Chart of the Week: The Other Side of the AI Trade

For most of us, artificial intelligence feels like an American success story.

Nvidia has become one of the most valuable companies in the world. Microsoft, Amazon and Meta have poured tens of billions into AI infrastructure, and Wall Street has rewarded all them accordingly.

Aside from China’s DeepSeek, most of the AI companies making headlines today are based in the United States.

But this week’s chart shows how some of the biggest beneficiaries of the AI boom could be located on the other side of the globe.

Look Here For Emerging Growth

According to data from Charles Schwab, technology companies are expected to account for nearly 60% of all earnings growth across emerging markets in 2026.

That’s more than 5X the contribution expected from the next-largest sector, materials, and more than enough to outweigh every other sector combined.

That might seem like a surprising number when you think about what drives emerging markets. We usually expect to see the most growth from banks, energy producers, commodity exporters and manufacturers.

Technology isn’t usually the first sector that comes to mind.

But artificial intelligence is changing that.

The AI boom isn’t just creating demand for software. It’s creating demand for the physical infrastructure that makes AI possible.

Every new AI model requires enormous amounts of computing power. And those systems depend on advanced processors, high-bandwidth memory chips and increasingly sophisticated manufacturing techniques.

Many of the companies producing those technologies are located outside the United States.

In fact, Schwab’s analysis shows that three companies alone account for a significant share of the technology sector’s contribution to emerging-market earnings growth: Taiwan Semiconductor Manufacturing Company (NYSE: TSM), SK hynix and Samsung Electronics.

Most investors know Taiwan Semiconductor, or TSMC, as the company that manufactures Nvidia’s advanced AI chips.

Without TSMC, much of today’s AI boom simply wouldn’t exist.

Meanwhile, South Korea’s SK hynix has become one of the world’s most important suppliers of high-bandwidth memory, or HBM, the specialized memory chips used in AI servers. Samsung also remains one of the largest semiconductor and memory manufacturers on the planet.

Together, these companies sit near the center of the AI supply chain.

And that’s becoming increasingly important as technology companies continue spending hundreds of billions of dollars building out AI infrastructure.

We’ve already discussed many of the bottlenecks facing this buildout. Data centers need enormous amounts of electricity, and utilities are struggling to keep up with demand.

In fact, new facilities often face lengthy permitting delays before construction can even begin.

But data centers simply can’t function without the hardware that powers them.

And as long as companies continue investing in AI infrastructure, demand for advanced chips and memory systems is likely to remain strong.

Here’s My Take

Investors don’t appear to be fully pricing AI growth into foreign markets.

While U.S. stocks currently trade at roughly 21X forward earnings, emerging markets trade at just over 11X earnings. That’s below their own long-term average and roughly half the valuation of the U.S. market.

In other words, some of the foreign companies that benefit directly from the massive amount of AI infrastructure spending still trade at valuations that look far more modest than many of their American counterparts.

That doesn’t automatically make them bargains.

But it does suggest that the benefits of the AI boom are beginning to spread far beyond Silicon Valley.

And that makes perfect sense to me.

After all, technological revolutions typically start out with a few obvious winners. But they reach another level when entire industries, supply chains and stock markets start benefiting too.

Regards,

Ian KingChief Strategist, Banyan Hill Publishing

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