(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Jamie McGeever

ORLANDO, Florida, July 16 (Reuters) - 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.

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 is

down 17% year to date, while the Philadelphia Semiconductor

Index 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

up 5% and the S&P 500 tech sector 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.

FLIGHT RISK

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 ( SKHY ), Samsung and

TSMC.

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.

(The opinions expressed here are those of the author, a

columnist for Reuters)

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(By Jamie McGeever

Editing by Marguerita Choy)