U.S. tech companies with a focus on emerging markets offer the best investment opportunities for the coming year, according to veteran emerging markets investor Mark Mobius.
“The U.S market will continue to do well. As you know, tech has already done well. So, what I would do is focus on companies and industries that are taking advantage of technology to improve productivity,” the chairman of the Mobius Emerging Opportunities Fund said in an interview with CNBC last week.
U.S.-based companies geared toward China and India, as well as other major emerging market economies, are well positioned, he added. “I focus on those companies that are global in their scope, and producing and exporting and selling in these countries, because that’s where the growth will be.”
Investors should also consider firms taking advantage of what Mobius calls “accelerated information,” such as chip manufacturers.
“I call AI accelerated information because there’s nothing artificial about AI and it’s not intelligent. But it’s getting more information faster and being able to analyze that information much more effectively,” he said.
His comments come as emerging markets that produce semiconductors enjoy an economic boom, with Taiwan — which makes most of the advanced chips in circulation — a particular success story.
ASEAN countries in Southeast Asia are also enjoying increased foreign investment. Malaysia’s focus on chip production, for instance, has seen it become deeply embedded into the global supply chain.
Speaking with CNBC at the October IMF annual meetings in Washington, D.C., Malaysia’s central bank governor Abdul Rasheed Ghaffour said the country exports 7% of the world’s semiconductors.
Heading toward a tech bubble?
Mobius says there’s “no question” that a tech bubble is on the horizon given the valuations of the so-called Magnificent Seven — a group of Big Tech stocks comprising of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla.
But although he admitted that some of stock prices had “gone up too fast and too far,” he’s not concerned.
“You must remember that you can’t just look at the price-to-earnings ratio, which is the normal measure that people use to evaluate whether an industry or a stock is too expensive, because the growth rate of these companies is so great,” he said.
Nvidia has been the primary beneficiary of the ongoing artificial intelligence boom, with its next-generation AI chip Blackwell now in focus. Shares of the company have nearly tripled so far in 2024 — up more than 170% in the year-to-date — making it the world’s most valuable publicly traded company.
Some investors worry the AI juggernaut won’t be able to keep up the rapid growth, however, although Mobius remains optimistic about the prospects for Nvidia and other Big Tech stocks.
“The [Magnificent Seven] earnings are growing at a terrific pace and you’ve got to look forward that will continue. I’m not so concerned about most of these companies being too expensive, they will continue to do quite well,” Mobius added.
“And of course, you have new companies coming into the picture that are also benefiting from these changes.”