Ruchir Sharma warns investors against buying the dip in Taiwan, South Korea

Rockefeller International Chairman Ruchir Sharma has raised concerns over the growing dominance of Taiwan Semiconductor Manufacturing Company (TSMC) in emerging market equities, calling it "a bit scary" that a single company now commands a greater weight in the MSCI Emerging Markets Index than India. 

He warned that investors seeking diversification through Taiwan and South Korea may instead be increasing their exposure to the US-led artificial intelligence boom.

Speaking to Bloomberg's Haslinda Amin, the veteran investor said the surge in AI-related stocks has made emerging markets increasingly dependent on a handful of technology companies. 

"And the amount of capital today, which is allocated to one company, TSMC, is a bit scary for me," Sharma said. "One company we are talking about that is greater in the index than all of India put together. And India plus Brazil aren't as big in the index as just one company is." 

According to MSCI's October 30, 2026 factsheet, TSMC accounted for 15.87% of the emerging markets benchmark, compared with India's 11.73% and Brazil's 3.9%. 

The combined weight of India and Brazil was 15.63%, marginally below TSMC's share. 

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'Zero diversification' in Korea and Taiwan

Sharma cautioned that investing in South Korea and Taiwan was essentially another way of betting on the AI cycle in the United States.

"No, I think that these markets are just leverage plays on the AI cycle, which is America. So you're going to get zero diversification by being in Korea and Taiwan," he said when asked whether market declines in South Korea and Taiwan presented buying opportunities. "So you can buy Korea and Taiwan. But be very clear that all you're doing is buying a leverage play."

The investor said the MSCI Emerging Markets Index had become heavily concentrated in the two markets, leaving relatively little space for other developing economies. 

"The entire emerging market trade today has become about Korea and Taiwan; those two countries today are nearly 50% of the MSCI Emerging Market Index," he said.

MSCI data for October 30 showed Taiwan accounting for 28.88% of the index and South Korea 19.66%, giving them a combined weight of 48.54%. China accounted for 20%. 

Sharma said countries such as Indonesia, the Philippines and several Eastern European markets had consequently received little investor attention, with many carrying weights below 1%. 

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'China has been a disappointment'

Turning to China, Sharma said the country's AI boom had failed to translate into sustained returns for equity investors.

"I'd say that's been the most disappointing trade," he said, adding that the enthusiasm surrounding Chinese AI companies had faded after an initial surge. "I've been quite pessimistic on China for all these years that we've been speaking. And I'd say that even for the pessimist like me, China has been a disappointment." 

The investor attributed the weakness partly to China's struggling domestic economy and prolonged property downturn. "The big story in China is that the domestic economy is in big trouble. The property market has gone bust, and the downward pressure that puts on the entire economy is huge and something which is underestimated," he said.

Sharma also questioned whether Chinese technology companies could generate attractive returns for shareholders despite their advances in artificial intelligence. "As far as AI is concerned, it's the typical Chinese story, which is that there's too much competition, too much capital chasing returns," he said.

The Rockefeller International chairman argued that excessive investment and intense competition made it difficult for companies to maintain their competitive advantages. "So very few people are able to actually make money as a shareholder in China, even if the technology they're creating is great," he said.

The investor called China a perennial underperformer. He said you can look at any long stretch in history and the Chinese stock market keeps disappointing. "There's far too much competition. There's too much overinvestment. Very few Chinese companies are able to build a moat, as they put it. They keep diluting the shareholders by having so much share issuance into the government. You just never know when the government will come and do something on the regulatory front, which will hurt a particular sector. So it is a very difficult market to invest in."