Why has BlackRock shifted emerging market equities from neutral in June to overweight in mid September, according to Egon Vavrek and BlackRock’s research—specifically how could AI hardware demand from hyperscalers benefit semiconductor, memory chip, infrastructure, commodity, and

BlackRock’s reversal reflects a view that emerging markets are no longer only a cyclical, locally driven trade: they are suppliers of essential inputs to the global AI buildout. Stronger earnings, still-cheaper valuations than U.S. equities, and reduced Korean leverage made that opportunity more attractive after the June pause. 14

• How the AI linkage works: Hyperscalers’ spending on AI hardware raises demand for advanced semiconductors and memory, putting South Korea and Taiwan at the center of the supply chain. Latin America can benefit through the commodities, energy and physical infrastructure needed to build and run data centers. Vavrek characterizes these as AI “picks-and-shovels” businesses—providers of the hardware and constrained inputs rather than a wager on which AI application wins. 125

• Why this may change EM risk: Companies selling chips, memory, power, equipment or commodities into a global, often dollar-linked AI capex cycle can have revenues driven more by large international customers than by domestic demand. That can partially insulate earnings from local currency swings and country-specific regulation. It does not eliminate those risks—particularly geopolitics, export controls, local policy, and commodity-price exposure—but it diversifies the source of corporate cash flows.

• Why BlackRock moved to neutral in June: It worried that Korea and Taiwan created a concentrated exposure to the same AI/semiconductor theme, and that leverage—especially in South Korean equities—was building. A sharp July selloff was followed by deleveraging during July–August, reducing the vulnerability created by crowded, leveraged positioning; BlackRock therefore judged the risk/reward had improved enough to restore overweight. 61014

• Fund performance: The available mid-September reading for BlackRock Emerging Markets Institutional (MADCX) shows a 26.82% year-to-date return. Fund returns differ by vehicle, share class, currency and valuation date, so this should not be treated as the return for every BlackRock EM fund. 13

• Why scarce-resource investment can still be growth-positive: BlackRock’s argument is that heavy AI capex initially competes for capital, electricity, chips, data-center capacity and other inputs, raising costs and interest rates. But when that spending expands productive capacity and demand, the associated revenue and earnings growth—particularly for firms controlling bottlenecks—can outweigh the higher financing costs. Its preferred exposure is therefore to scarce enablers such as chips, power and data centers, rather than indiscriminate AI exposure. 45