Emerging Markets and the ChatGPT Value Chain

Sergey Davalchenko: Emerging markets have become a global hub for innovation, and emerging markets feed into the structural global trends that take place.

I personally call it enablers—enablers of global trends that are structural transitions in electric vehicles, renewable energy, semiconductors, etc.

So one of the newest and perhaps most exciting things that’s starting to happen now is this ChatGPT that everybody’s talking about. It’s essentially a way computers are starting to talk back to humans, which has never happened before. But one of the things that people don’t realize is that a lot of this transition, if you look at the value chain, actually gets captured in emerging markets, whether it’s memory, semiconductor manufacturing, chip design, etc., etc.—very, very positive trend for emerging-market stocks.

One of the examples that I could give you where an emerging-market company would benefit from this transition is a company that manufactures BMC chips. A BMC chip is a baseboard management chip. It’s a very small chip that goes into every server that goes into a data center. And data centers are essential for migration to ChatGPT. Without that small chip, the server will not work. And this company, which happens to be an emerging-market company, has 85% global market share manufacturing that chip.

We are at the beginning of transitioning from old world to new world. These trends happen once in a lifetime, and I’m referring to whether it’s ChatGPT, renewable energy, electric vehicle trends, etc., etc.

What people forget is that if you look at the value chain that supplies into these global transitions, well over 50% of the value chain is domiciled in emerging markets. These trends offer multi-decade growth opportunities. It’s not a one-year thing; it’s not a three-year thing. It’s something that’s happening now, and it’s going to continue to happen for 10 years plus.