Emerging Markets Insights: AI and beyond

Three things we are thinking about today

1. Trade truce: Trade talks between US President Donald Trump and Chinese President Xi Jinping resulted in a one-year trade truce. US access to Chinese rare earths and Chinese access to moderately advanced semiconductor chips have been restored. Details on the implementation of the deal remain vague, but investors anticipate that trade normalization is in the interests of both countries. Importantly, Chinese restrictions on access to rare earths did not apply to only the United States, rather it was a global licensing system. With the trade truce in place, companies across the globe dependent on these materials can once again gain access.
2. ͏South Korean semiconductor demand surges: The US corporate results season for the big four Hyperscalers¹ highlighted a further surge in their spending on data centers to support booming demand for artificial intelligence (AI) models. Together these four companies have spent US$360 billion over the past 12 months and intend to spend even more in the coming 12 months. This has had a positive impact on the supply chain in Asia which manufactures the semiconductors powering these data centers. One of the chips requires high bandwidth memory, which is dominated by suppliers in South Korea and sold out through the end of 2026.
3. ͏͏Elections in Latin America: Following Mexico’s election last year, numerous countries in South America will hold elections in the fourth quarter of 2025 and in 2026. Chile’s election is on November 16, 2025, with Peru, Colombia and Brazil going to the polls next year. We are optimistic about potential leadership changes in Latin America and expect more pro-market policies. The leadership change in Mexico last year resulted in a new pragmatic president, who successfully dealt with the new US trade demands without a direct confrontation. 

Outlook

Our Asian equity portfolio manager recently visited Taiwan. This tech-heavy equity market has rallied 39.1% year to date,² driven by AI’s growth prospects.  No trip to Taiwan would be complete without extolling the opportunities of AI, and our portfolio manager agrees with this optimism. However, beyond the participating beneficiaries of AI, he wonders if non-AI companies have been overlooked.

On AI

There was almost uniform bullishness on AI in Taiwan. This optimistic outlook spanned demand into 2027 and beyond. No investor or company we met mentioned the risk of a mid-cycle correction. However, the discussion has now extended past semiconductor firms, centering around power and thermal management. This refers to components that control and dissipate heat of computer systems and devices. The roadmap for thermal management is now visible. One Taiwan-based global leader in power and thermal management solutions has mentioned that it reached its capacity utilization. A leading South Korean chip manufacturer also recently announced that its high bandwidth memory supply is sold out through 2026.

On non-AI

Companies in the consumer electronics/peripherals space have not been participating in this year’s rally in Taiwan. The portfolio manager concedes that the recovery for non-AI tech has not been that strong, but he believes that it is a matter of time until a bullish view emerges for this segment. With more powerful servers, desktop and laptop computers will need to be replaced by others with the ability to handle the additional power. This will in turn lead to the need to update peripherals, which the portfolio manager notes that he has not seen happening, yet. From a valuation perspective, these companies are less demanding.

The above are some examples of what the investment team looks out for—we try to identify opportunities before peers by leveraging our extensive network of analysts. We believe our industry-leading footprint enables us to identify investment opportunities beyond the mainstream, often before they are recognized by the broader market.

Market review: October 2025

EM equities rose in October 2025. Global equities advanced further in October, buoyed by a second US Federal Reserve (Fed) rate cut this year and easing US-China trade tensions late in the month.

The emerging Asia region rose, with most countries showing gains. Indian equities continued to recover as the central bank kept its key repo rate unchanged and revised its economic growth forecasts upwards on the back of falling inflation. Strong quarterly business updates from index heavyweights boosted bank stocks.

Chinese equities pulled back during the month. A resurgence of US-China tensions featured at the start of the month but calmed down upon a meeting of both countries’ leaders. This culminated in a one-year trade truce.

Equities in the emerging Europe, Middle East and Africa region rose, taking heed from global markets. Equities in the emerging Latin America (LatAm) region advanced; earnings season was broadly constructive, with financials and materials leading.

Download the full paper for detailed regional outlook.

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1. Alphabet, Meta, Amazon and Microsoft
2. As of October 31, 2025.

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This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell, or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. The views expressed are those of the investment manager, and the comments, opinions, and analyses are rendered as at publication date and may change without notice. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region, or market.

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International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. These risks are magnified in emerging markets. Investments in companies in a specific country or region may experience greater volatility than those that are more broadly diversified geographically.

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