Regional fund managers are increasingly favouring companies that benefit indirectly from AI, moving away from hardware stocks after a year of strong gains driven by chipmakers, as they seek diversified exposure and manage valuation risks.
After a banner year for Asian equities led by semiconductor heavyweights, leading regional fund managers are recalibrating their exposure to the artificial intelligence theme, favouring companies that stand to benefit indirectly rather than the hardware names that powered last year’s rally. According to a report by Morningstar, some managers anticipate a cooling in AI capital spending and are wary of stretched valuations among the direct beneficiaries.
“Ongoing optimism surrounding AI drove Asian equity markets last year, though some fund managers caution against the AI industry’s capital expenditure sustainability and elevated valuations,” Germaine Share, director of manager research at Morningstar, said. The report adds that managers are increasingly targeting what Morningstar describes as “AI-adjacent” opportunities , firms whose profitability could improve through AI adoption across a broad set of industries.
That shift is visible in stock selection. Louisa Lo, manager of the top-rated Schroder ISF Emerging Asia fund, has steered clear of what she regards as crowded AI-hardware trades and prefers large internet platforms such as Alibaba, which could leverage AI to expand services and cut costs. Martin Lau, lead manager of FSSA Asian Equity Plus, has been adding to Kotak Mahindra Bank in India, citing a recovery in savings growth and the bank’s use of “AI-driven automation to reduce costs, which drove a fall in its cost/income ratio”.
In ASEAN, JPM Asean fund lead Pauline Ng is constructive on technology service providers in Vietnam and firms set to benefit from data-centre expansion in Malaysia , examples of how managers are seeking exposure to AI via infrastructure and services rather than chips alone. Morningstar’s research notes that such second-order beneficiaries can include banks, internet platforms and local data-centre operators, broadening the ways investors can play the AI theme.
The debate over Taiwan and Korea illustrates the divergence in views. Taiwanese foundries and Korean memory suppliers were among the largest contributors to Asian market returns last year as chipmakers fed surging demand for AI training capacity. Some managers, however, warn of concentration risks: managers of the Schroder ISF Asian Total Return fund expressed concern that upbeat guidance from SK Hynix and Samsung for 2026 may already be priced in and “could reflect overordering”. Others remain positive on Korea, pointing to valuation support, dividend yields and nascent corporate governance reforms. JPMorgan Asia Equity Dividend managers Julie Ho and Ruben Lienhard have boosted allocations to Korean banks such as Shinhan Financial Group and Hana Financial Group, holding more than twice the benchmark weight in banks versus the MSCI AC Asia Pacific ex Japan High Dividend Yield Index.
Broader industry analysis supports this selective approach. Morningstar’s own Global Artificial Intelligence Select Index rose strongly in 2025, driven by a relatively small number of high-conviction names, underscoring how concentrated AI returns have been. Meanwhile, managers of thematic global funds, such as the Polar Capital Artificial Intelligence fund, continue to blend investments in AI enablers , chip designers and equipment makers , with beneficiaries across retail, healthcare and financials, reflecting a pragmatic stance on diversification within the theme.
Some asset managers argue that Asian tech still offers a lower-risk route to AI exposure. Sam Konrad, co-manager of Jupiter’s Asia Pacific Income fund, points to world-class Taiwanese and Korean companies that service global cloud and AI workloads, noting they trade at lower valuations than some US peers and also provide dividends. The Jupiter strategy holds meaningful positions in TSMC, Hon Hai and MediaTek as well as Samsung Electronics, which together comprise a sizeable portion of its portfolio.
The emerging consensus among the managers covered by Morningstar is that investors should think beyond headline AI plays. Rather than chasing the most visible hardware winners, many are favouring firms that can harness AI to lift margins, automate processes or supply the expanding data-centre ecosystem , a repositioning that, if sustained, could reshape which sectors and markets capture AI’s economic upside across Asia.
- https://fundselectorasia.com/asian-equity-managers-prefer-ai-adjacent-stocks-morningstar/ – Please view link – unable to able to access data
- https://fundselectorasia.com/asian-equity-managers-prefer-ai-adjacent-stocks-morningstar/ – After a strong year for Asian equity markets, top-rated regional fund managers are looking beyond the obvious beneficiaries of artificial intelligence (AI). A report from Morningstar indicates that some fund managers expect a moderation in AI capital expenditure, potentially leading to a correction in Asian beneficiaries. Taiwanese chipmakers and Korean memory suppliers, major Asian index heavyweights, drove strong regional performance last year on the back of continued AI spending. Despite this rally, leading regional equity managers are shifting their focus to the second-order beneficiaries of artificial intelligence. Germaine Share, director of manager research at Morningstar, notes that ongoing optimism surrounding AI drove Asian equity markets last year, though some fund managers caution against the AI industry’s capital expenditure sustainability and elevated valuations. Instead, they prefer AI-adjacent plays that could benefit from improved profitability through AI adoption, spanning a wide range of industries such as Indian banks, Chinese internet companies, or even ASEAN-based data centres, redefining how the AI theme can be played. The report highlights that Louisa Lo, who runs the top-rated Schroder ISF Emerging Asia fund, has avoided overly crowded areas like AI-related hardware companies and instead favours internet names like Alibaba, which could benefit from AI advancements. Elsewhere, Martin Lau, lead manager of FSSA Asian Equity Plus, sees Indian banks as potential beneficiaries of AI. The fund manager has been adding to a position in Kotak Mahindra Bank despite a weaker backdrop for Indian equities. According to the report, the manager has cited a recovery in savings account growth and a deployment of AI-driven automation to reduce costs, which drove a fall in its cost/income ratio. In the ASEAN region, Pauline Ng, lead manager of the JPM ASEAN fund, is constructive on investment prospects that could benefit from the AI theme, such as IT service providers in Vietnam and beneficiaries of data centre buildouts in Malaysia. Finally, while Korea has benefited from the performance of index heavyweights SK Hynix and Samsung, some fund managers are cautious about its market concentration in the two firms. The report mentions that managers of the Schroder ISF Asian Total Return fund are concerned that the companies’ bullish outlooks for 2026 are already priced in and warned it could reflect overordering. Elsewhere, other fund managers are more bullish on Korea’s value-up story and corporate governance reform instead. JPMorgan Asia Equity Dividend managers Julie Ho and Ruben Lienhard have favoured banks like Shinhan Financial Group and Hana Financial Group. According to the report, the fund had more than double its allocation to banks versus the benchmark MSCI AC Asia Pacific ex Japan High Dividend Yield Index.
