Emerging stocks hit records on AI chip strength

Emerging-market equities closed at record highs in Monday trading, with the rally driven by AI-related semiconductor strength offsetting broader geopolitical concerns. South Korea's KOSPI gained 5% as investors bet on memory chip and semiconductor equipment demand extending into 2027. SK Hynix and other Korean chip makers saw overnight gains of 9%, buoyed by JPMorgan's second upward revision of Kospi targets in less than a month, now sitting at 10,000. India's NIFTY 50, by contrast, lagged with declines of 1% to 1.2%, weighed down by oil and Iran war concerns that hit the energy-import-dependent economy harder.

The divergence within emerging markets reflects a fundamental split: tech-centric Asia is benefiting from the AI infrastructure supercycle narrative, while energy importers like India face margin pressure and currency depreciation from elevated crude prices. Analysts warn of elevated Kospi valuations as a potential risk factor for correction, yet long-term AI tailwinds remain priced in. JPMorgan highlighted corporate governance reform in Korea as an additional catalyst, reinforcing the structural bull case for the region.

China's currency has strengthened to a three-year high ahead of Trump's state visit, signaling confidence in negotiations and potentially offsetting some energy shock fears for Beijing-focused investors. Goldman Sachs revised its yuan forecasts upward, arguing the currency is more than 20% undervalued. This dynamic creates a two-way bet: if the Trump-Xi summit produces trade concessions, EM Asian growth and currency plays could extend gains; if geopolitical tensions escalate, Korean and Taiwanese chip plays face tariff or supply-chain risk.

However, the rally in EM equities masks underlying fragility. Commodity-dependent economies are suffering from energy inflationThe rate at which prices rise across an economy. and currency weakness, while tech-heavy markets are pricing in extended supercycle assumptions that could reverse on a macro disappointment or chip oversupply signal.