Emerging markets ride AI wave as South Korea KOSPI hits record; India lagging

Emerging markets are experiencing a bifurcated AI boom. South Korea's KOSPI hit record highs as SK Hynix and other chip makers rallied on US data center buildout expectations and memory supercycle narrative. The Korean benchmark benefited from JPMorgan's upgraded bull-case target of 10,000, citing improvements in the semiconductor cycle and governance reforms. Investors piled into Korean tech on the assumption that memory demand from AI infrastructure would sustain margin expansion through 2027.

Contrast this with India's market underperformance. Despite India's strength in software services and AI talent, the Nifty 50 and Bank Nifty fell 1 to 1.2% on May 11 amid oil price shocks from the Iran war and capital outflows. Prime Minister Modi explicitly urged citizens to cut fuel use, limit gold purchases, and work from home to preserve foreign-exchange reserves. The message was clear: energy security trumps growth narratives. Indian rupee weakness and the country's heavy reliance on imported oil expose the divergence between AI hype and macro vulnerability.

The narrative reveals a fault line: markets with semiconductor supply exposure (South Korea, Taiwan) benefit from AI capex waves, while energy-importing economies face headwinds. Thailand's largest refiner began diversifying crude sourcing away from the Middle East, signaling structural pressure on Asian energy balances. Goldman Sachs noted the Chinese yuan is 20% undervalued and expected continued strength, potentially helping Beijing offset energy costs while pressuring other Asian currencies.

The risk is that AI euphoria in chip-exporting nations masks underlying fragility in energy-importing peers. If the Iran war escalates or persists beyond summer, EM currencies and equities in oil-importing countries could see sharper repricing.