Morgan Stanley is forecasting the most powerful earnings surge for emerging markets in two decades, all driven by the artificial intelligence boom.
This powerful new trend begins with the hyperscalers—the tech giants like Microsoft, Google, and Amazon. They are in an intense AI arms race, collectively spending hundreds of billions of dollars to build and upgrade massive data centers. This investment, known as capex (capital expenditure), is the primary engine driving the entire narrative. To power their AI models, they need a staggering amount of specialized hardware, creating a direct and massive pipeline of orders for a very specific set of companies.
This leads us to the heart of the story: just three companies in emerging markets are positioned to capture the vast majority of this demand. First, there's TSMC in Taiwan, the undisputed world leader in manufacturing advanced logic chips. These chips are the sophisticated "brains" inside AI accelerators from companies like NVIDIA. Second and third are South Korea's Samsung Electronics and SK hynix. They dominate the crucial market for HBM (High-Bandwidth Memory), a type of super-fast memory that works alongside the main processor, allowing AI models to access and process enormous datasets at incredible speeds.
The effect of this dynamic is a highly unusual and concentrated growth cycle. In the past, emerging market growth was often a broad story tied to rising domestic consumption or the expansion of China's internet giants. Today, that narrative has been completely rewritten. The earnings upgrades for the entire MSCI Emerging Markets index are almost entirely due to the soaring profits of these three semiconductor powerhouses. Because TSMC, Samsung, and SK hynix together make up a significant portion of the index (around 18%), their incredible performance is single-handedly lifting the average for the whole group. Other sectors, like Chinese tech, have been relatively quiet in comparison.
The evidence supporting this trend is strong and consistent. We see it in the hard data, with South Korea reporting record-breaking semiconductor exports, surging over 100% year-over-year in early 2026. The companies themselves have posted stellar financial results, citing overwhelming demand and strengthening pricing power, especially in the memory market. After a period of oversupply, the cycle has flipped dramatically, allowing memory makers to command higher prices and achieve record margins. This isn't just a forecast; it's a powerful economic shift already in motion.
- Hyperscaler: Massive cloud computing companies like Amazon (AWS), Google (Google Cloud), and Microsoft (Azure) that provide computing services to millions of users.
- Capex (Capital Expenditure): Funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment.
- HBM (High-Bandwidth Memory): A specialized, high-performance computer memory used in high-performance computing and graphics accelerators, essential for training large AI models.