Emerging-market equities rally on AI and concentration thesis

Emerging-market equities have pushed to all-time highs, driven by concentrated AI narrative bets in technology-heavy indices like South Korea's KOSPI, which jumped 5% amid semiconductor optimism tied to Samsung, SK Hynix, and Korea-based chipmaking partnerships. JPMorgan raised targets on emerging-market indices amid AI strength, even as India-focused names like Nifty, Bank Nifty, and Sensex lagged 1% to 1.2% due to energy and inflationThe rate at which prices rise across an economy. headwinds from the Iran war. The divergence highlights the bifurcation between AI-linked and energy-import-sensitive markets.

South Korea's outperformance reflects its role as a hub for memory-chip production and AI infrastructure supply. SK Hynix and Samsung's dominance in DRAM and NAND flash, coupled with Qualcomm's reliance on Korean foundries, has positioned South Korean indices to capture AI capex upside. However, Standard Chartered's Steve Brice warned that high Kospi valuations represent a correction risk, even as he endorsed long-term AI growth potential. The convergence of semiconductor supply tightness, AI demand, and multiple expansion has created a "concentration" trade where a narrow group of AI-linked names drive returns while breadth deteriorates.

India faces structural headwinds: Modi's emergency appeals to cut gold purchases and fuel consumption signal desperation over FX reserves and inflationThe rate at which prices rise across an economy.. Biocon CEO Shreehas Tambe discussed the company's push into generic GLP-1 drugs, competing on price rather than margin as healthcare innovation shifts toward affordability. Energy import bills are straining refiner margins and central bank balance sheets. BYD, however, reported robust annual sales growth despite tepid market conditions, fueling bets on emerging-market EV adoption outpacing developed-market slowdowns.

The debate hinges on whether AI wealth creation in tech hubs like South Korea can offset macro headwinds in energy importers like India and Turkey. If crude prices fall and the Trump-Xi summit yields de-escalation, emerging-market FX and bonds could rebound sharply. If oil remains elevated and geopolitical tensions persist, the Asia-ex-China rally could face profit-taking as capital rotates toward oil exporters and safety.