To The Moon

Recent government statistics reveal that throughout 2025, Saudi Arabian investors significantly increased their trading activity in the US stock market, reallocating capital away from a domestic market that ranked among the world's worst performers. Data from Saudi Arabia's Capital Market Authority indicates that in the fourth quarter, transactions in US equity assets by Saudi financial institutions surged to approximately 254 billion riyals (around $68 billion), effectively doubling compared to the same period last year. Nearly all stock trading conducted outside the Kingdom during Q4 was concentrated in the US market. Concurrently, local trading activity on the Saudi stock exchange experienced an unexpected contraction. Total stock trading volume within the Kingdom plummeted from over 1.1 trillion riyals at the beginning of 2024 to about 574 billion riyals by the end of 2025. As illustrated, Saudi investors are flocking en masse to US equities. This divergence reflects starkly contrasting market trajectories. Influenced by declining international oil prices due to "oversupply" expectations, fiscal pressures, and regional tensions, Saudi Arabia's Tadawul All Share Index fell sharply by 9% in the fourth quarter, expanding its full-year loss to 13%. In contrast, US markets continued their ascent: the S&P 500 index gained over 16% for the year, primarily driven by the 'Magnificent Seven' tech giants and robust investor enthusiasm for artificial intelligence-themed investments. Although the Saudi sovereign wealth fund has been reducing its holdings of US-listed stocks, it continues to deploy substantial physical capital into the country. Significant transactions by the Public Investment Fund (PIF) include last year's $55 billion acquisition of gaming giant Electronic Arts Inc. and a recent $3 billion investment through a subsidiary into xAI, the company founded and led by Tesla Motors CEO Elon Musk. Saudi Arabia's IPO market, once a global highlight, has also cooled considerably, evidenced by a series of weak new listings and a slow start to initial public offerings this year. Meanwhile, US companies are preparing for a new wave of large-scale listings, including SpaceX, whose IPO could potentially surpass Saudi Aramco to become the world's largest, alongside possible offerings from two of the globe's leading AI application pioneers—Anthropic PBC and OpenAI Inc. Even as local investors withdraw heavily from the domestic stock market, Saudi regulators are intensifying efforts to attract foreign capital. Authorities recently opened the market to a broader range of international investors and are considering adjustments to trading rules to permit foreign investors to hold majority stakes in Saudi-listed companies. Some analysts suggest this move could unlock tens of billions of dollars in passive fund inflows. Saudi regulators are also encouraging companies to allocate a larger proportion of shares to retail investors in IPOs to boost local participation. Some investment banks have opposed this policy, arguing it carries significant risks of forcing shares onto a segment with still-uneven demand while limiting allocations to foreign institutional investors. The reasons behind the Saudi capital's preference for migrating west to the US market are clear. The primary reason is straightforward: an excessively large gap in relative returns. As the statistics show, trading volume in US stocks by Saudi institutions doubled year-on-year, with overseas transactions almost exclusively focused on US equities, while domestic trading volume shrank significantly. This shift is underpinned by a sharp contrast in market performance and sector structure: the Saudi market declined approximately 13% over the past year, hampered by oil price volatility, fiscal pressures, and regional geopolitical risks; whereas the US market was propelled by technology and AI themes, with the S&P 500 rising over 16% for the year. For capital seeking risk-adjusted returns, this is not a matter of sentiment but rather a question of which market offers stronger profit expectations and clearer upside potential. Secondly, the US market provides an "asset supply" that the local Saudi market cannot replicate. This includes the world's most powerful liquidity, the most comprehensive spectrum of technology growth companies, the highest concentration of AI leaders, and the richest pool of large-cap listed assets. The Saudi stock market remains highly dependent on oil prices, fiscal deficit expectations, and fluctuations in Middle Eastern geopolitics, making it resemble more of a "regional cyclical market" in a global portfolio context. In contrast, US stocks, particularly large-cap tech stocks, although carrying higher valuations, offer different drivers for investment returns—distinct from the oil price cycle—and possess a greater capacity for sustained investment from global capital. The Saudi capital pool is not merely chasing performance passively; it is actively allocating towards the US's integrated network of "technology, capital markets, and industrial policy." This aligns closely with the official Saudi investment strategy towards the US: for instance, last year Saudi officials initially committed $600 billion in US investments, later increased by the Crown Prince to nearly or up to $1 trillion, covering strategic areas such as AI data centers, nuclear energy, quantum computing, and international defense.