Some of the biggest gains from the U.S.-led artificial intelligence (AI) boom have been going to companies in other countries. Some of the world's best semiconductor stocks are in countries like Taiwan and South Korea. These countries are often categorized as "emerging markets" by international stock ETFs.
If you want to buy some of the world's leading AI chip stocks, the iShares MSCI Emerging Markets ETF (NYSEMKT: EEM) might be a good choice. It holds a portfolio of more than 1,100 international stocks in fast-growing economies beyond America.
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Emerging markets stocks are often described as "risky" compared to U.S. stocks. But this emerging markets ETF has a track record of outperforming the S&P 500 index. Could it keep beating U.S. stocks?
Let's take a closer look at this international ETF and see why it might be worth adding to a long-term portfolio.
The iShares MSCI Emerging Markets ETF holds a portfolio of 1,194 large-cap and mid-cap stocks from emerging markets. More than 10 countries are represented in the fund, and the top five markets are:
Taiwan and South Korea are home to some of the most in-demand tech stocks of companies that make semiconductors and AI memory chips. The fund's five largest stock holdings are household names to investors who follow the Asian AI trade: Taiwan Semiconductor Manufacturing, Samsung Electronics, SK Hynix, Tencent, and Alibaba Group. These five tech stocks make up about 33.4% of the fund.
During the past three years, this fund has delivered average annual returns of 22.9%, and an impressive 45.06% return in the past year, strongly outperforming the S&P 500.
Investing in emerging markets stocks is not for the faint of heart. Countries with developing economies are sometimes viewed as riskier places for investors compared to the U.S., because they can be more vulnerable to global crises. For example, in the month following the outbreak of the Iran war in late February, the iShares MSCI Emerging Markets ETF lost about 13.5% of its value.
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