Continental collision: When AI giants clash

Markets took this as a threat to the near monopoly of chip designer Nvidia, whose share price plummeted more in one day than any share has done in history. However, the real takeout is a far broader one – that competition in the tech industry is playing out at continental level, and that it’s a good thing.

The two super innovators, China and the US, in particular, are battling it out in the tech sector. From design to manufacturing, big data to e-commerce, these giants are pushing each other to new heights.

Asia vs America

The US market generally dominates technology and the emerging megatrend of artificial intelligence (AI). The seven biggest US tech companies – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla – are 20 times larger than the EU’s seven largest, and generate more than ten times more revenue. These US-based household names and more are all included in the award-winning 1nvest S&P500 Info Tech Index Feeder ETF.

However, Asia is not far behind, accounting for about a quarter of the worldwide AI market. Moreover, Asia is the region set to gain the most from AI in the years to come. A 2023 PWC study estimated that China will reap a 26% boost to their GDP in 2030 from AI compared to a forecasted 14% boost for North America.

Asia’s AI ecosystem

Asia’s tech sector has several standout characteristics. E-commerce is large and growing. Think of companies like Alibaba and Tencent. Temu is the latest name to rocket into our lives.

Asia is also the world’s AI manufacturing hub. China, Taiwan and South Korea are powerhouses in the production of the chips that are enabling the AI revolution. Taiwan Semiconductor Manufacturing Company (TSMC) stands out as the chief fabricator of Nvidia chips. China’s Foxconn famously does much of the manufacturing of iPhones.

Several governments in Asia are noteworthy for their support of tech. China and Singapore are champions in this regard. They invest heavily in AI, quantum computing, and biotech. This, coupled with regulation, is an important enabler of a thriving AI industry as we grapple with this novel technology.

Investing in Asia’s booming tech businesses

Our 1nvest MSCI EM Asia Index Feeder ETF is designed to provide efficient, simple access to the top tech stocks in emerging Asia. In fact, this ETF holds more than 1 000 stocks across various tech sub-sectors in 14 countries.

These five leading tech companies from Asia make up the five biggest holdings in our 1nvest MSCI EM ASIA Index Feeder ETF.

• Taiwan Semiconductor Manufacturing Company (TSMC): This Taiwanese chipmaker is the largest holding in the fund. While Nvidia tends to get all the applause for the incredible computing power of its chips, TSMC is the unsung hero. For the most part, Nvidia designs the semiconductors, but it’s TSMC, found on the tiny island of Taiwan 12 600 km from the centre of New York City, that makes the products that allow everything from autonomous vehicles to consumer products to change the world.
• Tencent: This Chinese multinational is our second-largest holding. This firm is best known to South Africans as a highly lucrative investment that JSE-listed company Naspers made through its subsidiary Prosus. Its Tencent holding alone has made Naspers a behemoth on the JSE.

Tencent offers a very different angle into Asia’s tech scene. The business offers a diverse range of services, including social networking, gaming, cloud computing, fintech, and online advertising. Tencent operates WeChat (known as Weixin in China), the country’s largest social-media super app, and is recognised as the world’s largest video game publisher, owning popular titles like Honor of Kings.

• Alibaba Group: This diversified tech giant specialises in e-commerce, cloud computing, digital media, and AI. It operates some of the world’s largest online marketplaces, including Taobao, Tmall, and Alibaba. The company also has divisions in cloud computing (Alibaba Cloud), digital payments (Alipay via Ant Group), logistics, and entertainment.

The group has been vocal about using AI to leverage dominance in e-commerce and cloud computing, and injecting efficiencies into its business.

• Samsung: This South Korean multinational has been around since 1969 and needs no introduction to South Africans. Its consumer electronics are hugely popular here and around the world (you may be reading this article on one!). The firm is deploying AI across its products and services with ambitious goals to lead the world in smartphone AI technology.
• HDFC Bank: Let’s not forget India. HDFC Bank is India’s largest private-sector bank, providing a wide range of financial services, including retail banking, corporate and wholesale banking, investment and wealth management, digital banking and payments. The bank is integrating AI and machine learning across its operations to improve customer service, fraud detection, and risk management. Major initiatives range from AI-powered credit scoring and personalised financial advisory to process automation.

Source: 1nvest

All together now

When Asia’s DeepSeek and America’s Nvidia clashed in January, markets got nervous. Less than two months later, the battered Nvidia stock price is making a comeback.

When competitors collide, a short-term shock is not surprising. In the long term, vigorous competition can be a good thing. The best minds in the world tend to push one another to new heights. That means better products – and investments – for us all.

Fortunately for investors, it is not an either/or decision. Our 1nvest MSCI EM Asia Index Feeder ETF is a highly effective, easy way to gain access to Asia’s growing tech phenomenon. While the US looks set to dominate Big Tech and AI, there is plenty to gain from expanding a portfolio to gain from the diversity and growth of Asia’s emerging tech giants.