AI growth shifts emerging markets

Emerging stock markets, especially in South Korea and Taiwan, have experienced sharp declines and intense volatility amid the AI boom. The Kospi index lost about 40% over six weeks following a significant rally driven by gains in companies like Samsung and SK Hynix. Meanwhile, the Taiwanese TSMC share dropped approximately 14%. The markets’ focus on a limited number of major AI-related companies has heightened volatility and transformed the landscape into a high-risk environment, leading to the withdrawal of over $144 billion from Korea and Taiwan's markets in the first half of the year. Volatility levels have risen above those seen during the COVID-19 pandemic. Additionally, the markets have become more concentrated, with only nine companies accounting for more than 40% of the MSCI Emerging Markets Index, reducing diversification and increasing risks for investors. Nevertheless, experts advise against panic despite the sharp fluctuations.

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