US stocks have been the winning trade in the past decade over UK shares. According to Vanguard research, US equities’ annualised return was 15.5%. By contrast, British stocks delivered a measly 6.1%.
Understandably, UK investors followed the money. Their historically significant home bias has faded. Brits now have twice the exposure to US stocks as London Stock Exchange shares.
But currency risk complicates matters. This year, the British pound has surged 8% against the US dollar to above $1.35. It’s only traded higher for brief periods since the 2016 Brexit vote.
Does this mean now’s a great time to buy US stocks? Let’s unpack it.
Currency impact
Sometimes overlooked, currency fluctuations substantially affect a portfolio’s value. The S&P 500 has gained 1% in 2025 so far. However, the Vanguard S&P 500 UCITS ETF has declined over 7% since January.
That’s because the popular exchange-traded fund is unhedged, so there’s no mitigation for exchange rate changes via currency swaps or forward contracts, and its market value is calculated in pounds. Despite US stocks delivering a positive return in dollar terms this year, British investors in the dollar-denominated S&P 500 have suffered due to the greenback’s weakness against sterling.
Investing while sterling soars
This might prompt some to shun stateside companies. That may not be the correct response. A strong pound means UK investors get more bang for their buck when buying US assets.
Furthermore, sterling strength often negatively impacts FTSE 100 shares. Over 80% of Footsie companies’ revenues come from overseas. Converted into pounds, they’re worth less than when the currency was weaker. Even more domestically-focused FTSE 250 firms generate most of their sales beyond British shores.
President Trump’s tariff blitz and attacks on the Federal Reserve have made the US a source of global uncertainty. This could continue to weigh on the dollar. Yet currencies are volatile. The pound’s relative strength isn’t guaranteed to last.
It’s a difficult investing environment to navigate. Exchange rates aren’t the only consideration. Earnings, profitability, and valuations also matter.
A US stock to think about
Still, there’s a good long-term opportunity here. It’s not a sure-fire way to get rich, but this could be a great moment to consider buying US stocks on the cheap with high-value pounds. One worth a look is artificial intelligence (AI) chipmaker Nvidia (NASDAQ:NVDA).
A forward price-to-earnings (P/E) ratio north of 31.3 raises Nvidia stock’s risk profile, but there’s no true equivalent to the AI computing king among UK shares. Demand for the company’s GPUs, which have valuable machine learning and data analysis applications, is immense. It shows little sign of abating.
Sidestepping US trade tensions with China, the semiconductor group’s first-quarter revenue skyrocketed 69% to $44.1bn. Free cash flow advanced 75% to $26.1bn. These are extraordinary numbers for any company, let alone one with a $3.44trn market cap.
Intensifying competition poses a challenge for Nvidia. Microsoft and Amazon are investing billions in their own AI models. That threat shouldn’t be ignored, but a Herculean effort will be required to dethrone Nvidia’s market-leading position. As the AI gold rush continues, Nvidia shares appear primed to benefit.
A dollar recovery could be on the horizon, which would benefit new investors who act now. Plus, I think Nvidia has sufficient share price growth potential to offset any further possible dollar weakness.
