Emerging Markets as a Viable AI Investment Play: 2025 Analysis

On December 2, 2025, MarketWatch published an article featuring a top-performing emerging markets (EM) fund manager who argued that EM can be an attractive AI investment play, alongside noting EM’s strong year-to-date (YTD) performance driven by dollar weakness and improved economic policies [1]. Data from the Ginlix Analytical Database shows the MSCI Emerging Markets Index ETF (EEM) has returned 29.64% YTD, while the US Dollar Index ETF (UUP) has declined 4.44%, supporting the fund manager’s observation of favorable EM market conditions [0].

Supporting the AI-EM linkage, a November 2025 CNBC report cited Goldman Sachs’ 10-year outlook, which identifies EM regions—specifically Taiwan, Korea, and China—as key beneficiaries of AI capital expenditure (capex) and adoption. The report projects that Taiwan’s earnings per share (EPS) could grow at a 10% CAGR over the decade, driven by AI capex [4]. Taiwan’s critical role in the global AI supply chain is further emphasized by Digitimes, which reported Pegatron’s chairman urging Taiwan to expand AI adoption beyond manufacturing, highlighting the region’s existing infrastructure strengths [3]. In China, ts2.tech data indicates Alibaba (BABA) has achieved seven straight quarters of triple-digit revenue growth from its AI products, demonstrating strong domestic AI monetization potential [5]. A separate CNBC interview with AIA’s Mark Konyn noted opportunities in Asia’s AI space, though he emphasized that innovation and capital flow remain concentrated in the US [2].

1. EM AI exposure is supply chain-centric
   : Unlike developed markets (US) that dominate front-end AI innovation, EM’s AI play revolves around supply chain infrastructure (semiconductors, manufacturing) and domestic adoption, creating a complementary investment opportunity [3][4][5].
2. Dollar weakness amplifies AI theme attractiveness
   : The confluence of a weakening dollar (which benefits EM assets) and the high-growth AI theme may attract incremental capital to AI-related EM stocks and ETFs, potentially extending EM’s YTD rally [0][1].
3. China’s AI domestic adoption presents unique opportunities
   : Alibaba’s sustained AI revenue growth indicates that China’s domestic AI market is maturing, offering EM investors access to a large and rapidly expanding AI ecosystem outside the US [5].

• AI capex beneficiaries
  : Taiwanese and Korean semiconductor firms (e.g., TSMC, Samsung Electronics) are well-positioned to capture growth from global AI infrastructure spending [4].
• Domestic AI growth in China
  : Companies like Alibaba with successful AI product monetization could drive further upside [5].
• ETF exposure
  : EM ETFs such as EEM, EWY (South Korea), and EWT (Taiwan) provide diversified access to the AI-EM theme [0].

• Currency risk
  : A reversal of dollar weakness could pressure EM valuations, as EM assets are sensitive to USD movements [0].
• Regulatory risk
  : EM countries like China may impose new AI regulations (e.g., data privacy, algorithmic transparency) that impact AI-related companies [1].
• Concentration and geopolitical risk
  : A significant portion of EM AI exposure is concentrated in Taiwan’s semiconductor sector, making the theme vulnerable to supply chain disruptions or geopolitical tensions [3].
• Volatility
  : EM markets historically exhibit higher volatility than developed markets, which could amplify short-term price swings for AI-related EM stocks [1].

• Market performance
  : EEM (EM ETF) YTD return: +29.64%; UUP (USD Index ETF) YTD change: -4.44% [0].
• AI growth metrics
  : Alibaba’s AI product revenue has grown triple-digit for seven consecutive quarters [5]; Taiwan’s projected 10-year EPS CAGR: 10% (AI-driven) [4].
• Affected instruments
  : Stocks (BABA, TSM, SSNLF), ETFs (EEM, EWY, EWT) [0].
• Information gaps
  : The MarketWatch article did not name the fund manager or specify the EM countries/companies he recommends as AI plays, which limits targeted investment analysis [1].