CONTRIBUTORS
Manraj Sekhon, CFA
Chief Investment Officer,
Templeton Global Investments
Bassel Khatoun
Senior Managing Director
Head of Research
Templeton Global Investments
Yu-Jen Shih, CFA
Portfolio Manager
Deputy Director of Research
Templeton Global Investments
Emerging Asia has taken center stage in the artificial intelligence (AI) revolution. From hyperscalers to chip producers and infrastructure enablers, companies across emerging Asia anchor a vibrant ecosystem that investors should consider as they seek exposure to the AI theme.
To identify the real long-term winners in this AI ecosystem, investors need to appreciate the AI innovations and growth drivers across emerging Asia. They need to understand, for instance, developments in China, where the “DeepSeek moment” in January 2025 heralded the rapid emergence of home-grown AI models that compete well on cost efficiency versus the incumbent models in the United States.
But the AI story in emerging Asia goes far beyond China. It is also about the semiconductor powerhouses in Taiwan and South Korea; the crucial OSAT (outsourced semiconductor assembly and testing) players in Southeast Asia; and the integration of AI into software services in India. At every layer of the so-called “AI stack,” the end-to-end complex of hardware, software and technologies that drive the development, training, scaling and deployment of AI solutions, we can find emerging Asia companies playing the critical role of value chain enabler.
At Templeton Global Investments (TGI), we are actively exploring the diverse opportunity set across the entire AI value chain in emerging Asia. This paper aims to share some of our perspectives on this dynamic ecosystem. We will adopt a structured approach, looking at four distinct layers that combine to form the entire AI stack, each with its own technological nuances, industry characteristics and growth driver.
Conclusion
Across all four key layers of an AI stack, we see evidence of emerging Asia companies playing the role of critical manufacturers, developers and service providers. In several aspects, these companies are not merely emerging—they are leading the rest of the world in the global AI value chain.
As a global asset manager, TGI invests across the developed and emerging markets. Our comprehensive research and firm conviction in the emerging Asia AI ecosystem complement our understanding of the global technology complex.
We believe a similarly holistic view should benefit investors as they seek diversified exposure to the AI growth theme. The ability to appreciate the full dynamics of emerging Asia’s AI ecosystem is the key to navigating this once-in-a-generation technological leap.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
Equity securities are subject to price fluctuation and possible loss of principal.
To the extent a portfolio invests in a concentration of certain securities, regions or industries, it is subject to increased volatility.
Large-capitalization companies may fall out of favor with investors based on market and economic conditions. Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks.
International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.
The government’s participation in the economy is still high and, therefore, investments in China will be subject to larger regulatory risk levels compared to many other countries.
There are special risks associated with investments in China, Hong Kong and Taiwan, including less liquidity, expropriation, confiscatory taxation, international trade tensions, nationalization and exchange control regulations and rapid inflation, all of which can negatively impact the fund. Investments in Hong Kong and Taiwan could be adversely affected by its political and economic relationship with China.
Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.
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