Emerging Markets Insights: AI, Energy and Robotics

Emerging-market equities should remain attractive because AI spending and improving corporate capital discipline outweigh significant energy, regulatory and valuation risks.

• During Xi Jinping’s state visit to the United States, China and the United States agreed to continue discussions on AI risks and benefits and to establish an incident-communication channel, but announced no joint AI rules.
• China may selectively ease restrictions on older Nvidia Blackwell GPU purchases by leading Chinese platform companies, while the United States retains an AI lead and China continues to narrow the gap.
• Almost 90% of the MSCI Emerging Markets Index by weight consists of net oil-and-gas importers; higher energy prices are creating pressure through protests, limited fiscal flexibility, sanctions risks and constrained storage capacity.
• Chinese humanoid robotics is being assessed through warehouse automation, healthcare assistance and industrial applications, with conviction dependent on reliability, repeat orders, deployment costs and a credible path to profitable growth.
• Emerging-market equities fell modestly in September but outperformed developed markets outside the United States; Taiwan and South Korea benefited from semiconductor, memory and AI demand, while China remained subdued and Brazil advanced.

Takeaway: Franklin Templeton remains positive on emerging-market stocks, especially Asian companies supporting AI, but recommends selective exposure to businesses with resilient cash generation, manageable debt, adequate valuations and demonstrable commercial returns.