Vanguard FTSE Developed Markets ETF (VEA) gained around 29% year to date and outperformed both the S&P 500 and Nasdaq 100.
VEA holds non-U.S. AI innovators like ASML and Shopify alongside lower valuations than U.S. indices.
International ETFs offer geographic diversification away from Magnificent Seven concentration risk in U.S. markets.
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The international ETFs have had quite the impressive year, outperforming the likes of the Vanguard S&P 500 ETF (NYSEARCA:VOO) as well as the Invesco QQQ Trust (NASDAQ:QQQ) so far this year while rolling over far fewer bumps in the road. Undoubtedly, time will tell how much longer the international ETFs can outperform the S&P 500 or Nasdaq 100. Either way, the valuations still look quite stellar with the ETFs that go above and beyond the U.S. market.
So, if you’re one of many investors who are ready to diversify geographically to new markets that might have the edge on valuation, perhaps it’s time to give the international ETF roster a second look now that they’re showing signs that they can keep up with America’s best indices. Of course, I’m not against foregoing international exposure if you’re fine with the valuations and the heaviness in the Magnificent Seven indices.
The Nasdaq 100 index, in particular, is a cheap way to become overweight in the Magnificent Seven names, which are bound to soar higher if the AI trade is due for another leg higher. Though the performance of the seven names will vary, I do think that the group remains one of the most powerful forces in AI as many of the top players race to achieve some form of superintelligence over the coming decade.
When it comes to the superintelligence race, there’s a lot on the line. And that makes the Mag Seven worth owning, even if they’re pricier, and doubts grow about their ability to monetize the jarring level of spending they’re doing.
Though I have confidence in the Mag Seven, investors must also be ready to invest beyond America, if not for diversification, to invest in the other AI innovators out there that also stand to win in the global AI race. And, yes, it’s a global race that could have big winners abroad.
Here is one of the top international ETFs that is firing on all cylinders, which also has intriguing, lower-cost AI names in the mix that U.S. investors might find they’re underexposed to going into the new year.
