Global investment funds have started to move away from an over-reliance on AI technology companies in emerging markets. Concerns over overvalued stocks and the concentration of risks in a few large companies are creating pressure to diversify portfolios.
According to Bloomberg, major funds such as J.P. Morgan Asset Management and Grantham Mayo Van Otterloo are diversifying their investments by shifting into sectors like energy, electronic games, and consumer products. Interest in markets such as India and China is also increasing in this process.
Concentration in emerging markets is at striking levels. Taiwan Semiconductor (TSMC), Samsung Electronics, and SK Hynix alone account for more than 30% of the MSCI Emerging Markets Index. The technology sector covers about 45% of the index. This makes emerging market performance overly dependent on a few tech giants.
This concentration has pushed volatility in emerging market stocks to its highest level in six years. Shares of chip manufacturers lost value amid concerns that global spending on AI infrastructure exceeds real demand. Investment managers say they are reducing risk by exiting semiconductor companies and shifting to areas less connected to AI.
On the other hand, US restrictions on technology exports are keeping interest in Chinese tech companies alive. The domestic technology ecosystem developing under the leadership of firms like Huawei and SMIC offers investment opportunities by spreading risk in the AI field.
AI infrastructure spending to reach $750 billion in 2026
Switzerland-based reinsurance company Swiss Re Corporate Solutions predicts that spending by data center operators on AI technologies will reach $750 billion in 2026. This figure represents a major jump from last year's spending of about $500 billion.
According to Reuters, the company stated that this spending will increase risks linked to rapidly growing data centers and digital infrastructure, boosting demand for insurance services across many sectors. AI infrastructure spending is estimated to reach up to $1.6 trillion over the next five years.
While these massive investments support economic growth, they will also increase the need for risk coverage for physical and digital assets. However, they also have the potential to raise insurance costs by strengthening inflationary pressures.
