How AI could bring back American exceptionalism
But without the market power of artificial intelligence companies, they may have to quickly come back to America.
Why it matters: Much of Europe's outperformance this year stems from a weakening dollar, not stronger fundamentals. Without the AI boom that is fueling the resurgence in U.S. stocks, the old world may struggle to keep up.
What they're saying: " People want to be in the U.S. markets in the AI trade," Stuart Kaiser, head of U.S. equity strategy at Citi, told Axios.
"It's a market you have to be involved in."
Zoom out: The American stock market has outpaced gains in global equities for the last 15-plus years.
Europe saw a 17.9% total return in U.S. dollar terms in the first half of 2025, but just 8.8% in local currencies, according to Vanguard.
That gap signals the rally was largely driven by currencies and requires a catch-up on fundamentals to continue driving its growth.
By the numbers: Nvidia alone is worth an amount equal to 14% of the total U.S. GDP, according to Robert Ruggirello, chief investment officer of Brave Eagle Wealth Management.
"Not owning it is…painful," he wrote in a note.
Of note: The European index was outperforming the S&P 500 for most of 2025 until recently.
S&P 500 tech stocks are now outperforming both the broader U.S. and European markets.
Zoom in: U.S. firms are embracing AI at scale. Europe is behind.
European firms lag U.S. peers by 45% to 75% on AI adoption, according to McKinsey research last fall.
Over the past 50 years, the U.S. has created 241 companies worth over $10 billion from scratch, while Europe has created just 14, Andrew McAfee of MIT told the Wall Street Journal.
Between the lines: The slower AI momentum in Europe reflects regulatory pressure, higher corporate taxes, and fragmented markets, barriers the U.S. lacks.
Even European AI successes often funnel into U.S. markets: DeepMind, the British AI firm behind Gemini, sold to Alphabet in 2014.
Reality check: Strategists still see growth opportunities in Europe and beyond, given fiscal stimulus and potentially better economic growth.
Trends like the shift to global assets can "last a lot longer than you think," Ryan Detrick, chief market strategist at the Carson Group, told Axios.
We're only about seven months into this rotation.
The bottom line: AI is powering the American stock market. If you're seeking diversification, that may be hard to find in the U.S. indices.
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