The decline in the U.S. net foreign asset position is often attributed solely to trade deficits. However, a major driver was the appreciation of foreign investments in the U.S. equity market, which outperformed global markets and thus increased the value of U.S. liabilities to the world.

The U.S. is shifting from industry supporter to active owner by taking direct equity stakes in firms like Intel and U.S. Steel. This move blurs the lines between free markets and state control, risking a system where political connections, not performance, determine success.

Some countries are reducing holdings of US government bonds, but they are often rotating that capital into US equities. Since both are dollar-denominated assets, this trend represents a shift in risk appetite and asset allocation, not a genuine move away from the US dollar system itself.

The decline of US dominance is not a natural geopolitical shift but a deliberate process. Financial elites are asset-stripping the West while establishing new nodes of control and fee-generation within rising power blocs like China and the GCC, managing the transition for their own benefit.

Beyond financial diversification, Gulf States may be using their significant investments in American venture capital as a bargaining chip. By threatening to review or pull back these commitments, they can apply economic pressure on the US administration to seek diplomatic solutions to conflicts like the Iran war.

Counterintuitively, a typical global reserve portfolio has a lower US dollar share (around 57%) than a return-seeking sovereign wealth fund's equity portfolio (up to 80%). The outperformance of US large-cap stocks makes any diversified equity strategy heavily weighted towards the dollar, independent of reserve policy.

Shifting from passive LPs to active owners, Gulf sovereign wealth funds are now engaging in "GP staking"—buying equity in top asset managers like BlackRock and Fortress. This strategy gives them direct influence over the global investment ecosystem itself, not just participation in individual deals.

During the 2008 financial crisis and the COVID-19 pandemic, BlackRock was contracted by the U.S. government to manage the bailout funds. This gave the firm immense power to decide how capital was allocated, which companies were propped up, and which were allowed to fail, concentrating wealth and power.

Foreign holdings of US equities are at a historic high, double their share of global GDP compared to the peak of the 2000 dot-com bubble. This extreme concentration, largely driven by the AI trade, makes the global financial system uniquely vulnerable to a downturn in the US stock market.