I participated in a webinar hosted by CBOE and Webull about leveraged and inverse ETFs, lots of great questions from the audience. Click HERE for the replay.

Back to the AI theme again today, but this time with an emerging markets tilt. US investors, myself included, tend to be very US centric in their investing. This has served us very well the past few years, but AI impacts companies globally. You could also argue that the US AI ecosystem is overvalued and perhaps there are better opportunities in emerging markets……..

The Great Catch-Up: How AI Could Supercharge Emerging Markets (And What to Own Now)

AI is lowering the cost of intelligence, software, and distribution. In emerging markets (EM), where talent is abundant but capital, infrastructure, and institutions are uneven, that’s a catalytic combo. Think of the impact in three ripples—what happens first, what follows, and what compounds.

First-order effects (12–24 months)

• Productivity shock in services. Code assistants, copilots, and AI contact centers lift throughput for IT, BPO, fintech ops, underwriting, and logistics. Unit economics improve even at small scale.
• New startup formation everywhere. Local founders can ship global-grade software without Silicon Valley headcount. Local-language AI unlocks dormant demand in India, Indonesia, Brazil, MENA, and Africa.
• Infra spend accelerates. Telcos, towercos, and data-center operators see rising AI/edge workloads; power reliability becomes a profit center.
• E-commerce and fintech conversion lifts. Better targeting, fraud detection, and credit scoring expand TAM at lower CAC.

Second-order effects (2–5 years)
• Services export boom. “India IT” goes multi-polar: Mexico, Colombia, Brazil, Poland, Vietnam, and Philippines scale higher-value AI ops as near-/re-shoring continues.
• Wage convergence and formalization. SMEs adopt AI back-office and compliance; tax capture improves; digital payments deepen.
• Domestic champions emerge. Platforms leverage proprietary data moats (payments, ride-hail, marketplaces) to build defensible AI loops.
• Data sovereignty and localization. Governments push for local training/inference, creating durable demand for regional cloud and colocation.

Third-order effects (5–10 years)

• Power becomes strategy. Nations with cheap, reliable electricity and permitting speed win AI capex. Utilities, transmission EPCs, and gas suppliers in EM become AI toll roads.
• Capital markets upgrade paths. As AI profitability hardens, some markets earn higher index weights and lower risk premia.
• Education and labor rewiring. Upskilling platforms, credentialing, and second-career pathways expand employable life—supportive for financials and asset managers.
• Policy and geopolitics. Export controls, sanctions, and data rules bifurcate supply chains; winners are countries that stay investable while securing inputs (energy, semis).

Public EM names with real AI leverage (by theme; liquid tickers where possible)

• Platforms using AI at scale: MercadoLibre (MELI), Sea (SE), Grab (GRAB), PDD Holdings (PDD), Meituan (3690.HK), Baidu (9888.HK), Alibaba (BABA), Tencent (0700.HK), Naspers/Prosus (NPSNY/PRX.AS), Nubank (NU), StoneCo (STNE), PagSeguro (PAGS), TOTVS (TOTS3.SA).

• India IT and engineering services (AI enablement): TCS (TCS.NS), Infosys (INFY), HCLTech (HCLTECH.NS), Wipro (WIPRO.NS), LTIMindtree (LTIM.NS), Tech Mahindra (TECHM.NS), Persistent (PERSISTENT.NS).

• Semis and hardware supply chain (MSCI classifies Taiwan as EM): TSMC (TSM), MediaTek (2454.TW), Hon Hai/Foxconn (2317.TW), Wistron (3231.TW), Quanta (2382.TW); China: SMIC (0981.HK/688981.SH), Hua Hong (1347.HK), AI server OEMs like Inspur (000977.SZ).

• Data centers, towers, connectivity: GDS (9698.HK), Chindata (CD.US/now private pending—monitor peers), Asia/LatAm towers (AMX, AMT’s EM exposure), Indosat Ooredoo (ISAT.JK), PLDT (TEL.PS), Globe (GLO.PS).

• Payments and rails: dLocal (DLO), Ebanx (private; watch comps), MercadoPago within MELI, PIX-native Brazilian fintechs via STNE/PAGS; Africa: Safaricom (SCOM.NR) via M-Pesa, MTN Group (MTNOY).

• Energy and power enablers tied to AI loads: CEMIG/CPFL/Energia (Brazil utilities), NTPC/Power Grid Corp (India), Adani Enterprises (ADEL.NS) for infra and data-center push; Middle East telco-cloud plays via STC (7010.SE).

• Vision/AV and edge AI: iFlytek (002230.SZ), SenseTime (0020.HK) with policy risk; Israel’s Mobileye (MBLY) is DM by index but part of regional AI stack.

Who wins

• EM platforms with proprietary data and recurring engagement (MELI, SE, NU, PDD, 0700.HK) that can compound AI-driven monetization.
• EM IT services that productize AI (TCS/INFY/HCLTECH) and move up the value chain from body-shop to solutions.
• Regional cloud/colo/power with land, interconnects, and PPAs; utilities that can add baseload and transmission quickly.
• Semiconductor and server supply chains in Taiwan/China that capture AI hardware demand regardless of which model vendor wins.

Who loses

• Labor-only outsourcing with thin IP and no AI augmentation—margin pressure and client churn.
• High-cash-burn consumer tech without a data moat—AI lowers entry barriers for rivals.
• Sovereigns and corporates with fragile grids—AI capex bypasses unreliable power.
• Companies caught in sanctions/export-control crossfire or forced to dual-track incompatible ecosystems.

Key risks

• Policy and geopolitics: sanctions, data localization mandates, election swings.
• Power scarcity and permitting delays choke AI build-outs, especially in South/Southeast Asia and Africa.
• FX and funding costs: higher real rates and volatile currencies compress EM tech multiples.
• Bubble dynamics: vendor-financed infra and headline capex that outpaces monetization; governance and disclosure gaps.

Likely scenarios and positioning

Actionable framework

• Core compounders: MELI, NU, SE, PDD or 0700.HK (choose your China risk), plus TSM.
• Enablement sleeve: India IT basket (TCS/INFY/HCLTECH), Taiwan OEMs (Quanta/Wistron), payments rails (STNE/PAGS/DLO).
• Infra and power: country-by-country—Brazil (CEMIG/CPFL), India (NTPC/PGCIL), SEA telcos with DC buildouts.
• Risk controls: cap position sizes in sanction-exposed Chinese AI; pair platform longs with puts around policy events; keep FX hedges where feasible; demand free-cash-flow visibility on infra names.

Big snapback day in all the momentum names and the debasement trade. Once again the dip buyers were rewarded. So far this morning things look pretty strong, except precious metals.

Today we get the delayed CPI report, which could be market moving. Doubt anything in the report will change the narrative of another rate cut next week. The more interesting Fed meeting will be in December.

Next week will be when all the fun starts. We have earnings from AAPL, MSFT, GOOGL, AMZN, and META. We also have FOMC and Jensen Huang gives a keynote address on Tuesday. My sense is that being pretty much at the highs again you ought to add some hedges ahead of all of this.

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