The booming interest in artificial intelligence (AI) stocks, highlighted by companies like Nvidia Corp. (NVDA, Financial), is pulling investment away from emerging markets, according to Banco BTG Pactual SA's founder, Brazilian billionaire Andre Esteves. Esteves notes that the high growth and wealth creation once associated with emerging markets now better describe regions like Silicon Valley.
The success of U.S. firms, especially in the AI sector, has attracted global investors. Esteves specifically mentioned the "Magnificent Seven" - Nvidia (NVDA, Financial), Apple Inc. (AAPL, Financial), Microsoft Corp. (MSFT, Financial), Amazon.com Inc. (AMZN, Financial), Meta Platforms Inc. (META, Financial), Alphabet Inc. (GOOGL, Financial), and Tesla Inc. (TSLA, Financial) - as key drivers behind the S&P 500 Index reaching new heights this year. This surge in AI stocks has made emerging-market equities appear undervalued in comparison, with their prices at record lows relative to the S&P 500, based on data dating back to 1987. Over the past three years, emerging-market stocks have dropped by 23%, contrary to a 15% increase in the MSCI ACWI Index.
Esteves revealed that BTG's digital platform, primarily serving Latin American clients, has seen a significant demand for shares of Apple (AAPL, Financial) and Nvidia (NVDA, Financial). Despite the current trend of investors moving towards stocks in Europe and emerging markets, as indicated by Bank of America Corp.'s latest fund manager survey, some analysts believe that a real shift towards emerging market equities will only occur once there is more certainty regarding the Federal Reserve's interest rate decisions.
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