Vanguard Sees Developed Markets Outside U.S. Outperforming AI Boom Winners

Vanguard's analysis, published in its July Market Perspectives report, represents a notable shift in thinking about where AI gains will accrue. While the first phase of the AI boom has concentrated returns in U.S. technology giants and hyperscalers—the companies building the AI tools themselves—Vanguard argues the next phase is about whether AI investments translate into measurable productivity gains across the broader global economy. This distinction matters because it redirects investor attention from the builders to the beneficiaries: companies in non-tech sectors and countries outside the U.S. that stand to gain when AI capabilities become embedded in their own operations and supply chains.

The firm's 10-year return projections anchor this thesis with concrete numbers: developed markets ex-U.S. (4.5% to 6.5% annually) are expected to outpace U.S. growth stocks (3.6% to 5.6%) by a meaningful margin. The two ETFs highlighted—SPDW and VYMI—offer different entry points. SPDW provides pure-play exposure to 2,436 developed-market stocks across 25 countries, with notably strong holdings in Japan (21.8%), the U.K., Canada, and South Korea, including semiconductor and chip companies like Samsung Electronics and SK Hynix that stand to benefit from AI infrastructure buildout. VYMI, by contrast, emphasizes dividend-paying value stocks and extends to 45 countries, accepting some emerging-market exposure in exchange for higher dividend yields and stronger recent returns (14.1% annualized over five years versus SPDW's 9.8%). The performance gap between the two—VYMI's 34.6% one-year return compared to SPDW's 29.6%—suggests that the dividend-value tilt has recently rewarded investors, though past returns do not guarantee future performance.