Ira Singh
Khabar Khabaron Ki,08 April’24
In the wake of unprecedented global enthusiasm surrounding Artificial Intelligence (AI), some of the world’s largest money managers are shifting their focus beyond the borders of the United States in search of the next wave of AI winners. Amidst a three-fold surge in Nvidia Corp. and a remarkable 50% uptick in a key US index for semiconductor manufacturers in less than a year, investors are now turning their attention towards emerging markets, eyeing better value propositions and a wider array of investment options.
This strategic shift towards emerging markets reflects a broader trend in the investment landscape, as investors seek to diversify their portfolios and capitalize on the transformative potential of AI beyond traditional hubs like Silicon Valley. With AI permeating various sectors, from healthcare to finance, emerging markets offer a fertile ground for innovation and disruption, presenting investors with compelling opportunities for long-term growth.
One such emerging market contender garnering attention from global investors is India-based Reliance Industries Ltd. (RIL), led by billionaire industrialist Mukesh Ambani. Leveraging its expansive infrastructure and formidable financial backing, RIL has positioned itself as a key player in the global AI race, pioneering developments in digital services and AI-driven solutions.
We see AI as a growth driver in emerging markets,” Jitania Kandhari, deputy chief investment officer at Morgan Stanley Investment Management, reportedly quoted as saying. “While we have previously invested in direct AI beneficiaries like semiconductors, going forward it will be key to look for companies in different industries that are adopting AI to enhance earnings.”
AI stocks are spearheading a $1.9 trillion rebound in emerging markets this year, with Taiwanese and South Korean chip companies such as Taiwan Semiconductor Manufacturing Co. and SK Hynix Inc. accounting for 90% of the gains, according to official data. Despite this surge, most AI stocks in emerging markets still offer significantly better value compared to their U.S. counterparts.
While Nvidia trades at 35 times its projected earnings, Asian AI giants typically boast valuations between 12 and 19 times.Emerging markets also present opportunities for faster growth. Analysts anticipate a 61% increase in earnings for emerging- market technology companies as a whole, dwarfing the projected 20% rise for U.S. peers.
Investors are increasingly turning to exchange-traded funds (ETFs) focused on emerging markets, with more than half of all inflows this year pouring into the iShares MSCI EM Ex-China ETF, which includes companies investing in AI, according to information.
In addition to these developments, established businesses are garnering fresh investor interest after signaling their foray into AI. Saudi Arabia is emerging as a hub for Chinese AI ventures, exemplified by Alibaba Group Holding Ltd.’s cloud partnership with Saudi Telecom Co. Meanwhile, India’s Reliance Industries Ltd., led by billionaire Mukesh Ambani, has developed a chatGPT-style model with capabilities in 22 Indian languages, indicating its involvement in the digital transformation of the nation.
As the global quest for AI innovation intensifies, some of the world’s largest money managers are venturing beyond American shores in search of the next wave of AI winners. These investors are drawn to regions like Asia, where a confluence of factors, including robust technological infrastructure, a burgeoning talent pool, and supportive government policies, create an environment ripe for AI-driven innovation. With emerging markets offering promising opportunities for growth and innovation, companies like Reliance Industries Ltd.stand poised to play a pivotal role in shaping the future of AI on global scale.