Rethinking International Investing in a Global Tech Era
- Zachary Bouck
- Jun 16
- 3 min read
Over the past 15 years, investors have recited a familiar narrative about international diversification: U.S. and international equities take turns leading performance, and eventually the trend reverses. Charts often show this cyclical dynamic—until recently.
In reality, the expected reversal hasn’t materialized. Except for the first five months of 2025, U.S. equities have outperformed international markets nearly continuously for over a decade. So, what changed?
I believe the traditional way of thinking about where a company is domiciled—as a key driver of investment performance—is no longer useful. Here's why.
A Brief Detour Through Globalization
To understand how we got here, let’s briefly review the history of globalization, often viewed in three waves:
1870–1914 – Fueled by steam power, railroads, and the telegraph.
1914–1971 – Driven by global institutions (UN, World Bank, IMF), post-WWII rebuilding,and air travel.
1971–Present – Marked by the end of the Cold War, free trade agreements, the rise ofJapan and Germany, and most importantly, the technology revolution.
Throughout each phase, companies grew profits by expanding beyond borders. If French chocolate sold well, why not offer it in the U.S.? And just like that, a regional business became global. Historically, companies faced many barriers—languages, tariffs, regulations, customs—but today, many of these have been minimized, especially for digital-first firms.
Netflix doesn’t face tariffs like physical products. Apple products are engineered in California, manufactured in Vietnam, and sold globally. Language barriers are largely solved by software. Tech companies are no longer bound by traditional geography in any meaningful way.
The Flawed “Country-Based” Lens
Because of these shifts, using national borders as a primary investment lens no longer provides meaningful insight—especially when comparing U.S. vs. non-U.S. equity performance.
For example, the Russell 2000 (U.S. small-cap stocks) has delivered a 7.6% annualized return over the past 20 years. The MSCI EAFE Index, representing developed international markets, has returned 6.25%. Meanwhile, the Russell 1000 (large U.S. stocks), many of which are global tech giants, would rank among the top-performing “countries” on its own.
Calling Apple, Microsoft, or Meta "U.S. stocks" isn’t particularly helpful when constructing a diversified portfolio. These companies are not just based in the U.S.—they are fundamentally global in revenue, operations, and user base.
Apple manufactures in Vietnam. Facebook operates globally. Microsoft earns revenue from every continent.
If these firms were domiciled in Tokyo or Berlin, would their performance really be different?
Rethinking Portfolio Construction
Rather than framing asset allocation by geography, consider a more modern lens:
#1 Global Reach
Tech companies are global in user base, supply chain, and infrastructure. Lumping them in with domestic banks or manufacturers to gauge “U.S. performance” is misleading. Instead, we should describe them as "U.S.-domiciled companies" rather than assume their performance reflects the U.S. economy.
#2 Global Revenue
Over 55% of revenue for the U.S. tech sector comes from outside the U.S. (Morningstar). By contrast, sectors like Utilities or Real Estate are far more domestically anchored. Tech’s revenue source is increasingly de-linked from U.S. GDP, policy, or consumer health.
#3 Reclassifying Global Tech
An investor could reasonably argue that these companies remain tied to U.S. regulatory frameworks. That’s fair. But a better approach might be to classify them as a separate category: Scalable Global Innovators—firms that derive the majority of their growth and revenue from outside their home market.
Why This Matters
Treating large-cap U.S. tech firms as “U.S. stocks” distorts portfolio allocation decisions. In fact, investing in U.S. small and mid-cap stocks today is more akin to investing in the domestic economies of France or Germany—more closely tied to local economic cycles and less exposed to global growth engines.
If you carved the Bay Area out of U.S. equity indexes, long-term performance would closely resemble that of many international markets. The “outperformance” of U.S. equities is really the outperformance of a handful of global tech giants—not a broad-based reflection of the U.S. economy.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
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