As developed markets stumble over AI, emerging markets stand firm

<div class="grid grid--33-66-col"><div class="col"><img loading="lazy" src="/getContentAsset/ec7b6482-68e6-4583-b158-b380103b3a01/cb87803a-320c-480f-ab75-7b9029eaaf79/Felipe-Berliner-1_1.jpg?language=en" alt="Felipe Berliner 1_1" title="FELIPE BERLNER 1_1" style="width: 180px" class="fr-fic fr-dib fr-fil"></div><span style="font-size: 12px"><div class="col"><strong>Felipe Berliner<br></strong>CO-FOUNDER &amp;<strong data-renderer-mark="true">&nbsp;</strong>HEAD OF STRUCTURING<br><br><p>Felipe Berliner is a Co-founder and the Head of Structuring at Gemcorp Capital, where he leads the firm’s investment structuring and execution.<br><br>Prior to co-founding Gemcorp in 2014, Felipe spent most of his career at Merrill Lynch and Goldman Sachs within the emerging markets structuring team. He was also a director at VTB Capital, working on financing companies, financial institutions and sovereigns across Sub-Saharan Africa, Latin America, Eastern Europe and Asia. Before his banking career, he worked as a capital markets, M&amp;A and project finance lawyer in Brazil.<br><br>Felipe holds a Law degree from Universidade Candido Mendes in Brazil and an MBA from INSEAD in France.</p></div></span></div><hr><p><em>Fears over artificial intelligence are unsettling developed market financial assets. Felipe Berliner explains why demographics and abundant natural resources should place emerging markets on firmer ground.</em>&nbsp;</p><p>In recent weeks, global financial markets have been shaken less by what artificial intelligence has done and more by what it might do.</p><p>In developed markets, the tremors are visible. The tech-heavy Nasdaq Composite index has slumped this year as investors reassess the durability of technology earnings. Software stocks have come under particular stress; by mid-February, the S&amp;P Software &amp; Services Select Industry Index had sunk 19 per cent since the start of the year.&nbsp;</p><p>Contagion has spread beyond public equities. US listed private credit funds, otherwise known as business development companies, have sold off sharply. Around a fifth of BDC loan books are exposed to software, with some vehicles far more concentrated.¹ &nbsp;Wealth management groups, transport operators, property companies and logistics businesses have also been caught in the fallout, as investors speculate over whose lunch AI could eat next.&nbsp;</p><h2 style="font-size: 2rem">Crowded trades versus structural tailwinds</h2><p>The sell-off has exposed how the fortunes of developed financial markets rest largely on assumptions about sustained technological dominance.&nbsp;</p><p>Contrast that with emerging markets. The MSCI Emerging Markets Index was up over 10 per cent in the first six weeks of the year, building on a 34 per cent gain in 2025. In credit, effective yields and total returns on the ICE BofA Global Emerging Market Credit Index comfortably exceeded its US high yield counterpart. Private credit shows an even wider premium, with effective yields around 16.4 per cent in emerging markets compared with roughly 10 per cent in the US.</p><p>Macroeconomic conditions are also supportive. The International Monetary Fund expects emerging and developing economies to grow by 4.2 per cent in 2026, compared with just 1.8 per cent for advanced economies.^2&nbsp;</p><h2 style="font-size: 2rem">Back in the real world</h2><p>We have seen emerging markets move in and out of favour before. But this latest shift feels more structural than cyclical. The divergence reflects a distinction between economies increasingly built on intangible expectations and those anchored in tangible assets and demographic momentum.</p><p>Much of the anxiety around AI centres on disruption: which business models may be undermined, which margins compressed and which competitive moats eroded. These are legitimate concerns in mature economies where growth is modest and valuations embed high expectations. But many emerging markets sit on the other side of a different equation, where growth is driven by people, infrastructure and resources.</p><p>Demographics matter. Across much of emerging Asia, Latin America and Africa, median ages remain far below those in North America, Europe and Japan. Younger populations imply rising urbanisation, household formation and consumption over decades rather than years. They will underpin demand for housing, transport, education, financial services and energy. These dynamics are not closely correlated to or easily displaced by AI innovation.</p><p>Natural resource abundance is another key factor. Emerging markets dominate global reserves and production of critical minerals central to electrification and the energy transition. The Democratic Republic of Congo, for example, accounts for roughly 70 to 73 per cent of global cobalt production and holds more than half of known reserves.³&nbsp; Argentina, Bolivia and Chile together control between 50 and 60 per cent of global lithium reserves, while producing around a third of supply. Chile and Peru account for roughly 34 to 40 per cent of global copper production, and Brazil holds around 20 per cent of global reserves in nickel, rare earths and graphite.^4&nbsp;</p><p>The International Energy Agency projects lithium demand will increase five to eightfold by 2040, with electric vehicles and battery storage accounting for more than 90 per cent of consumption by 2030. Copper demand is expected to rise 30 to 50 per cent by 2040.⁵</p><p>Even the AI boom is supportive of emerging markets. Data centre investment is running at around $400 billion annually and could reach $1.8 trillion by 2030.⁶&nbsp; All of it depends on power generation, transmission networks and copper-intensive infrastructure.&nbsp;</p><h2 style="font-size: 2rem">Opportunities backed by real assets</h2><p>From a private credit perspective, this is creating substantial opportunities across the value chain. Financing is needed not only for mining operations but also for ports, railways and logistics facilities that move materials to market. Power generation is essential for energy-intensive extraction processes. Water infrastructure is critical for lithium production. These are asset-backed, cash-generative projects linked to long-term structural demand.</p><p>None of this suggests that emerging markets are immune to volatility. Nor does it imply that the current sell-off in developed markets will persist indefinitely.&nbsp;</p><p>But the structural question facing investors is unlikely to disappear. Can they continue to achieve attractive risk-adjusted returns in economies growing at less than two per cent annually, with ageing populations and valuations tied to technological dominance? Increasingly, the answer may lie in younger, emerging economies and in who controls the physical assets that power electrification, data infrastructure and energy security.</p><p>Markets have a habit of chasing the abstract and neglecting the concrete. Recent events suggest investors are beginning to rediscover the value of the latter. That is good news for emerging markets. &nbsp;&nbsp;</p><p><strong>References</strong></p><ol><li>Financial Times, Investors sour on listed credit funds over AI hit to software sector, February 10, 2026</li><li>IMF, World Economic Outlook Update, January 2026</li><li>World Bank, Cobalt in the Democratic Republic of Congo, May 2021</li><li>U.S. Geological Survey, Mineral Commodity Summaries, January 2025</li><li>International Energy Association, Global Critical Minerals Outlook, May 2025</li><li>Delphos, Emerging Markets Infrastructure: Top 2025 Opportunities, March 2025</li></ol><p><br></p><p style="font-size: 12px"><strong>Important Information:</strong></p><p style="font-size: 12px">This content has been prepared solely for informational purposes by Gemcorp (as defined below), is confidential and may not be reproduced.</p><p style="font-size: 12px">This content does not constitute an offer or solicitation of an offer with respect to the purchase or sale of any security and should not be relied upon when evaluating the merits of investing in any securities or form the basis of an investment decision. 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