Global Capital Performs "Great Migration"! AI Infrastructure Boom and Weak Dollar Ignite Emerging Market Bullishness

Bloomberg News has learned that emerging market stocks are gradually becoming one of the hottest investment and trading themes in the global stock markets this year. Top fund managers worldwide are increasingly favoring broad emerging market assets—including stocks, bonds, and sovereign currencies. Citigroup’s equity analysts stated that fund managers from the world’s largest asset management firms, managing over $20 trillion in assets, have significantly increased their long positions in Asian, Latin American, European, Middle Eastern, and African emerging market stocks and ETFs, local currency bonds, and certain credit assets, betting on strong global economic growth, the benefits of the global AI infrastructure boom, highly concentrated computing power chains, and a weakening dollar that will favor emerging market assets.

This shift also reflects the more uncertain investment environment for developed market stocks and bonds, as policy uncertainties and concerns over fiscal expansion have suppressed bullish sentiment. Long-term sovereign bond yields in the US, Japan, and Germany continue to rise. The MSCI Emerging Markets Index remains at record highs and has outperformed US and developed market indices significantly this year, with trading volumes of related ETFs (emerging market equity ETFs) also surging.

After the U.S. Supreme Court overturned the global reciprocal tariffs led by President Donald Trump and ruled them illegal, emerging market assets experienced a strong rally. The iShares MSCI Emerging Markets ETF (EEM.US), managed by the world’s largest asset manager BlackRock with total assets of $29 billion, hit new all-time highs, rising 16% this year. Driven by the strong rally of core holdings like TSMC, the world’s largest chip manufacturer, and South Korea’s two major memory chip giants—Samsung Electronics and SK Hynix—EEM’s price has repeatedly hit record highs, outperforming the S&P 500 index by a wide margin.

Under the trends of “American exceptionalism,” “selling off US assets,” and the booming global AI wave, South Korea’s stock market, which experienced a 75% surge in its benchmark index in 2025, remains one of the “craziest markets” in 2026—its index has already gained 50% this year. This includes core AI supply chain companies like TSMC, Foxconn, SK Hynix, Samsung, Alibaba, and Tencent, which are leading the global AI computing industry. As a result, emerging market indices that include these giants are leading global stock markets, with record-breaking capital inflows into emerging market funds reflecting “global capital reallocation.” Additionally, core ETFs related to Asian sovereign currencies and bonds have also seen strong capital inflows this year.

Michael Hartnett, dubbed “Wall Street’s most accurate strategist,” a US bank equity strategist, has repeatedly emphasized that as the “American exceptionalism” narrative collapses and the dollar weakens, with global growth shifting focus from the US to broader markets, emerging markets are expected to continue outperforming the US and enter a new bull cycle.

Citigroup: Top Global Fund Managers Increasing Preference for Emerging Market Assets

Citigroup’s equity analysts said that fund managers have significantly increased their long positions in Asian, Latin American, and European, Middle Eastern, and African emerging market stocks. They favor emerging market bonds as their preferred long-duration assets, contrasting with their short positions on US Treasuries and core European sovereign bonds. Citigroup noted that in the credit markets, emerging market corporate debt is the most overweighted, while US investment-grade bonds remain a popular underweight or reduction target.

Despite recent global market shocks caused by fears that AI might disrupt key traditional growth sectors, emerging market assets continue to perform well. The MSCI Emerging Markets Index rose by 1% on Thursday, reaching new all-time highs, boosted by strong earnings reports from Nvidia, a core AI chip company, and the surge in stock prices of Asian AI infrastructure players, along with a weaker dollar.

The current stock trading landscape favors semiconductor and AI infrastructure stocks over software stocks, with most of the former located in emerging Asian markets. Citrini Research recently released its “2028 AI Doomsday Prediction,” a comprehensive scenario envisioning a dystopian AI future where, despite exponential growth in AI productivity by 2028, the complete disruption of white-collar jobs triggers a “global economic plague,” causing panic in financial markets.

