US stocks are back on top. After a year and three quarters in which international stocks almost continuously outperformed, the tables have turned.
Year to date, the Vanguard Total International Stock ETF (VXUS) is up 13.2% on a total-return basis, trailing the 14.6% gain for the Vanguard Total Stock Market ETF (VTI).
That’s a notable reversal. In 2025, VXUS nearly doubled VTI’s return, gaining 32.4% versus 17.1%. And for much of this year, international stocks kept their lead, outperforming by as much as 10 percentage points in February.
International stocks could still stage a comeback and finish the year on top. But for now, US stocks are riding high on the AI boom. Megacap tech names like Nvidia, Microsoft, Meta and Apple have traded at or near record highs in recent sessions, powering the broader market. Other AI infrastructure winners, including Intel, Micron and AMD, have added to the gains.
A Long Stretch of US Dominance
Before last year’s big gain, international stocks had underperformed their US counterparts for years. From VXUS’s inception in January 2011 through the end of 2024, VTI surged 466%, compared with 82% for VXUS.
That gap led some investors to question whether international diversification was worth it at all. 2025’s outperformance was vindication for those who had stuck with it, and it raised hopes that international stocks were entering a longer run of leadership.
Historically, US and international stocks have moved in cycles, with one outperforming the other for years at a time before the roles reverse. International stocks led for much of the 2000s, for example, before the US took over for most of the following decade and a half.
What It Means
The recent reversal doesn’t mean US outperformance is back for good, but it’s worth watching.
The AI boom remains a massive tailwind for corporate earnings in the US, and by extension for the US market. Some international markets, including Japan, South Korea and Taiwan, have benefited from the boom too, thanks to their roles in the chip supply chain. But many others haven’t benefited at all.
As long as AI remains the market’s dominant theme, that gives the US an edge that a broad international fund can’t easily match.
