Emerging market funds are piling into
tech to ride the artificial intelligence
boom on expectations it will drive
returns for the next decade. It's
already been a winning trade. AI
companies are the six biggest
contributors to the rally in Bloomberg's
EM stocks index this year. For more,
let's bring in Shiny Civabalon, our
senior emerging markets editor, who's
joining us now. So Shini, if the US is
the epicenter of AI, which many
investors we speak to do say it is, why
are they now looking to emerging markets
for this trade?
>> Uh good morning Jennifer, thanks for
having me. Um first of all, emerging
markets have an advantage over US in AI
because US AI is a bet on the US winning
the global AI race, right? Um but
emerging markets are like a hedged
portfolio where if the US wins the
global AI race um there's one set of
companies that can succeed um Taiwan
Semiconductor Manufacturing Corporation,
Skhinix and so on and then if China
makes strides in AI there's a whole set
of um stocks that will win um Alibaba,
Tencent, Jeremy and so on. So um
irrespective of how AI shapes from here
on, emerging markets do have a winning
um um you know a chance at winning the
AI race. So that is the key advantage
that emerging markets have over the US.
However, the valuations are quite um
reasonable at this point. Um you would
say Nvidia trades at about 35 times
forward earnings. um in the emerging
markets in comparison you have TSMC that
trades at like 18 and Alibaba trading at
13 times PE. So valuations are another
compelling reason.
>> But Shiny as your story points out the
rally is really currently fixated on a
number of major companies that we talk
about quite often. How long is this
likely to continue?
Well, um yeah, that's uh anybody's
guess, but AI is a mega trend um that's
spreading around the world and uh it can
go beyond you know um temporary um
fluctuations in the risk uh sentiment
and that is one thing that we have seen
in the last two years that even though
investors perception of emerging markets
um you know ebed and flowed uh we have
seen AI making steady progress because
this is a generation Additional
opportunity.