Emerging Markets and the Hidden Technology Investment Opportunity

For much of the past decade, emerging markets struggled to attract the same level of investor attention enjoyed by major US technology companies. A strong dollar, slower earnings growth and concerns about economic volatility often pushed these markets into the background. Today, however, the landscape is changing rapidly.

According to Nick Payne, portfolio manager of the Comgest Growth Global Emerging Market Equity strategy, three structural forces are driving a renewed investment case for emerging economies. The first is the outlook for the US dollar. After years of strength, growing fiscal deficits and increasing reliance on foreign capital are raising questions about the long-term sustainability of a strong currency. Historically, periods of dollar weakness have provided a favourable backdrop for emerging market equities.

The second factor is fiscal discipline. While many developed economies responded to the pandemic with expansive fiscal measures and rising debt levels, several major emerging countries maintained a more cautious approach. This shift has gradually altered investor perceptions, positioning many emerging economies as relatively stable and financially responsible.

The most important driver, however, is the changing dynamic of return on equity. For years, developed markets – particularly the United States – benefited from rising profitability driven by software and digital platforms. The artificial intelligence boom is now creating a different environment, one that requires substantial investment in physical infrastructure, advanced manufacturing and semiconductor production.

This transition is creating significant opportunities across Asia. Companies such as TSMC, Samsung Electronics and SK Hynix occupy critical positions within the global AI supply chain. Their technologies power the advanced processors and memory systems required to train and operate increasingly sophisticated artificial intelligence models. As demand accelerates, these businesses are experiencing stronger earnings prospects and improved capital returns.

Beyond the headline names, investors are also focusing on less visible but strategically important companies. Delta Electronics has become a key provider of power management and cooling solutions for data centres, an area of growing importance as AI workloads place greater pressure on computing infrastructure. Another example is Aspeed, a Taiwanese company whose server management chips are embedded in a large share of the world's servers, giving it a highly defensible market position.

Electrification represents another major investment theme. The rapid expansion of data centres, renewable energy systems and electric vehicles is increasing pressure on existing power grids. This trend is creating demand for energy storage, transmission infrastructure and advanced electrical equipment. Companies such as CATL have emerged as major beneficiaries thanks to their leadership in battery and energy storage technologies.

For long-term investors, the combination of digitalisation, artificial intelligence and electrification is reshaping where value is created across the global economy. Rather than focusing exclusively on consumer-facing technology giants, many investors are increasingly looking at the industrial backbone that enables technological progress.

In that context, emerging markets are no longer simply a diversification story. They are becoming a central destination for technology-related investment, supported by strong structural trends, improving returns on capital and companies positioned at the heart of the next phase of global innovation.