Paradoxically, foreign investors are large net sellers in booming Korean and Taiwanese markets. This isn't a bearish call on the AI theme. Rather, for long-only Emerging Market funds, the outsized performance of a few large-cap tech stocks has caused these positions to breach portfolio concentration and risk management limits, forcing them to trim holdings.

While both Korea and Taiwan benefit from the AI boom, Korean large-caps have seen more explosive earnings growth. This is due to a key strategic difference: Korean memory makers have leveraged supply shortages to significantly increase prices, leading to earnings estimates multiplying 5-6x. In contrast, Taiwanese firms have shown more pricing discipline.

While bullish on India, investors should note it's not participating in every global trend. Unlike North Asia (Korea, Taiwan), India is not a player in the "AI picks and shovels" hardware theme. It also lacks the investment drivers seen in Europe related to serving an aging population.

The powerful earnings growth story for North Asian markets like Korea and Taiwan is driven by the durable AI theme, not cyclical factors. Their role as essential suppliers of semiconductors for the AI supply chain provides a structural tailwind that should endure beyond the current geopolitical conflict, assuming a global recession is avoided.

Beyond the well-known semiconductor race, the AI competition is shifting to energy. China's massive, cheaper electricity production is a significant, often overlooked strategic advantage. This redefines the AI landscape, suggesting that superiority in atoms (energy) may become as crucial as superiority in bytes (algorithms and chips).

Emerging Market investors have a "bittersweet" feeling about the North Asian equity boom. While performance is strong, the rally is driven by capital expenditure from US hyperscalers, not local dynamics. This dependency makes the success feel borrowed and harder to sell to global allocators as a unique, intrinsically-driven Asian growth narrative.

Middle Eastern countries are making massive sovereign AI investments to diversify their economies. They are leveraging their core advantage—cheap energy—to power massive compute infrastructure, aiming to shift from an economy based on exporting hydrocarbons to one based on exporting intelligence and tokens.

Massive investments from Gulf Cooperation Council (GCC) nations, derived from oil sales (petrodollars), are a primary driver of the US AI infrastructure buildout. This creates a direct link between geopolitical stability in the Strait of Hormuz and the financial health of the American AI sector. A conflict could instantly cut off this capital, popping the AI bubble.

The global stock market rally is largely an extension of the U.S. AI story. International markets are benefiting from demand for AI-related inputs (e.g., minerals from Latin America) and as global investors seek to diversify away from highly-valued U.S. tech stocks into other, relatively cheaper markets.