Why investors are looking beyond AI
Jefferies' assessment comes amid growing concerns about the cost of the global AI infrastructure boom and the earnings growth required to justify elevated valuations.
In a related analysis, the brokerage expects earnings growth for global AI stocks to slow from around 100% in 2026 to 30% in 2027 and 22% in 2028. By comparison, earnings growth for global stocks outside AI is projected to moderate from 16% in 2026 to 9% in both 2027 and 2028.
Valuations also favour a broader investment universe. Global AI stocks trade at 23 times forward earnings on an equal-weighted basis, compared with 13 times for the basket of stocks outside AI, according to Jefferies.
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Although these global estimates do not directly determine emerging-market returns, they highlight why investors may be examining opportunities beyond companies most closely associated with AI.
Semiconductor exposure remains significant
A shift away from concentrated AI investments does not necessarily mean abandoning technology stocks. Semiconductor manufacturers remain important beneficiaries of AI infrastructure spending, supplying the chips and components required for data centres and advanced computing.
TSMC, Samsung Electronics and SK Hynix together accounted for 32.1% of the MSCI AC Asia ex-Japan Index as of October 14, according to Jefferies. However, the brokerage's Asia ex-Japan long-only equity portfolio had a combined allocation of 16% to these three companies.
The difference illustrates how portfolio managers can retain exposure to the AI supply chain while limiting concentration relative to the broader market.
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Where could investors look next?
Jefferies' portfolio positioning suggests a broader regional approach rather than an exclusive focus on AI-linked markets.
The brokerage's recommended allocation to India stood at 12%, against a benchmark weighting of 10.9%. China was assigned a recommended weighting of 22%, compared with 19.9% in the benchmark, while Hong Kong's recommended allocation was 6%, against 3.2%.
These allocations reflect Jefferies' portfolio strategy, not a guarantee that these markets will outperform.
For investors, the emerging trend is a potential broadening of market leadership. The key considerations will be valuations, earnings visibility, sector diversification and the ability of companies outside the AI ecosystem to deliver sustainable growth. The slowdown in AI-related returns may create opportunities elsewhere, but it does not by itself establish that the technology rally is over.
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