July 2025 — As artificial intelligence (AI) continues to redefine global competitiveness, China's tech giants and AI ecosystem are emerging as key drivers of equity performance across emerging markets. Market data show that EM equities with strong tech exposure are outperforming their resource-heavy or politically volatile peers—anchored by China's renewed focus on platform regulation, cloud infrastructure, and domestic innovation.

AI: From Frontier Buzz to Core Earnings Driver

After several cycles of hype, AI is now moving markets through real revenue. Chinese giants like Alibaba, Tencent, Baidu, and ByteDance are monetizing AI across cloud services, advertising, e-commerce logistics, and enterprise SaaS.

  • Alibaba Cloud has doubled its enterprise AI client base in under 12 months, offering LLM-as-a-service to thousands of SMEs.

  • Tencent has integrated real-time AI agents into its WeChat ecosystem, bolstering monetizable user engagement.

  • Baidu’s Apollo Go continues commercial rollout of autonomous taxis in Tier-1 cities, signaling AI infrastructure maturity.

This operational momentum is restoring investor confidence, even in the face of geopolitical scrutiny and capital market bifurcation.

Regulatory Clarity Breeds Re-Rating

Beijing's more calibrated regulatory tone toward big tech in 2024 has also helped re-rate the sector. With antitrust and data sovereignty policies now better understood, investors are regaining exposure to China’s tech names as part of broader EM strategies.

Moreover, policy tools—such as AI development grants, chip subsidies, and sovereign AI compute infrastructure—are reinforcing China’s position as a global AI scale-up zone, not merely a consumer market.

Tech-Tilted EM Portfolios Outperform

Emerging market indices with heavier tech and communication sector weightings—notably China, Taiwan, and South Korea—have sharply outperformed commodity- or finance-heavy counterparts like Brazil or South Africa in recent months.

According to VanEck and other fund managers:

  • EM tech exposure has become a core allocation strategy, not a speculative tilt.

  • Semiconductors, AI software platforms, and cloud service providers now account for a disproportionate share of EM equity returns YTD.

  • The spillover effects from China's AI maturity are benefiting regional suppliers and data center infrastructure firms across Asia.

Global Capital Is Tilting Back

Despite deglobalization narratives, foreign institutional investors are again allocating to Asia-based tech growth, particularly in EM-focused ETFs and sovereign wealth portfolios.

Factors behind this shift include:

  • Attractive valuations relative to US tech names, especially post-2022 correction

  • Currency-adjusted returns in the yuan, won, and NT dollar, supported by strong FX reserves

  • Domestic demand for enterprise and public-sector AI use cases, which reduces reliance on export cycles

Private equity and venture investors are also circling late-stage AI startups in China and Southeast Asia, drawn by scale advantages and increasingly exportable platforms.

Beyond China: A Broader EM Tech Renaissance?

While China remains the flagship, other EM markets are following suit:

  • India’s AI policy push has triggered public-private investments in multilingual LLMs and digital infrastructure.

  • Vietnam and Indonesia are rising as low-cost tech manufacturing and talent hubs, drawing AI-focused FDI.

  • Middle Eastern markets, particularly the UAE and Saudi Arabia, are deploying sovereign capital into AI research hubs and local model training.

Collectively, these moves suggest a broader tech renaissance across emerging markets, with AI at its core.

Bottom Line

China’s AI and big tech resurgence is doing more than just fueling its own equity rebound—it’s lifting the broader emerging market equity narrative, attracting fresh global capital and reframing EMs as innovation exporters, not just raw material suppliers.

For investors, tech-centric EM exposure is no longer a hedge—it’s a growth imperative.