Saudi funds perform "Western migration"! Saudi domestic stock market fades as funds flock to US stocks.

Government statistics show that in the whole year of 2025, Saudi Arabian investors significantly increased their trading volume in the US stock market, reallocating funds from the domestic market, which was one of the worst-performing stock markets globally. According to the Saudi Capital Market Authority, in the fourth quarter, Saudi financial institutions' trading volume of US stock assets rose to approximately 254 billion riyals (about 68 billion US dollars), almost doubling from the same period in the previous year. In the fourth quarter, almost all of the stock trading conducted outside the Kingdom of Saudi Arabia was concentrated in the US stock market. At the same time, local trading activities on the Saudi Stock Exchange unexpectedly contracted. The total stock trading volume within the Kingdom decreased significantly from over 1.1 trillion riyals at the beginning of 2024 to approximately 574 billion riyals at the end of 2025. As shown in the figure above, Saudi investors are flocking to the US stock market. This divergence reflects the sharp differences in market trends. Influenced by the downward trend in international oil prices due to the expectation of "oversupply," fiscal pressures, and regional tensions, the Saudi Tadawul All Share Index plummeted by 9% in the fourth quarter, with a full-year decline expanding to 13%. In contrast, the US market continued to rise: the S&P 500 index rose by over 16% throughout the year, mainly driven by the enthusiasm of investors for thematic trading in artificial intelligence led by seven major tech giants. Despite the Saudi Public Investment Fund continuously reducing its holdings of US-listed stocks, it still injects a significant amount of physical capital into the country. Important transactions of the Saudi Public Investment Fund (PIF) include last year's acquisition of gaming giant Electronic Arts Inc. for $55 billion and a recent $3 billion investment in xAI led by Tesla CEO Elon Musk through a subsidiary. The IPO market in Saudi Arabia, once a highlight of the global stock market, has also cooled significantly, with a series of weak-performing new listings and a slow start to this year's new IPOs. Meanwhile, US companies are preparing to launch a new wave of large-scale listings, including SpaceX, whose IPO size could surpass Saudi Aramco to become the world's largest IPO project, along with the world's two largest AI application leaders - Anthropic PBC and OpenAI Inc. Despite local investors withdrawing massively from the domestic stock market, Saudi regulatory authorities are still intensifying efforts to attract foreign capital. Recently, regulatory agencies have opened up the market to a wider range of international investors and are considering adjusting trading rules to allow foreign investors to hold a majority stake in Saudi listed companies. Some analysts suggest that this move could release passive inflows of billions of dollars. Saudi regulatory agencies are also encouraging companies to allocate a larger proportion of shares to retail investors in IPOs to increase local investor participation. Some investment banks oppose this policy, believing that forcibly pushing shares to a group with still uneven demand poses significant risks and limits the allocation quota of foreign institutional investors. Why Saudi funds favor the US stock market The reason why Saudi investors are almost "voting with their feet" for the US stock market is very direct: the significant difference in relative returns. As the above statistics show, Saudi financial institutions' trading volume in US stocks doubled year-on-year, and almost all Saudi overseas transactions are concentrated in US stocks; meanwhile, Saudi domestic stock trading volume has significantly declined. This is due to the stark contrast in market performance and industry structure between the two regions: the Saudi stock market fell by about 13% in the previous year, dragged down by oil price fluctuations, fiscal pressures, and regional geopolitical risks; while the US stock market continues to be boosted by technology and AI themes, with the S&P 500 posting a gain of over 16% throughout the year. For funds seeking risk-adjusted returns, this is not an emotional issue but a question of where there are stronger profit expectations and clearer upward beta. Secondly, the US stock market provides an "asset supply" that Saudi domestic markets cannot replace. It has the world's strongest liquidity, most complete technology growth lineage, the highest concentration of AI leaders, and the richest pool of large-cap listed assets. The Saudi domestic stock market is fundamentally still heavily influenced by oil prices, fiscal deficit expectations, and Middle East geopolitical fluctuations, making it more like a "regional cyclical market" in global allocation; whereas US stocks, particularly large tech stocks, although with higher valuations, provide different investment return growth factors from the oil price cycle and stronger global capital relay capabilities. Saudi domestic funds are not just passive chase-ups but actively engaged in the configuration of the US "technology-capital market-industrial policy" tripartite network. This is almost consistent with the official Saudi direction towards the US: for example, last year, Saudi officials pledged an initial $600 billion investment in the US, and then the Saudi Crown Prince indicated that it could be raised to nearly or even reach $1 trillion, covering strategic areas such as AI data centers, nuclear energy, quantum computing, and international military defense.