In today’s shifting economic environment, disciplined investors must adapt their strategies to thrive.
Global foreign direct investment flows have experienced a notable decline, with 2024 seeing an 11% drop to around $1.5 trillion. In the first half of 2025, flows fell another 3%, extending the downward trend. However, these figures mask important divergences: while developed economies endured the largest contraction—driven by an 18% slide in cross-border M&A—developing regions such as Latin America & the Caribbean saw inflows rise by 12%, and developing Asia grew by 7%. Africa, in contrast, suffered a 42% slump.
This uneven backdrop highlights that today’s profit opportunities are increasingly selective and targeted. A broad “buy the world” approach is losing steam as investors seek smarter, more resilient pathways to growth.
The era of broad globalization is giving way to a more fragmented reality shaped by geopolitical tensions, supply-chain de-risking, and high interest rates. The US–China strategic rivalry, Russia–West sanctions, and regional conflicts have prompted firms to de-risk supply chains strategically, reshoring and nearshoring production where possible. High financing costs have challenged capital-intensive infrastructure and industrial projects.
UNCTAD forecasts that these headwinds will persist through 2025, although easing rates and renewed M&A could spur a modest rebound later in the year. For investors, the key takeaway is that country and sector selection matter. A nuanced, bottom-up approach can unlock pockets of resilience and growth.
Amid general caution, digital and AI-related investments have powered a notable bright spot. In the first half of 2025, global greenfield investment climbed by 7%, fueled by projects tied to artificial intelligence. The US alone recorded $237 billion in new greenfield projects, nearly matching 2024’s total, with over half focused on AI, including $103 billion in semiconductor fabs and $27 billion in data centers.
McKinsey estimates that from 2022 to 2024, industries of the future saw inflows exceeding 75% of announced greenfield FDI, a share that continues to rise. As these sectors define tomorrow’s economy, they offer investors both growth potential and strategic resilience.
International investing is not without its hazards. Political risk, policy shifts, currency volatility, and unexpected regulatory changes can erode near-term returns. Infrastructure and SDG-related projects, especially in poorer nations, have seen a steep decline: sustainable development investment in developing countries fell 7% in value, with infrastructure finance 25% below the decade average.
Despite these challenges, private capital plugging gaps in energy, water, health, and transport still holds appeal. Specialized funds, blended-finance structures, and impact investors can find compelling entry points where public funding falls short, though they must navigate elevated policy and execution risks.
Developing a robust international allocation requires discipline and a clear framework. Consider these practical steps:
The United States remains the largest FDI destination, with a total stock of $5.7 trillion at year-end 2024, up 30% since 2019. In 2024, international companies invested over $290 billion, primarily through reinvested earnings. Manufacturing leads with $2.4 trillion in stock, including chemicals, transportation equipment, and computers & electronic products. The information sector holds $272 billion, and professional services also command substantial allocations.
Beyond the US, select developing economies are capturing attention. Latin America & the Caribbean posted a 12% inflow increase, buoyed by agrifood, digital, and renewable-energy projects. Developing Asia grew by 7%, driven by manufacturing hubs evolving into innovation centers. Africa requires caution: inflows plunged 42%, yet specific markets like Kenya and Rwanda offer niche opportunities in fintech and renewable energy.
To track international investments effectively, use a balanced set of metrics encompassing financial returns, risk-adjusted performance, and sustainability impact. A simple framework might compare net inflow growth, project IRRs, and ESG scores across regions and sectors.
This snapshot underscores the value of dynamic portfolio reviews and strategic reallocations as global flows shift.
As international markets evolve, seize the moment by embracing a forward-looking approach. Build portfolios that balance stability with selective growth, harnessing long-duration infrastructure assets tied to AI, while maintaining disciplined risk management. Engage local partners, stay attuned to policy shifts, and remain agile to capture emerging hotspots.
Your “passport” to profits lies in a well-researched, flexible investment blueprint that navigates fragmentation and harnesses the power of future-shaping industries. With careful planning and execution, investors can unlock sustainable returns across a complex global landscape.
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