Global asset manager BlackRock has upgraded emerging-market equities to 'overweight', citing the AI infrastructure boom. The firm forecasts 34% earnings growth for these regions, outpacing the US, and notes attractive valuations. This marks a strategic reversal from their neutral stance held earlier this year.
BlackRock has updated its outlook on emerging-market equities, moving to an 'overweight' position. This change in strategy, announced in September 2026, marks a reversal from the firm's neutral stance in June, when concerns over market volatility and high debt levels kept them cautious. The asset manager now sees a clearer path for developing economies to benefit from the global expansion of artificial intelligence.
The investment thesis is built on the concept of 'AI scarcity.' BlackRock argues that the infrastructure required to support AI is not evenly distributed, giving specific geographic regions a competitive advantage. The firm highlights South Korea and Taiwan as essential hubs for semiconductor and memory chip production, which are the building blocks of AI systems. Additionally, they point to Latin America as a critical provider of the commodities and energy infrastructure needed to power massive data centers. The belief is that as AI technology scales, the value of these physical resources and production capabilities will rise, driving corporate profits in these regions.
Financial data provides a strong argument for this shift. Current forecasts for the MSCI Emerging Markets Index suggest earnings growth of more than 34% over the next 12 months. This is notably higher than the 20% growth projected for the MSCI USA Index. Furthermore, emerging-market equities are trading at a valuation discount, with forward price-to-earnings multiples around 10 times, roughly 50% cheaper than their American counterparts. Strategists noted that the market correction seen in July helped reduce excessive borrowing in key markets like South Korea, making the risk-reward profile more attractive for investors.
While the firm is optimistic, it does not ignore the risks involved in this trade. Emerging markets remain highly sensitive to fluctuations in the US dollar and changes in global interest rates. Geopolitical tensions, trade conflicts, and potential regulatory shifts in developing nations can also lead to sharp volatility. Additionally, the AI-driven thesis assumes a sustained demand for technology infrastructure. If the pace of AI development slows or if energy and commodity costs become unsustainable, the expected profit growth may not materialize as planned.
For investors, this update highlights the importance of keeping an eye on global capital flows. The relative strength of the US dollar and future policy decisions from major central banks will be key factors to track, as these directly impact the movement of money into or out of emerging markets. As the investment cycle progresses, market observers will look to upcoming quarterly earnings reports to see if corporate profits in these regions can actually meet the high growth expectations set by the firm.