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Use these market charts to support your conversations with clients about asset-allocation opportunities.

The AI glow-up of emerging markets

February 27, 2025

Emerging markets (EM) are being written in code, powered by elite semiconductors, and accelerated by the most aggressive AI buildout in history.

Sector weights as a percentage of the MSCI Emerging Markets Index (USD)

Key takeaways:

  • EM has firmly pivoted away from being a "commodities" play, with AI and the technology sector now dominating some of the larger EM countries, like China, Taiwan, and South Korea.
  • Why talk with clients about EM stocks now? Value—EM stocks remain heavily discounted relative to U.S. stocks, based on price-to-earnings ratios for the MSCI Emerging Markets Index versus the S&P 500® index.1
  • EM stocks are powerful potential growth engines for your clients’ portfolios. But they’ve historically been quite volatile and now mimic the U.S. tech sector, so consider these as a “satellite” asset-allocation opportunity.
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FNDE

Schwab Fundamental Emerging Markets Equity ETF

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Schwab Emerging Markets Equity ETF

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Schwab Fundamental Emerging Markets Equity Index Fund

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1 Schwab Center for Financial Research, “Emerging Markets: AI Opportunity and AI Risk,” published 01/12/26; accessed 01/27/26: https://www.schwab.com/learn/story/emerging-markets-ai-opportunity-and-ai-risk.

Sources: Schwab Center for Financial Research; MSCI. Data as of 01/06/26. Sectors are based on the Global Industry Classification Standard (GICS®), an industry analysis framework developed by MSCI and S&P Dow Jones Indices to provide investors with consistent industry definitions. Indexes are unmanaged, do not incur management fees, costs, and expenses and cannot be invested in directly. For additional information about the indices and terms shown, please visit www.schwabassetmanagement.com/resources/glossary.

Past performance is no guarantee of future results.

Investing involves risk, including loss of principal. The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. 

All expressions of opinion are subject to change without notice in reaction to shifting market, economic or political conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

International investments involve additional risks, which include differences in financial accounting standards, currency fluctuations, geopolitical risk, foreign taxes and regulations, and the potential for illiquid markets. Investing in emerging markets may accentuate this risk.

All corporate names and market data shown are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security.

Diversification does not ensure a profit and does not protect against losses in declining markets.

The Schwab Center for Financial Research® is a division of Charles Schwab & Co., Inc. Articles attributed to SCFR are the opinions of employees of Charles Schwab & Co., Inc., Member SIPC and may not reflect the views of Schwab Asset Management.

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