AI Capex Boom Lifts Emerging Markets; Korea Outpaces India

Emerging-market equities have closed at record highs this past week, driven predominantly by the AI capex story and semiconductor cycle acceleration. South Korea's KOSPI has surged 5% in recent sessions, with JPMorgan raising its bull-case target to 10,000 on the back of memory-chip supply tightness and corporate governance reform. However, the breadth of the EM rally is paper-thin; India's Nifty 50, Bank Nifty, and Sensex have declined 1% to 1.2% in the same period, reflecting oil and geopolitical headwinds that are weighing on the subcontinent's import bill and foreign-exchange reserves.

The dichotomy reveals how AI capex is concentrating in semiconductor-production hubs while commodity-import-dependent economies are caught in a margin squeeze. South Korea benefits from its dominant position in memory chips (DRAM, NAND) and foundry services; Taiwan's foundries and the KOSPI's memory stocks are attracting fresh capital from global tech investors betting on the AI data-center spending cycle. India, by contrast, is an energy importer with no major semiconductor production, making it vulnerable to the oil shock. Modi's appeals for fuel conservation and his unprecedented call for Indians to stop buying gold underscore the FX stress.

Asia-linked ETFs like EWY (Korea) and EWT (Taiwan) are now outpacing traditional US equity exposure as traders rotate into AI hardware plays with direct exposure to capex cycles. Emerging-market currencies, however, remain under pressure from the oil shock; the Korean won, Thai baht, and Philippine peso are sliding as energy costs mount. Pimco and Franklin Templeton have warned that the Iran war could force the Federal Reserve to raise rates rather than cut them, a headwind for emerging-market carryIncome earned from holding a position over time. trades and EM fixed income.

The narrative holds that as long as AI data-center spending remains robust and semiconductors stay in focus, Korea and Taiwan will outperform. However, any sign of capex moderation, China dumping cheaper RAM, or a broader tech selloff would quickly reverse the EM gains. The breadth compression in emerging markets mirrors the same concentration risk seen in US equities, leaving the trade vulnerable to a sharp rotation.