For years, EM equities have faced criticism as an asset class. In 2025, however, a clear turning point emerged. MSCI EM equities rose 34%, comfortably outperforming the S&P 500’s 18% gain as EM share prices finally responded to a sharp improvement in fundamentals. Two tailwinds drove this acceleration. First, Artificial Intelligence (AI) related capital spending has lifted EM companies, especially in North Asia, as key suppliers to the global AI supply chain, with many already seeing earnings gains from “picks‑and‑shovels” exposure. Second, a benign commodity backdrop alongside China’s anti involution policies and firmer metals demand supported resource heavy markets such as Brazil and South Africa.
