While the S&P 500 surged in 2025, it trailed behind most international markets.
US stocks enjoyed a stellar 2025, yet <a s benchmark Kospi index surged almost 76% in 2025.
Markets across Asia have been riding the momentum of AI enthusiasm.
Tech companies and chipmakers in South Korea, Taiwan, Japan, and China all profited last year from heightened investor interest in artificial intelligence.
South Korea’s Kospi index soared nearly 76% in 2025, marking its strongest year since 1999. Japan’s Nikkei 225 rose 26%, driven by gains among tech firms and semiconductor producers.
In Japan, shares of memory chip manufacturer Kioxia jumped 536%. Meanwhile, in South Korea, shares of tech giant Samsung climbed nearly 130%.
“The AI trade has broadened materially over the past year,” said Arun Sai, senior multi-asset strategist at Pictet Asset Management. “That optimism has increasingly been priced in beyond the US, extending globally, particularly into markets such as Korea and Japan.”
In Taiwan, shares of Taiwan Semiconductor Manufacturing Company (TSM) rose 46.54% last year, reaching record highs. Simultaneously, shares of China-based Alibaba (BABA) surged 75.81% as the company embraced AI and introduced its own chatbot.
Stocks in Europe rallied early in 2025 as the German government implemented historic reforms to increase defense spending. European defense stocks climbed throughout the year, with German manufacturer Rheinmetall gaining 154%.
At the same time, brighter economic outlooks for Greece, Spain, and Poland provided a lift to those nations’ markets. European banks such as Santander (SAN) and Deutsche Bank (DB) also experienced standout years, each rising about 126% and helping to boost broader markets.
Spain’s benchmark IBEX 35 index rose 49%, marking its best performance since 1993. Italy’s FTSE MIB climbed nearly 32%, its strongest year since 1998. Germany’s DAX increased 23% and Greece’s ATHEX investors scrambling for global exposure, Poland offered a unique mix of growth and value,” said David Russell, global head of market strategy at TradeStation.
“Greece is finally recovering from a decade-long debt crisis,” Russell said. “The country recovered its investment-grade rating at Moody’s and enjoyed a tourism boom. It’s a classic comeback story following a period of bad loans and low multiples.”
The UK’s benchmark FTSE 100 index gained 21.51%, its best year since 2009. The index then began 2026 on a strong note, briefly rising above a record high of 10,000 points on Friday for the first time in history.
For US investors, analysts suggest the dollar will remain a key indicator for gauging international stock returns.
“If the dollar continues to weaken, foreign stocks may continue to have the wind at their back,” Reynolds at Glenmede said.
Although international markets experienced a year of outperformance, some investors maintain that fundamentals still favor the United States.
“We still favor the US first and international second,” said Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute. “We feel the dollar will stabilize, which will help to dampen the advantage for emerging market equities.”
Wall Street remains optimistic about the outlook for US stocks, as corporate profits have proven resilient and there is confidence that AI will continue to drive earnings growth. Nevertheless, investors looked overseas last year to diversify portfolios amid heightened uncertainty, and international markets—both developed and emerging—proved to be a strong choice.
“One of the biggest and most underappreciated surprises of 2025 has been the extraordinary outperformance of emerging market (EM) equities,” Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, said in a December 15 note.
“Overweighting the US has served global investors well the past 15 years,” Shalett said. “That said, we believe shifting geopolitical, monetary and fiscal policy regimes amid technological upheaval and the constraints of developed world debt are creating a need for diversification beyond US stocks and bonds for long-term investors.”
