Nine firms now make up over 40% of MSCI EM index

The artificial intelligence frenzy has reshaped the MSCI Emerging Markets Index into something few diversification-minded investors would recognize: a benchmark more top-heavy than the S&P 500, dominated by a handful of chipmakers at the center of the global AI buildout.

Nine Companies, 40 Percent of the Index

Just nine companies — mostly large Taiwanese and Korean technology firms, plus China's Alibaba ↗ 1.26% and Tencent — now account for more than 40 percent of the index, according to Reuters. By June's end, top-10 concentration in MSCI EM had surpassed roughly 40 percent, above the S&P 500's approximately 36 percent, according to State Street Global Advisors.reuters+1

MSCI's research head Ashley Lester said emerging markets no longer offer the diversification investors once sought. "They're right in the centre of the AI boom," he said, referring to the large AI hardware companies that now dominate the benchmark.wealthprofessional

The concentration has made for violent swings. South Korea's Kospi doubled in the first half of 2026 before shedding roughly 40 to 50 percent from its highs in barely six weeks, a round trip driven by Samsung Electronics and SK Hynix ↘ 3.92%. Taiwan Semiconductor Manufacturing Company ↗ 0.44%, the largest stock in the EM universe, fell almost 14 percent as the selloff spread. Volatility on MSCI's $1.8 trillion EM benchmark has climbed past its peak during the COVID-19 pandemic.zacks+3

Investors Retreat From Asia

The turbulence has accelerated outflows. International investors pulled money from Asia-ex-China equity markets faster in the first half of the year than in any comparable stretch since at least 2010, per LSEG data cited by Reuters. South Korea and Taiwan absorbed most of the selling, shedding more than $100 billion and $44 billion respectively, according to JPMorgan ↗ 0.34%.wealthprofessional

William Bratton, head of cash equity research for Asia-Pacific at BNP Paribas, told Reuters that institutional clients "are struggling with the level of volatility in Korea at the moment".reuters+1

What Comes Next

Not all managers are retreating. Union Bancaire Privée technology portfolio manager Dimitri Kallianiotis urged clients to hold their nerve and ride the volatility. Aubrey Capital Management director Mark Martyrossian described memory-chip makers as "the picks and shovels of the AI rally" but noted the sector's cyclical nature had reasserted itself. "The recent correction has been a reminder that this historically cyclical business is still sensitive to the supply/demand dynamic," he wrote.wealthprofessional

Martyrossian flagged India as a contrarian option, noting its economy grew more than 7 percent in each of the last two quarters even as foreign institutional investors withdrew $27 billion through mid-July.wealthprofessional