Foreign investors have significantly increased their investments in the U.S. stock market in recent years, driven largely by the rapid expansion of artificial intelligence (AI) technologies and corresponding capital expenditures. While this influx of overseas capital has helped finance America’s persistent current account deficit, it has also raised questions about the long-term sustainability of the country’s external imbalances.

The U.S. current account deficit measures the difference between the value of goods, services, income, and transfers imported by the United States and those exported. For decades, this deficit has been financed by foreign entities purchasing American assets, effectively lending money to the U.S. government and private sector. At present, the current account shortfall is close to 4% of gross domestic product (GDP), and trade deficits in goods and services remain near 3% of GDP, in a $31 trillion economy.

Efforts by the Trump administration to reduce the trade gap through immigration reform, increased domestic investment, and tariffs have yet to produce a significant shift. Meanwhile, attracting foreign capital remains essential to maintaining the value of the U.S. dollar and keeping bond yields stable.

Over the past two decades, the composition of foreign financing for the U.S. deficit has shifted markedly. In the early 2000s, official sector investors such as central banks and sovereign wealth funds—particularly in Asia and the Middle East—dominated U.S. Treasury purchases. For example, Japan and China together held a substantial share of U.S. public debt, with their official holdings accounting for 18% and 14% respectively in the mid-2000s. Since then, official holdings have declined sharply, now representing a small fraction of total U.S. debt held abroad.

Private investors have increasingly taken the lead, with foreign holdings of U.S. equities growing substantially. In 2010, foreign investors’ portfolios were about one-third equities and just over 20% Treasuries. By the first quarter of 2026, those shares had shifted to 61% equities and 14% Treasuries. Foreign ownership of U.S. stocks has reached a record 18%, nearly doubling since the mid-2000s.

Economists caution that this change in investor profile could increase financial risks. Central banks traditionally prioritize safety and liquidity when investing in U.S. government bonds, whereas private investors tend to pursue higher yields, taking on greater risk and showing more sensitivity to market fluctuations. In a downturn, private capital could retreat rapidly, potentially destabilizing U.S. external financing.

However, some analysts argue that today’s leading U.S. tech firms, such as Apple and Microsoft, offer investment security comparable to government debt. Both companies carry triple-A credit ratings, and corporate bond yields for some giants have occasionally fallen below those of short-term U.S. Treasuries. These firms are also considered indispensable to the U.S. economy and national security, suggesting government intervention to prevent failure if needed.

This trend extends beyond private funds, with some central banks and sovereign wealth funds reallocating assets from Treasuries to major technology stocks, reflecting confidence in these companies’ stability.

Despite these shifts, underlying U.S. fiscal challenges persist. Analysts at Deutsche Bank highlight the widening gap between growing investment inflows into equities and declining demand for government debt amid a weakening fiscal position. Additionally, new research from the Federal Reserve indicates that rapid technology investment, spurred by AI, may exacerbate the current account deficit by increasing imports relative to exports.

As foreign capital continues to support U.S. financial markets, questions remain about the durability and risk associated with this evolving funding landscape. The balance between attracting private investment and maintaining financial stability will be a defining challenge for the U.S. economy in the coming years.