Emerging Markets Equity Strategy 1Q26 Earnings Dissector: Embracing the concentration in AI; lifting MXEF target to 2000

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Emerging Markets Equity Strategy 1Q26 Earnings Dissector: Embracing the concentration in AI; lifting MXEF target to 2000

s mostly J.P. Morgan Securities plc

attributed to the accelerating growth in Korea and specifically the IT sector (Table Asia Equity Strategy

19ConsensusEPSrevisionsinthepastonemonth,thremonths,sixmonths,and12months(%)). At the same time, the breadth of earnings revision in EM inflected sharply Joy Wang

down - Figure 7MSCIEMearningsrevisionbreadth. This divergence - higher growth forecasts amid negative revision (852) 2800-2322

breadth - indicates that EM growth leadership has become more concentrated, and joy.y.wang@jpmorgan.com

specifically in AI. We recommend staying with the momentum in the AI J.P.MorganMorganBrokingSecurities(Hong (AsiaKong)Pacific)LimitedLimited/ J.P.

hardware space (embracing the inherent concentration risks). With recent

upgrades to Taiwan/Korea targets and robust AI/DC capex-driven earnings that

should help offset weak consumer spending, cost pressures and supply risks from

the Iran conflict, we raise our MXEF index base/bull/bear case targets to

2000/2200/1500. For high-conviction stock names, please see Table 2EMhigh-convictionstocks.

• Earnings premium with AI/DC capex as an offset to macro headwinds.

Incoming evidence over the past 3 months that mitigates the monetization

challenges in AI (step-gains in model capabilities, accelerating agentic token

consumption, easing token pricing deflation, and new funding secured), and

cascading hardware pricing increases (which JPM Tech analysts believe will

continue) have materially raised the future growth trajectory for AI capex and

for upstream hardware revenues. However, the situation in the Middle East