Investors have poured money into emerging markets in recent years as the search for big stock gains has migrated overseas and as they look for diversification beyond the concentrated S&P 500
. But the U.S.-Iran military conflict has reframed the concentration question, highlighting the level of risk in emerging markets when it comes to gains being dependent on a select number of stocks, many tied to the AI boom.
The iShares MSCI Emerging Markets ETF (EEM
) has had strong performance over the past few years and into 2026, up 29% in 2025 and still holding onto a small gain this year. However, its holdings remain largely tilted toward Asia, with large exposure to China, South Korea, India, and Taiwan, together representing over three-quarters of the index weight, and many of the top stocks tied to tech, including Taiwan Semiconductor and Samsung.
“If you look at the index within emerging markets, it’s still roughly 80% Asia,” Malcolm Dorson, senior emerging markets portfolio manager and senior v.p. head of the active investment team at ETF company Global X said on CNBC’s “ETF Edge” earlier this week. “That gives you a lot of concentration risk,” he said.
