TSMC, Samsung Electronics and SK Hynix now account for more than 30 percent of the MSCI Emerging Markets Index, creating a structure in which emerging market equity returns are heavily swayed by a small group of semiconductor companies. As the artificial intelligence (AI) semiconductor rally loses momentum, global asset managers are broadening their investment targets to China and India as well as sectors such as consumer goods and energy.

On July 12, blockchain outlet Cryptopolitan reported that the combined weight of TSMC, Samsung Electronics and SK Hynix in the MSCI Emerging Markets Index has risen above 30 percent. That is close to the influence of the “Magnificent Seven” in the U.S. S&P 500.

Technology stocks account for about 45 percent of the overall emerging markets index. The combined market capitalisation of TSMC, Samsung Electronics and SK Hynix was tallied at $4.4 trillion. Performance of emerging market equity funds has effectively become concentrated on the share-price moves of a handful of large AI semiconductor stocks.

Market sentiment has been shifting. Semiconductor stocks are weakening on concerns that cloud companies may have built AI systems ahead of demand. Moves by some AI companies to develop their own chips are also increasing the possibility of fewer orders for external suppliers. Companies’ AI spending may keep rising, but actual demand may not follow at the same pace, prompting increased caution.

Against that backdrop, large asset managers are widening their investment universe. JPMorgan Asset Management and GMO are also looking at gaming, energy and consumer goods companies. JPMorgan Asset Management is seeking investments in India and China to reduce dependence on one Taiwan semiconductor company and two large Korean semiconductor companies.

Korean stocks were directly affected by the slowdown in the semiconductor rally. Samsung Electronics recently reported solid results, but the share-price reaction was limited. Investors responded more sensitively to the possibility of overheating in AI investment than to improved earnings. The KOSPI has fallen 20 percent from its June peak, and circuit breakers were triggered several times as selling pressure intensified. GMO continues to hold SK Hynix but at a lower weighting than its benchmark index.

Tom Chiang (톰 치앙), a GMO portfolio manager, assessed that SK Hynix shares have risen about 13-fold since early 2025, but the scale of the rise far exceeds what the company’s actual business performance supports. He concluded that the pace of semiconductor stock gains has run ahead of fundamentals.

SK Hynix began trading depositary receipts on the Nasdaq Global Select Market on July 11. The company raised $26.5 billion, which was described as the largest for a foreign company listing in the United States. The depositary receipts rose as much as 14 percent over the offering price on the first day of trading.

Despite a correction in semiconductor stocks, inflows into emerging market equity funds are continuing. The Avantis Emerging Markets Equity ETF, with $25.4 billion in assets under management, recorded the largest weekly inflow in the past four months. By region, Hong Kong stocks were strong. Alibaba rose more than 13 percent and Tencent gained more than 4 percent. The Hang Seng Index has been the strongest among major emerging market stock markets so far this month, while the KOSPI has slipped to the bottom tier.

Chinese stocks drew attention as relatively low valuations stood out as an investment appeal. The forward price-to-earnings ratio of the Hang Seng China Enterprises Index is about 8.9, lower than 13 for the MSCI Asia Index. Tencent has also previously traded at what was described as an undervalued level of around 11.

A sharp rise in shares of Chinese AI company Zhipu also drew market attention. The company, formally named Knowledge Atlas Technology JSC, plans to raise $4 billion through an offering, but only about 13.5 percent of its total shares are available for trading in the market.

Zhipu shares rose as much as 20 percent intraday on July 11 and ended up 19 percent. The stock is up 1,650 percent since January, the highest among Hang Seng Composite Index constituents. Some pointed out that the rally depends heavily on the small free float, increasing volatility risks.

Emerging market stocks have entered a phase shaped simultaneously by the high weighting of large semiconductor stocks such as TSMC, Samsung Electronics and SK Hynix, expectations for AI investment and fatigue from overheating. Emerging market inflows are continuing, but investors are increasingly moving to reduce semiconductor concentration and diversify into Hong Kong stocks, consumer goods and energy.