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Why BlackRock Returned to Overweight Emerging-Market Equities on AI
BlackRock moved emerging market equities back to overweight in mid September because it sees Korea, Taiwan and Latin America as suppliers of scarce AI inputs—chips, memory, infrastructure and commodities—while Korean... The thesis is selective rather than a blanket bet on emerging markets: BlackRock favors “picks an...
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Key takeaways
- BlackRock moved emerging market equities back to overweight in mid September because it sees Korea, Taiwan and Latin America as suppliers of scarce AI inputs—chips, memory, infrastructure and commodities—while Korean...
- The thesis is selective rather than a blanket bet on emerging markets: BlackRock favors “picks and shovels” businesses that can benefit from hyperscaler AI spending, even if higher demand for capital and power pushes...
- A mid September market data snapshot showed a 26.82% year to date return for BlackRock Emerging Markets Institutional (MADCX), but performance varies by fund, share class, currency and valuation date.[51]
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openai.comCreate a landscape editorial hero image for this Studio Global article: Why has BlackRock shifted emerging-market equities from neutral in June to overweight in mid-September, according to Egon Vavrek and BlackRo. Article summary: 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 valuation. Topic tags: general, news, general web. Style: premium digital editorial illustration, source-backed research mood, clean composition, high detail, modern web publication hero. Use reference image context only for broad subject, composition, and topical grounding; do not copy the exact image. Avoid: logos, brand marks, copyrighted characters, real person likenesses, fake screenshots, UI text, readable text, watermarks, charts with fake numbers
BlackRock’s return to an overweight view on emerging-market (EM) equities was not simply a reversal on risk appetite. Its central argument is that parts of emerging markets are becoming crucial suppliers to the global AI buildout: South Korea and Taiwan in semiconductor, memory and hardware production, and Latin America in commodities and physical infrastructure. That structural demand, combined with accelerating earnings growth, valuations below those of U.S. equities and easing leverage concerns in Korea, changed BlackRock’s assessment after its June move to neutral.12
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The core idea: emerging markets as AI’s supply base
Egon Vavrek, BlackRock’s head of emerging markets, described the opportunity as AI hardware and the “picks-and-shovels” companies serving hyperscalers.17 The phrase matters because it shifts attention away from trying to identify the eventual winning AI application or platform.
Instead, the focus is on the inputs required regardless of which software companies ultimately prevail:
- South Korea and Taiwan: semiconductor, memory-chip and related hardware supply chains that support AI computing capacity.
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- Latin America: commodities and physical infrastructure linked to building and operating the AI ecosystem.
- Other bottlenecks: power, chips and data centers—areas BlackRock has identified as direct ways to gain exposure to the AI buildout.
Hyperscalers need large volumes of computing hardware and supporting capacity to expand AI services. In BlackRock’s framework, that can raise the economic value of constrained inputs and support the earnings of their suppliers.1
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Why this is different from a traditional emerging-markets trade
Conventional EM investing is often framed around local growth, domestic interest rates, currencies and country-specific policy. BlackRock’s AI-scarcity thesis adds another earnings driver: sales into a global capital-expenditure cycle led by large technology customers.
For a chipmaker, memory supplier, power provider or infrastructure business serving that cycle, demand may be linked less directly to its domestic economy than to global AI investment. That does not remove traditional EM risks. Geopolitical tension, export controls, commodity-price moves, regulation and currency changes can still affect companies and valuations.
But it can diversify the source of earnings. The investment case becomes less about broad domestic demand alone and more about ownership of a scarce component, resource or piece of infrastructure in a global buildout.
What changed after BlackRock’s June downgrade
BlackRock stepped back to neutral in June because leverage concerns—especially in Korea—were building. It also faced concentration risk: Korea and Taiwan both offered substantial exposure to the same AI and semiconductor theme, so a crowded trade or sharp reassessment of AI expectations could hurt the region disproportionately.12
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The subsequent selloff and deleveraging in Korean equities altered that calculation. BlackRock said deleveraging had eased its concern, supporting the return to overweight.12 News reporting on the shift similarly identified July–August deleveraging after a sharp July selloff as a key reason the firm judged the risk/reward more favorably.
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The important distinction is that BlackRock did not argue that concentration risk had disappeared. Its September stance reflects a view that the market’s leverage vulnerability had diminished enough for the underlying AI-linked earnings and valuation case to matter again.
Why AI investment can help growth even while consuming scarce resources
AI infrastructure is capital-intensive. It competes for financing, electricity, materials, chips, data-center capacity and corporate balance-sheet resources. BlackRock acknowledges that this can contribute to a higher cost of capital.37
Its argument is that higher rates are not automatically negative for equities when they reflect stronger investment and growth. If AI investment produces durable revenue and earnings growth, particularly for firms that control scarce inputs, that earnings strength can help offset the burden of higher financing costs.33
That is why BlackRock’s preferred expression is not indiscriminate exposure to anything labeled AI. It is targeted exposure to bottlenecks—such as semiconductors, power and data centers—that could benefit whether AI’s eventual winners are one group of applications or another.34
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Fund-performance context
A mid-September market-data reading listed a 26.82% year-to-date return for BlackRock Emerging Markets Institutional (MADCX).51 That figure should not be treated as a return for every BlackRock emerging-markets vehicle: BlackRock offers multiple funds and share classes, with differing currencies, fees, holdings and valuation dates.
Bottom line
BlackRock’s September upgrade rests on three linked judgments: EM earnings have improved, valuations remain relatively lower than U.S. equities, and Korean deleveraging has reduced a near-term positioning risk.12 The strategic element is AI scarcity: Korea and Taiwan supply critical computing hardware, while Latin America offers exposure to resources and infrastructure required by the buildout.
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For investors, the implication is a narrower one than “buy emerging markets because of AI.” BlackRock’s thesis favors businesses with scarce, tangible roles in the AI investment cycle—and it still depends on earnings delivery amid substantial geopolitical, regulatory, commodity and market risks.
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BlackRock moved emerging market equities back to overweight in mid September because it sees Korea, Taiwan and Latin America as suppliers of scarce AI inputs—chips, memory, infrastructure and commodities—while Korean...
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BlackRock moved emerging market equities back to overweight in mid September because it sees Korea, Taiwan and Latin America as suppliers of scarce AI inputs—chips, memory, infrastructure and commodities—while Korean... The thesis is selective rather than a blanket bet on emerging markets: BlackRock favors “picks and shovels” businesses that can benefit from hyperscaler AI spending, even if higher demand for capital and power pushes...
What should I do next in practice?
A mid September market data snapshot showed a 26.82% year to date return for BlackRock Emerging Markets Institutional (MADCX), but performance varies by fund, share class, currency and valuation date.[51]