflow into emerging market (EM) ETFs has significantly slowed. In the last week of May, inflow was only $475 million, down from $741 million the previous week; net buying for the full month of May amounted to $2.5 billion, a sharp decline from April's $6.3 billion. Of this, EM equity ETFs contributed $2.4 billion, while bond ETFs were almost flat. Notably, some Asian investors are taking opposite actions: retail investors in South Korea net sold US assets for two consecutive months in April and May, totaling over $1.4 billion, the first time since June 2023 that there has been continuous net selling; investors in Taiwan net sold $149 million worth of USD-denominated bond ETFs in the last week of May, with the outflow increasing compared to the previous week.
Analysis framework
Nomura uses a high-frequency capital flow proxy indicator for analysis, based on the following assumption: Funds listed or registered outside the US and focused on US assets are mainly held by non-US retail and institutional investors. By tracking changes in these funds' capital flows, we can effectively reflect the allocation preferences of foreign capital toward the US equity and bond markets. The report cross-validates trends on a weekly and monthly basis and compares behavioral differences among regional investors (such as South Korea and Taiwan) to identify structural shifts in capital flows. The analysis particularly focuses on the catalytic role of the AI theme in attracting US stocks and highlights the current global capital risk preference bias toward developed market technology sectors through comparisons with emerging market capital flows.
Methodology notes
Measuring market sentiment and investor behavior through capital volume rather than price
Instead of directly analyzing price fluctuations, the report tracks the scale of capital inflows/outflows of various funds as a leading indicator of investor confidence in the US stock market (especially AI-related assets). Accelerated capital flows often signal subsequent market momentum enhancement.
Cross-border capital flows reflect global risk appetite and the attractiveness of dollar assets
The report views foreign capital inflows into US stocks as a configuration choice of global capital in a 'risk-on' environment, especially in the context of AI technological breakthroughs, where dollar assets (particularly US stocks) become carriers of both risk hedging and growth attributes, attracting international capital backflows.
Key data
- Weekly inflow into US equity funds (May 23-May 29)$2.7 billionFaster than the previous week's $1.4 billion
- Total inflow into US equity funds in May$8.6 billionHighest since January 2026 ($9.5 billion)
- Weekly inflow into emerging market ETFs (May 23-May 29)$475 millionSlowed compared to the previous week's $741 million
- Net selling of US assets by retail investors in South Korea in May$568 millionSecond consecutive month of net selling, last seen in June 2023
- Weekly net selling of USD bond ETFs by investors in Taiwan$149 millionOutflow increased compared to the previous week
Impact & implications
The report suggests that the accelerated inflow of foreign capital into the US stock market, especially under the AI theme, reflects strong optimism from global investors toward the US technology sector. This could further support US stock valuations, particularly for AI-related growth stocks. At the same time, the slowdown in emerging market capital inflows and the reduction of USD assets by some Asian investors indicate that capital is currently tending to concentrate on core assets in developed markets with clear technological narratives and visible earnings.