A once-in-a-generation opportunity is emerging in emerging market equities, according to Ninety One, as a confluence of factors increasingly favours the asset class heading into 2026.
While US mega-caps continue to dominate investor attention, the global investment manager argues that a select group of companies across Asia and other emerging markets have quietly become indispensable to the global AI value chain.
With established leadership positions, robust capabilities and strong competitive moats, these firms may offer durable and underappreciated opportunities for long-term investors, according to the firm’s Emerging Market Equities 2026 Outlook.
The performance of the so-called ‘Secret Seven’ – key technology and semiconductor firms across Taiwan, China and South Korea – underscores this shift, with several matching or surpassing the achievements of their US peers over the past year.
These are:
- Delta Electronics, Taiwan
- Anji Microelectronics, China
- Accon Technology, India
- Samsung Electronics, South Korea
- SK Hynix, South Korea
- TSMC, Taiwan
- ASE Technology, Taiwan
“They have outperformed the US Magnificent Seven this year, with TSMC keeping pace with NVIDIA, given its role as the sole producer of NVIDIA’s highest-end chips.”
Shares in TSMC have risen 57 per cent over the past year to 20 January compared to 32 per cent by NVIDIA.
The Bloomberg Magnificent 7 Index rose 25 per cent in 2025, compared with 16 per cent for the S&P 500, but only Alphabet and Nvidia outperformed the S&P 500 on an individual basis. Year-to-date, only Amazon and Alphabet are in the green as of 20 January. Meanwhile, the S&P 500 is down 0.06 per cent.
Leading investment research firm, Zacks, has labelled the Magnificent 7 as “over”. Zacks’ stock strategist, Tracey Ryniec, says despite most of the Mag 7 stocks being among the best performers of the last 10 years, things are beginning to look different.
“Because of the AI revolution, NVIDIA is the best performer of the last five years among the Magnificent 7, with shares up 1,344 per cent as of 13 January 2026. The S&P 500 was hot over the last five years; it gained 84.7 per cent during that time. But two of the Magnificent 7 stocks didn’t even beat the S&P 500: Tesla and Amazon,” Ryniec said.
“Are they ‘magnificent’ if they aren’t even outperforming the S&P 500?”
On the other hand, Ninety One say the ‘Secret Seven’ companies sit at the heart of the world’s most advanced technology manufacturing cluster, benefiting from deep engineering expertise, tightly integrated supplier networks and some of the highest R&D investment levels globally.
“They provide the critical bottleneck components, from leading-edge logic and high-bandwidth memory to advanced packaging, switching and datacentre power systems, that determine the pace at which global AI capacity can scale,” the outlook said.
“At the same time, the traditional defensibility of software is being eroded as AI lowers barriers to entry, increasing the importance of upstream hardware ecosystems where EM companies hold structural leadership.”
EM outlook
EMs also demonstrated notable resilience in 2025, with performance comfortably ahead of developed markets. The MSCI Emerging Markets index returned 33.5 per cent during the 12-month period versus returns of 21.6 per cent by the broader MSCI World index.
EMs were supported by pragmatic policymaking, resilient domestic demand and valuations that continue to stand in stark contrast to stretched levels in parts of the developed world.
“A series of macro shocks have failed to unsettle the asset class, largely because investors were able to look through short-term disruption and focus on stronger underlying fundamentals.
“With diversification already beginning to broaden global market leadership, emerging markets are increasingly positioned to benefit from shifts in global capital allocation,” the outlook said.
Co-portfolio manager of EM equity Archie Hart said EMs are benefiting from a powerful combination of reform momentum, policy clarity and increasingly resilient domestic growth.
“From infrastructure investment in India and economic diversification in the Middle East to improving governance and capital market reform elsewhere, these structural shifts are broadening the opportunity set and strengthening the foundations for long-term growth.”
Looking ahead to 2026, the macro backdrop also appears increasingly constructive.
“The current US-dollar cycle has extended far beyond its historical average and now shows signs of reaching maturity, with rate differentials, capital flows and policy dynamics beginning to look similar to previous turning points. Historically, such conditions have tended to favour non-US assets, particularly EMs, where valuation starting points are far more attractive. This combination of cyclical support and improving structural foundations gives EM a stronger starting point than in previous years.”
A mix of higher real rates, conservative policy stances and ongoing reform momentum continues to underpin confidence in the asset class, according to Ninety One.
“Regions such as the UAE and broader Middle East stand out as structural winners, supported by economic diversification and growing integration with Asia. In South America, improving policy credibility and falling rates are paving the way for renewed domestic and foreign investment.”
While EMs remain attractively valued on a relative basis, risks such as renewed tariff uncertainty or short-term volatility linked to US market corrections could create temporary disruption.
However, the structural economic base, diversified earnings profiles and lower starting valuations give emerging markets greater potential to rebound more swiftly than more concentrated developed markets, Ninety One believes.
“US policy in South America has also gained attention following recent actions in Venezuela, but this does not change the generally positive view on the broader EM asset class,” Hart said.
“Arguably, if the US erects a security umbrella over the Western Hemisphere and acts to install or maintain western and market-friendly regimes, this could be positive for South American markets.”
While there has been some speculation that a stronger security focus on South America may lead to a weaker focus on other geographies, the status quo in areas such as the South China Sea or Taiwan is unlikely to change in the medium term, according to the firm, with deterring conflict remaining a US priority.
Co-portfolio manager of EM equity Varun Laijwalla added: “Pockets tied too closely to a single narrative could face disappointment if growth assumptions cool,” but said the broader asset class retains significant resilience.
Emerging markets are positioned for stronger recovery potential because “valuations start from a lower level” and the underlying real economy is “far broader based than in the US,” Laijawalla cautioned.
