AI Boom Seen Driving Next Decade of Emerging Markets Performance

Emerging market funds are actively reallocating capital into AI-related companies, anticipating that the ongoing AI boom will drive significant returns for the next decade. This strategic pivot, exemplified by asset managers like AllSpring Global and GIB Asset Management, is already yielding results, with AI companies being the six largest contributors to the Bloomberg EM stocks index rally this year, driven by the success of firms such as DeepSeek and Asian semiconductor giants.

Analysis

A significant strategic pivot is underway within emerging market (EM) asset management, with funds increasingly concentrating capital in artificial intelligence-related stocks to capture a perceived decade-long growth cycle. This trend, exemplified by managers such as AllSpring Global Investments and GIB Asset Management, has already demonstrated strong performance attribution. Notably, AI companies have accounted for the six largest positive contributors to the Bloomberg EM stocks index rally this year, validating the strategy in the near term. The bullish conviction is further supported by the operational success of specific entities, including Chinese AI developer DeepSeek and the broader ecosystem of powerhouse Asian semiconductor firms, indicating that this is a key performance driver for the asset class.

Key Decisions for Investors

• Investors with emerging market exposure should review their portfolios to assess their allocation to the AI and semiconductor sectors, as this theme is currently the primary driver of EM index returns.
• Given the strong positive sentiment and demonstrated performance, consider initiating or increasing positions in EM-focused technology funds or individual companies central to the AI supply chain.
• Monitor the concentration risk associated with this trend, as the rally is currently driven by a small cohort of stocks, and watch for signs of broadening participation or capital flow saturation.