AI Boom Fuels Emerging-Market Investment Surge
The artificial intelligence (AI) revolution is reshaping investment landscapes, particularly in emerging markets (EM), where funds are increasingly betting on tech-driven growth to deliver strong returns over the next decade or more.
According to recent insights from asset managers and analysts, this shift is driven by soaring demand for AI technologies, from semiconductors to cloud computing, which are propelling EM stocks ahead of global benchmarks.
Investors like AllSpring Global Investments and GIB Asset Management are reallocating portfolios toward AI-exposed companies in regions such as Asia.
Standout performers include Taiwan Semiconductor Manufacturing Co. (TSMC), Tencent Holdings, Alibaba Group, Samsung Electronics, SK Hynix, and Xiaomi, which have collectively driven 37% of the gains in Bloomberg‘s EM stock index this year.
Remarkably, these AI-linked EM firms have even outpaced the “Magnificent Seven” U.S. tech giants, highlighting the global diversification of AI innovation beyond Silicon Valley.
Experts predict this trend could endure for 10 to 20 years, with profound implications. Alison Shimada of AllSpring describes it as “transformational” for local populations in EM countries, potentially boosting economic development through job creation, infrastructure upgrades, and enhanced productivity in sectors like manufacturing and electric vehicles.
Kunal Desai from GIB emphasizes that Taiwan and South Korea will lead the charge, while Malaysia, China, India, Latin America, and the Middle East stand to gain from AI data centers and applications.
Forward earnings estimates for EM tech stocks have risen 15% since January, far outstripping the 6% growth for broader EM equities, signaling robust profit potential.
This AI fervor addresses a longstanding challenge for EM investments: inconsistent earnings. While overall EM companies have missed profit forecasts by over 12% quarterly since early 2022, AI-heavy IT firms have consistently met expectations, restoring investor confidence.
As adoption accelerates, AI could create a new layer of sustainable growth, especially in North Asia, according to UBS strategist Xingchen Yu.
For businesses, this means opportunities in supplying AI components or integrating the technology, potentially lowering costs and innovating products.
Users worldwide could benefit from more affordable AI-powered devices and services, democratizing access to tools like smart assistants and autonomous systems.
However, risks like trade tensions—evident in recent semiconductor tariffs—affect market volatility, as seen in declines for South Korean chipmakers.
Overall, the AI boom positions EM as a vital player in the tech ecosystem, offering investors diversified exposure and promising long-term economic uplift.
With momentum building, this could redefine global markets, making AI not just a U.S. story but a worldwide engine of progress.
FAQ
What are the top AI stocks in emerging markets?
Leading contributors include TSMC (Taiwan), Tencent and Alibaba (China), Samsung and SK Hynix (South Korea), and Xiaomi (China), which have significantly boosted EM indexes due to their roles in semiconductors, cloud computing, and AI hardware.
How will AI impact emerging economies?
AI is expected to drive transformational growth by enhancing productivity, creating jobs in tech sectors, and fostering innovation in areas like data centers and electric vehicles, potentially leading to disproportionate economic gains in countries like Taiwan, India, and Malaysia over the next decade.
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