This “AI prosperity crisis memo from the future” reinforces a bet that Asia—home to core chip manufacturers like TSMC, Foxconn, SK Hynix, Samsung, and many AI infrastructure companies—will be the biggest winner of the “AI upheaval” trend. In contrast, US tech sectors with higher software and asset-light exposure are experiencing turbulence.

The concentration of leading chip manufacturers, high-performance AI server foundries, and key hardware suppliers for AI data centers—such as power and liquid cooling equipment—along with recent listings of AI-related tech stocks like Zhipu and MiniMax in Hong Kong, are increasingly attracting global investors to Asian tech stocks.

The strongest current theme in AI investment is undoubtedly the “supply-side constraints + high technical barriers” in AI infrastructure manufacturing and foundry services—covering advanced process nodes, packaging, HBM/high-end server storage, critical power, liquid cooling, and thermal management equipment. These segments shift AI’s unit economics from “software seats” to “compute and energy per token,” and are primarily concentrated in Asia.

As shown in the chart, Asian stock markets have had the best start in history relative to US markets, with data up to February 23 showing year-to-date returns since 1998 when MSCI Asia Pacific Index was launched.

Regarding broad emerging market asset returns, a Bloomberg-compiled indicator measuring local currency government bonds has returned 2.2% so far this year, after an 8.5% return last year—the best since 2017. Another similar index tracking sovereign dollar bonds (recently favored emerging market sovereign USD debt) also performed strongly in 2026, rising 1.7%, after a 13% increase last year.

Citigroup states that gold has long been favored by fund managers as a stable long-term income asset. Data shows that managers have increased their gold holdings amid recent market gains, driven by strong central bank gold purchases and expectations of a weaker dollar. The firm added, “There is no disagreement on the view that going long gold and short the dollar is a favored strategy.”

Emerging Markets’ Rally Is Far From Over

Michael Hartnett, a renowned strategist who coined the “Magnificent Seven” concept and successfully predicted the US tech bull market and emerging market trends, has repeatedly emphasized this year that the next global stock market bull cycle will be led by emerging markets and small-cap US stocks.

He stresses that global asset allocation will shift away from heavy reliance on US tech giants toward emerging market stocks, commodities, and gold. Hartnett points out that the dollar’s continued depreciation, the high concentration of US tech stocks, and rising valuation bubbles in AI-related tech stocks make emerging markets and international assets more attractive in terms of valuation and growth prospects—especially in a scenario of dollar cycle reversal.

The current strength of emerging markets is not just a “high beta rebound,” but rather a result of a broader shift in global asset pricing from “US exceptionalism” toward “weak dollar + global growth rebalancing.” When the dollar weakens and global growth remains resilient, emerging markets benefit from concentrated leadership in semiconductor and AI infrastructure supply chains, improved risk appetite, local currency bond returns, and narrowing credit spreads.

Recent market performance confirms this: while MSCI Emerging Markets Index hits new highs, US markets remain volatile. Under the combination of a weakening dollar, rising fiscal pressures in developed markets, and resilient global growth, emerging market equities are among the most favorable relative performance windows in recent years.

Structurally, this emerging market bull run is not a typical “resource-driven” rally but a resonance of three forces: Asian tech, Latin American resources, and local currency bond yield recovery. A key driver of recent record highs in MSCI EM is the surge in Asian tech stocks and dollar weakness; LSEG’s January 2026 Global Wealth Report also shows that in 2025, Asia-Pacific-led emerging markets outperformed the US and other developed markets in key sectors like technology, materials, and consumer discretionary. The current rally is driven not just by resource prices like oil and copper but also by core participants in the semiconductor and AI supply chains, raw material supercycles, and local currency asset recovery. This explains why emerging markets are more likely than the US to generate a “broader-based” bull market expectation: they can benefit from global manufacturing and commodity rebounds and, with their massive AI infrastructure sector, become the biggest winners of AI-driven disruptive change.