Emerging market equities look set for a broader rally as AI opportunity expands beyond US tech, according to Allspring Global Investments’ Derrick Irwin.
Derrick Irwin, Senior Portfolio Manager and Co-Head of Intrinsic Emerging Markets Equity at Allspring Global Investments said: “AI remains a multiyear global growth theme. Despite the promise of AI-driven revenue growth, we expect the industry to remain in the investment phase for at least the next three years.”
“In emerging markets, AI-related performance, particularly in the infrastructure layer benefiting Korean and Taiwanese companies, has been influenced by US tech partnerships that emphasise collaboration among technology firms, capital markets, and government.”
“We believe Chinese technology companies offer a compelling counterbalance for investors seeking long-term AI exposure, especially as concerns grow over potential overbuild in US AI infrastructure.
“Chinese AI has absorbed much less capital expenditure and could prove to be higher-return investments than AI investments in the US.
“We maintain a constructive view on emerging market (EM) equities heading into the second half of 2026. Unlike a decade ago, when vulnerabilities such as large current account deficits defined the “Fragile Five,” many of these economies have strengthened external balances and fiscal positions. This structural improvement reduces systemic risk and provides a foundation for a more broad-based equity rally.
“Importantly, we expect EM performance to be driven by multiple factors beyond AI, including domestic consumption growth, policy support, and sector diversification.
“We see earnings growth accelerating. Consensus earnings are expected to rise from approximately 15% in 2025 to more than 20% in 2026. Flows have begun to accelerate into EM equities. EM equities saw $31bn in inflows last year and $78bn year to date. Although flows have slowed following the Iran crisis, we see room for more than $500bn in additional flows into the asset class in the medium term.”