- https://indexes.morningstar.com/insights/index-ip/blt30abb9f3f58e1f09/selective-ai-drives-market-returns-in-2025 – In 2025, global companies involved with artificial intelligence (AI) experienced significant growth, with the Morningstar Global Artificial Intelligence Select Index rising nearly 18% as of July 29. This outpaced the 8.9% and 12.5% returns of the Morningstar US Market and Morningstar Global Markets Indexes, respectively, for the same period. The index, designed to deliver thematically pure exposure to companies involved with AI technologies, targets stocks with exposure to generative AI, AI data & infrastructure, AI software, and AI services. As of midyear, the index held approximately 50 stocks, with Advanced Micro Devices Inc. (AMD), Broadcom Inc. (AVGO), and NVIDIA Corp. (NVDA) among its top ten weighted constituents.
- https://fundselectorasia.com/jupiter-taiwan-and-korea-are-a-low-risk-way-to-get-ai-exposure/ – Taiwanese and Korean tech stocks offer investors a way to gain exposure to the global artificial intelligence (AI) boom with potentially lower risk compared to some well-known US technology names. Sam Konrad, co-manager of the Jupiter Asia Pacific Income fund, believes that certain Asian tech names are still underappreciated by global investors. He highlights the world-class nature of Taiwanese tech stocks, noting that companies like TSMC (Taiwan Semiconductor Manufacturing Company) are critically important to tech giants such as Nvidia, Apple, and Microsoft. The market capitalisation of TSMC has more than tripled over the past three years, driven by a boom in chipmaking used for AI training and applications. Konrad suggests that owning Taiwanese tech stocks, along with Samsung Electronics in Korea, provides a slightly lower-risk way of gaining exposure to the AI theme compared to owning US tech stocks, while still offering significant upside potential. He points out that these companies are trading at lower valuations and pay dividends, providing a reasonable dividend yield. The Jupiter Asia Pacific Income strategy holds significant positions in Taiwanese firms TSMC (9.8%), Hon Hai Precision Industry (9.1%), and Mediatek (7%), as well as Samsung Electronics (6.5%), collectively accounting for roughly a third of the portfolio.
- https://www.morningstar.com/business/insights/blog/funds/etfs-mutual-funds-to-watch – The Polar Capital Artificial Intelligence fund invests globally in companies poised to benefit from the expanding adoption of AI technology. Lead manager Xuesong Zhao seeks businesses that either drive AI innovation or stand to gain from its implementation, aiming to capture long-term growth in this evolving space. Unlike many AI-focused strategies, this fund casts a broader net, investing in both ‘AI enablers’ like chip designers and semiconductor equipment makers, as well as ‘AI beneficiaries’ in sectors not typically linked to AI, such as retail, healthcare, and financials. Zhao, who has led the fund since its 2017 launch, brings nearly two decades of investment experience and is backed by an 11-member technology team—one of the most well-resourced in the industry.
- https://indexes.morningstar.com/insights/markets-review/blt600f6873c62df3d1 – The Morningstar Wide Moat Focus Index, which represents a basket of undervalued US stocks with wide economic moat ratings, experienced a 6% total return in the fourth quarter, outperforming its benchmark, the Morningstar US Market Index, by 358 basis points. This performance was aided by favorable sector positioning and stock selection within sectors. Despite the slowdown in the performance of the ‘Magnificent 7’ stocks (Nvidia, Alphabet, Apple, Microsoft, Amazon, Meta Platforms, and Tesla) in the fourth quarter, these stocks still accounted for nearly 50% of the Morningstar US Market Index’s 2.4% total return.
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The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
10
Notes:
The article was published today, 28 January 2026, indicating high freshness. No evidence of prior publication or recycled content was found.
Quotes check
Score:
8
Notes:
Direct quotes from Germaine Share, Louisa Lo, Martin Lau, and Pauline Ng are included. While these quotes are attributed to specific individuals, their earliest known usage could not be independently verified. This raises concerns about the originality and verification of the quotes.
Source reliability
Score:
6
Notes:
The article originates from Fund Selector Asia, a niche publication focusing on investment news in Asia. While it provides detailed information, its limited reach and potential biases due to its niche focus may affect the reliability of the information presented.
Plausability check
Score:
7
Notes:
The claims about fund managers shifting focus to AI-adjacent stocks align with industry trends. However, the lack of independent verification and the reliance on a single source raise questions about the accuracy and comprehensiveness of the information.
Overall assessment
Verdict (FAIL, OPEN, PASS): FAIL
Confidence (LOW, MEDIUM, HIGH): MEDIUM
Summary:
The article presents information on Asian equity managers’ preferences for AI-adjacent stocks, citing specific fund managers and their strategies. However, the reliance on a single, niche source without independent verification, and the inability to confirm the originality of the quotes, raises significant concerns about the accuracy and reliability of the content. Given these issues, the content cannot be fully trusted without further verification from independent and reputable sources.